As an employer, you have to deduct employment insurance (EI) premiums from your employee’s insurable earnings up to the yearly maximum. And you must contribute 1.4 times the amount of EI premiums that you deduct from your employee’s remuneration.
Insurable employment includes most employment in Canada under a contract of service (employer-employee relationship).
There is no age limit for deducting EI premiums.
EI premium rate and maximum
Each year, the CRA give the maximum insurable earnings and rate for you to calculate the amount of EI to deduct from your employees.
In 2016, the maximum annual insurable earning is $50,800; the EI premium rate is 1.88%; the maximum annual employee premium is $955.04 and the maximum annual employer premium is $1,337.06.
You have to deduct EI premiums from insurable earnings you pay to your employees. In addition, you must pay 1.4 times the amount of the employee’s premiums.
If you pay salary $2000/month to one employee in 2016, the EI premiums you deducted from this employee for the month
$37.6 ($2000 x 1.88%)
Plus: Your share of EI ($37.6× 1.4)
Total amount you remit for EI premiums for this month
You should stop deducting employment insurance premiums when you reach the employee’s maximum insurable earnings ($50,800 for 2016) or the maximum employee premium for the year ($955.04 for 2016).
The annual maximum insurable earnings ($50,800 for 2016) apply to each job the employee holds with different 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 paid the maximum premium amount during the previous employment.
The CRA will credit or refund any overpayments to employees when they file their income tax and benefit return.
EI premiums are not required to be deducted for the following types of employment:
- Casual employment if it is for a purpose other than your usual trade or business.
- Corporate employee who controls more than 40% of the corporation’s voting shares receiving salary, wages or other remuneration
- Directors’ fees
- Employment that is an exchange of work or service (even if there is a contract of service)
- Tips and gratuities (direct tips or gratuities – not controlled by the employer)