Canada Consults On Employment Insurance Rates

by Mike Godfrey, Tax-News.com, Washington

22 August 2011

The Canadian government is to consult on proposals for the improvement of the Employment Insurance (EI) rate-setting mechanism, as part of a larger aim to ensure greater premium stability.

The consultations were launched by parliamentary secretaries Shelly Glover (Finance) and Dr. Kellie Leitch (Human Resources and Skills Development) on August 18. Canada's EI programme provides temporary financial assistance for the unemployed while they look for work or upgrade their skills, and is worth approximately CAD23bn (USD23.3bn) a year.

The programme is financed entirely by contributions from employees and employers, via premiums paid on insurable earnings, up to an annual limit known as the “maximum insurable earnings” (MIE), set at CAD44,200 for 2011. Employers pay 1.4 times the employee premium rate. Different rates apply to Quebec.

The premiums were frozen in 2009 and 2010 as part of plans to steer Canada out of recession, and last year the government introduced a limit on the annual increase in EI premium rates to 5% of insurable earnings in 2011 and 10% in subsequent years.

The present consultations will focus on how the EI rate-setting mechanism can be further improved to ensure more stable and predictable rates, while: ensuring the EI program breaks even over time; avoiding large cumulative surpluses or deficits; and maintaining a transparent rate-setting process.

Leitch said: “Canadians want to be certain that EI premiums are only used to pay for the EI program, which we have already accomplished with the creation of the Canada Employment Insurance Financing Board. Like the government, they also want the program to break even over time, with no large surpluses or deficits.”

Glover added: “With these consultations, we are aiming to ensure greater premium stability. This is in keeping with the spirit of the Next Phase of Canada’s Economic Action Plan and its measures to encourage business investment and growth, including tax reductions, cuts to red tape and a new one-time EI Hiring Credit for Small Business.”

The consultation is open until November 30.

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