About the deduction of Employment Insurance (EI) premiums

On this page

• What are EI insurable earnings
• When to deduct EI premiums
• When to stop deducting EI premiums
• What if the employee has different jobs
• What to do if you have employees whose province of employment is Quebec
• What to do if you have employees outside Canada
• What to do if you are self-employed
• What is the EI Premium Reduction Program
• References

What are EI insurable earnings

Insurable earnings are the employee's earnings from insurable employment. Insurable employment includes most employment in Canada under a contract of service.

To be considered as insurable earnings, the amount has to be paid in cash by the person's employer and received and enjoyed by the person in respect of that employment.

Generally, you have to deduct EI premiums from:

• Salary, wages or other remuneration
• Commissions
• Bonuses
• Most taxable benefits received in cash
• Honorariums
• Certain tips and gratuities

To determine if you need to deduct EI premiums, refer to:

• Determine if a benefit is taxable
• Determine the tax treatment of payments other than regular employment income

When to deduct EI premiums

You have to deduct EI premiums from your employee’s insurable earnings.

EI premiums:

• start to be deducted from the first dollar earned up to the yearly maximum
• have no age limit for deducting them

Employer EI contributions

You must also contribute 1.4 times the amount of the EI premiums that you deduct from your employees' remuneration and remit the total of both amounts. Even if the required deductions were not made, you are deemed to have made them and the deductions not being made may result in a PIER.

Learn more: Pensionable and insurable earnings review (PIER).

When to stop deducting EI premiums

What if the employee has different jobs

The EI annual maximum insurable earnings apply to each job the employee holds with different employers (different business numbers).

What happens if your employee has multiple employers

If an employee leaves one employer during the year to start work with another employer, the new employer also has to deduct EI premiums without taking into account what the previous employer paid. This is the case even if the employee has contributed the maximum amount during the previous employment.

Any overpayments will be refunded to employees when they file their income tax and benefit returns. As an employer, you are not entitled to a refund for the employer's share of the contributions.

Example

Situation

• Your employee notifies you that they have reached the maximum EI premiums for the year. They tell you that they had $900 in EI premiums deducted by a previous employer in the year and that when combined with the EI you have deducted from their pay, they have reached the maximum.

Result

• Do not stop deducting EI premiums from their pay. You are required to deduct EI premiums from your employee's pay until they reach the maximum contribution for the year in their employment with you. Do not factor in EI premiums made through other employers.

What happens when an employer is restructuring

Where there was an employer restructuring, the successor employer may consider the EI premiums previously deducted, remitted or paid by the former employer for the employment of the employees for the year as if they had been deducted, remitted, or paid by the successor employer.

Learn more: Employer restructuring/Succession of employers - CPP/EI explained.

What to do if you have employees whose province of employment is Quebec

If you have employees whose province of employment is Quebec, regardless of your employee's province or territory of residence, you have to deduct a reduced employment insurance (EI) premium using the Quebec EI premium rates and maximums in addition to the Québec Parental Insurance Plan (QPIP) premiums.

Learn more: Québec Parental Insurance Plan (QPIP) Premiums | Revenu Québec.

What to do if you transfer an employee between Quebec and another province or territory

You may have a place of business in Quebec and in another province or territory. If you transfer an employee from Quebec to another part of Canada, in addition to deducting EI/QPIP premiums, you will also have to prepare two T4 slips.

It is important that you calculate and report the proper deductions and insurable earnings on both T4 slips.

What to do if you have employees outside Canada

If you have employees working outside (or partly outside) Canada, you must deduct EI premiums if all of the following applies:

Learn more: Employment outside Canada.

What to do if you are self-employed

If you are self-employed, participation in the EI program is voluntary.

You are eligible to participate if all of the following apply:

• You do not work as a barber, hairdresser, fisher, taxi driver, or a driver of other passenger vehicles
• You are a Canadian citizen or a permanent resident of Canada.
• You either operate your own business or work for and control more than 40% of the voting shares of a corporation

If you are a fisher, a barber, a hairdresser, or if you drive a taxi or other passenger vehicle, you do not need to register for the self-employed program. People in these professions should apply for EI benefits as an employee.

Learn more:

• EI benefits for self-employed people
• Canada Pension Plan (CPP) and Employment Insurance (EI) Rulings

What is the EI Premium Reduction Program

References

Related topics

• Administration of the Canada Pension Plan and the Employment Insurance Act

Multimedia

• Video: A deeper look at the Canada Pension Plan and Employment Insurance |  42 minutes

Legislation