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Reduced EI Premiums

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Canada Pension Plan (CPP), Québec Pension Plan (QPP) and Employment Insurance (EI) - > Reduced Employment Insurance rates

Employers may qualify for reduced EI rates

Employment Insurance Act s. 69(1)

Employers who provide a wage-loss replacement plan for short-term disability for illness of or injury to their employees may be able to qualify for a reduction in their EI premium rate. To be considered for the Premium Reduction Program, the wage-loss replacement plan must:

	provide at least 15 weeks of benefits for short-term disability
	match or exceed the level of benefits provided under EI
	pay benefits to employees after 14 days of illness or injury
	be accessible to employees within 3 months of hiring
	cover employees on a 24-hour-a-day basis

The employer premiums are reduced by reducing the factor that is applied to the employee premiums. Normally, employers pay 1.4 times the total of employee premiums. Although it is only the employer portion of the premium that is reduced, it is a requirement of the Premium Reduction Program that the employer return 5/12 of the savings to the employee.

There are 4 different categories for reduced premiums, with the savings for 2009 ranging from 1.2% to 17.4%. The 17.4% savings is achieved when the employer is able to pay premiums equal to 1.157 times the employee premiums, instead of the regular 1.4 times.

For an employee who earned more than the maximum insurable earnings amount of $42,300 in 2009, the savings to the employer could be up to $177.82 per employee. $74.09 of this savings would have to be returned to the employee. Although a cash rebate (taxable and insurable) can be provided to the employee, other arrangements can be made to satisfy Service Canada that a portion of the savings is being returned to employees, including:

	a written mutual agreement between employer and employees or their representatives on the method of returning the employees' portion of the premium reduction;
	new employee benefits provided as a result of the premium reduction, such as a dental plan, group life insurance; or
	increased employee benefits or upgrading of existing benefits, such as more holidays, more time off work, increased life insurance.

Resources:

Canada Revenue Agency (CRA):

How to reduce the EI premium rate if you provide your employees with a short-term disability plan

Service Canada:

EI Premium Reduction Program - Guide for Employers

Revised: April 23, 2010

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Personal Tax Business Canada Pension Plan (CPP), Québec Pension Plan (QPP) and Employment Insurance (EI) - > Reduced Employment Insurance rates

Employers may qualify for reduced EI rates

Employment Insurance Act s. 69(1)

Personal Tax
Business
Canada Pension Plan (CPP), Québec Pension Plan (QPP) and Employment Insurance (EI) - > Reduced Employment Insurance rates