Canada Restricts Employment Insurance Increase

by Mike Godfrey, Tax-News.com, Washington

04 October 2010

Canadian Minister for Finance, Jim Flaherty has announced that, to support Canada’s economic recovery, increases to Employment Insurance (EI) premiums will be limited to CAD0.05 per CAD100 of insurable earnings and CAD0.10 for subsequent years.

“To help Canadian workers and employers overcome the challenges posed by the 2008 global financial crisis, the Harper government acted in Canada’s Economic Action Plan to freeze EI premiums for 2009 and 2010 at their lowest level since 1982. To maintain the momentum of Canada’s economic recovery, our government will reduce the recommended EI rate increase by two-thirds,” said Flaherty. “At a time when every dollar counts to individual families, this could mean almost CAD75 extra in the budget of the average Canadian family next year. Cumulatively, this will amount to CAD1.2bn back in the pockets of workers and job creators.”

The Canada Employment Insurance Financing Board (CEIFB) is required to set the rate by November 14, 2010. Without the newly-announced limit in place, the CEIFB would have raised premiums by the full legislative limit of CAD0.15 cents. Under the new limit, the employee rate per CAD100 of insurable earnings can rise to no higher than CAD1.78, starting January 1, 2011. Employers contribute 1.4 times the employee’s premiums. The rate is different in Quebec than in the rest of Canada because Quebec has assumed responsibility for maternity and parental benefits.

The federal government will also undertake consultations with Canadian individuals and businesses on how the EI rate-setting mechanism can be further improved to ensure more stable, predictable rates going forward. Details on these consultations will be announced shortly, Flaherty said.

“Canadians want to be certain that EI premiums are only used to pay for the EI program, which we have already accomplished. They also don’t want to see rapid increases in premiums, and our government is listening and acting on those concerns by limiting EI premium increases to protect Canadian jobs,” Flaherty said. “Our plan balances the genuine importance of preventing large EI rate increases, which would jeopardize our fragile economic recovery, and the unavoidable need to bring the EI account back to balance over time.”

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