In Canada, both employees and employers make contributions to employment insurance (or EI) premiums. Employee contribution amounts are determined by employee insurable earnings multiplied by the federal (or provincial, in Quebec) rate, up to a maximum annual insurable earnings amount. You can locate the latest Federal and provincial (Quebec) EI premium rates and maximums by visiting https://www.canada.ca.
Employers must contribute EI premiums based on a factor of 1.4 times the employee's premium contribution (there can be exceptions: see https://www.canada.ca and talk with your implementation consultant). If we take Linda as an example again Employers also have a federal – or provincial, for Quebec – maximum annual employer premium amount. As a rule, the employer is responsible for the following:
- Deducting employee EI premiums from the employee's insurable earnings up to a maximum annual premium amount
- Contributing employer EI premiums, calculated by multiplying employee contributions by 1.4, up to a maximum annual employer premium amount
For the year 2018, for employee contributions, the federal rate is 1.66% on a maximum annual insurable earnings amount of $51,700, for a maximum annual employee contribution amount of $858.22. The employer maximum annual premium amount is $1,201.51.
For example, if Linda lives in Ontario and earns $30,000 annually, her total annual EI contribution amount would be $489, calculated as follows: $30,000 x 1.66% = $489
The employer's total annual EI contribution amount would be $684.60, calculated by multiplying Linda's amount by 1.4: $489 x 1.4 = $684.60
However, if Linda's annual salary were $95,000, her total EI contributions would be $858.22, and her employer's contributions would be $1,201.51, because the 2018 maximum annual insurable earnings amount is $51,700.
To set the employment insurance factors for a legal entity, you need to create at least one EI rate group and reference code entry and save it, effectively assigning it to the legal entity.
If the legal entity has received permission from Service Canada to remit employment insurance premiums at a lower rate, you can enter an additional EI rate group and reference code with a lower defined factor. If you configure multiple EI rate groups for a legal entity, you can override the default rate group at the employee level in People for a selected employee in the Payroll > Tax Definitions screen in the Employee Payroll Tax section. Instructions and additional information are available in the topic Assign EI Rates to Employees.
In the following screenshot, you can see the entries for employment insurance rates for a selected legal entity in the Employment Insurance sub-tab:
In the example screenshot, in addition to the Default EI rate group, you can see additional EI rate entries for the legal entity Manufacturing Co. Canada. Each of these was set up with a different rate. Take the example Category 3 EI 1.224, which has a rate set at 1.224 with an effective start date of January 1, 2020:
After you have created employment insurance rates for a legal entity, you can assign them to employees. See Assign EI Rates to Employees.