Who Has to Pay Employment Insurance (EI)
Premiums?
Employers, whether incorporated or not, are responsible for deducting EI premiums from all
employees, regardless of age. The employer pays a premium of 1.4
times the employee premium, unless they qualify for reduced premiums under the
Premium Reduction Program.
Self-employed people can remit EI
premiums based on their self-employment income, in order to qualify for
certain benefits. See our article on EI for the
self-employed.
If a barber or hairdresser is your employee, the normal processes for
deduction of income tax, EI premiums and CPP contributions are followed
If a self-employed barber or hairdresser rents or leases space, a chair, or
both from your barber or hairdresser establishment, you are required to report
their gross earnings on a T4 slip, and to pay both the worker's share and your
share of EI premiums. The worker is responsible for their own CPP
contributions and income tax.
For more information, see these Canada Revenue Agency (CRA) articles:
EI premiums are not
payable in some employment situations, such as when the employee controls more than
40% of the corporation's voting shares, when the employee and the employer do
not have an arm's length relationship
(depending on other circumstances), or some other cases. However, an employee
who controls more than 40% of the corporations voting shares is eligible to
pay EI premiums on a voluntary basis, in order to qualify for EI
special benefits for the self-employed.
Some of the
other situations where income is not subject to employment insurance:
casual employment if it is not for your usual trade
or business;
when a corporation employs a person who controls
more than 40% of the corporation's voting shares (as mentioned above);
employment that is an exchange of work or services;
employment in agriculture or horticulture when
the person receives no cash remuneration; or
works less than seven days with the same
employer during the year (Note: If the employee works 7 days
or more, the employment is insurable from the first day of work.)
employment of a person in connection with a circus,
fair, parade, carnival, exposition, exhibition, or other similar
activity, except for entertainers, if that person:
is not your regular employee; and
works for less than seven days in the year
(Note: If the employee works 7 days or more, the employment
is insurable from the first day of work.)
employment of a person in a rescue operation, as
long as you do not regularly employ that person for that purpose;
employment by a government body as an election
worker if the worker:
is not a regular employee of the government
body; and
works for less than 35 hours in a calendar year
(Note: If the employee works 35 hours or more, the
employment is insurable from the first hour of work.)
There are some types of employment payments and other payments from which
EI premiums do not have to be deducted. CRA information on what type of payments are and are not subject to CPP, EI
or tax deductions is available in their Special
Payments Chart.
CRA also has a section titled CPP/EI
Explained, which talks about different types of earnings and how
they are treated for CPP and EI purposes. It includes
information on: