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:
Canada Revenue Agency (CRA):
Revised: February 25, 2012
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