EI Premium Reduction Program – For employers
If you are an employer who provides your employees with a short-term disability plan and your plan meets certain requirements, you may be entitled to pay your Employment Insurance (EI) premiums at a rate that is lower than the standard employer rate of 1.4 times the employees' EI premiums.
On January 1, 2017, the EI waiting period was reduced from two weeks to one week.
Short term disability plans that are registered with the Premium Reduction Program may have an elimination period before the payment of benefits, similar to the EI waiting period.
To align with the EI one-week waiting period, a regulatory amendment was made to reduce the elimination period standard for short-term disability plans to a maximum of seven consecutive days (from 14 days), effective January 1, 2017.
Some employers may have existing qualifying plans that were in place prior to January 1, 2017, and which no longer meet the new standard. To mitigate the impact on these employers and their employees, the Government has put in place a four-year transitional period (from January 1, 2017 to January 2, 2021) to provide affected employers time to make adjustments to their short-term disability plan to meet the new standard. During the transitional period, they can continue to qualify to participate in the program and receive a premium reduction.
At the end of the transitional period, all affected employers’ short-term disability plans will need to be in compliance with the amended elimination period standard, in order to retain their premium reduction.
Basic requirements that must be met
To be considered for a premium reduction, the plan that provides short-term disability benefits to employees must:
- provide at least 15 weeks of benefits for short-term disability;
- match or exceed the level of benefits provided under EI;
- pay benefit to employees within 8 days of illness or injury (the elimination period cannot exceed 7 consecutive days);
- be accessible to employees within three months of hiring; and
- cover employees on a 24-hour-a-day basis.
Evidence of the employer's commitment to provide a short-terms disability plan is required. In addition, the employer must provide an undertaking that they will return 5/12 of the savings to the employees covered by their plan.
For more information please refer to the Program Guide.
This guide provides detailed information about:
Under the Employment Insurance (EI) Act and the EI Regulations, an employer's EI premiums may be reduced when employees are covered by a qualified short-term disability plan which reduces EI benefits that would be payable if such a plan did not exist.
For each calendar year, the rates of premium reduction are established based on four categories of qualified plans, with a distinct rate for each category. These categories of qualified plans are identified as follows:
Category 1 - A cumulative paid sick leave plan which allows for a minimum monthly accumulation of 1 day and a total accumulation of at least 75 days.
Category 2 - A cumulative paid sick leave plan which allows for a minimum monthly accumulation of 1 2/3 days and a total accumulation of at least 125 days.
Category 3 - A weekly indemnity plan with a benefit period of at least 15 weeks.
Category 4 - A weekly indemnity plan with a benefit period of at least 52 weeks. (This reduction is available only to public and para-public employers of a province.)
In September of each year, the annual rate of premium reduction applicable to the following calendar year for each plan category is calculated by the Canada Employment Insurance Commission's Chief Actuary, EI Premium Rate Setting, pursuant to section 69 of the Employment Insurance Act. Because an annual rate of premium reduction is given only when the effective date of an employer's reduction is January 1, the pro-rated rate of reduction is based on the number of months in the year for which the employer is entitled to a reduction.
Rates of premium reduction are expressed as a percentage of employee insurable earnings. A corresponding multiple must then be used by the employer to calculate the employer premiums payable based on the employee premiums. Employers cannot use a reduced rate until such time that they receive an entitlement decision from Service Canada containing their individual assigned rate. The multiple that is used by an employer who does not have a reduction is 1.4.
You may access the annual and pro-rated rates of reduction and their corresponding multiples for a particular year by consulting the following options:
- 2017 Rates and Multiples
- 2017 Rates and Multiples - Quebec Parental Insurance Plan contributors
- 2018 Rates and Multiples
- 2018 Rates and Multiples - Quebec Parental Insurance Plan contributors
- 2019 Rates and Multiples
- 2019 Rates and Multiples - Quebec Parental Insurance Plan contributors
Information about the maximum insurable earnings:
How to contact us
For further information, contact the EI Premium Reduction Program.
Frequently asked questions
Who can apply for a premium reduction?
Employers who have insured employees covered by a short-term disability plan may apply. Insured employees are those on whose behalf an employer remits EI premiums to the Canada Revenue Agency (CRA).
How do I apply for a premium reduction?
When may I apply for a premium reduction?
You may apply at any time. If your plan meets the requirements for a premium reduction on the date you applied, the effective date of the reduction will be based on that date; otherwise the effective date of your reduction is based on when your plan becomes a qualifying plan. For more information, refer to Chapter 2 of the Program Guide.
What must I submit with my application?
You must submit a copy of: the short-term disability plan(s) provided to your employees, any collective agreements(s) that are applicable to the employees covered by the short-term disability plan(s) and the written mutual agreement between you and your employees regarding your obligation to return their portion of the reduction, if such an agreement exists.
What if some of these documents are not available when I apply?
Submit your application along with any documents you can supply. We will contact you to request any missing documentation required when we assess your application. The missing documentation must be provided within 30 days after our request is made.
In addition to the date I apply, what other factors determine my reduced rate?
Your reduced rate is also determined by the type of short-term disability plan provided to your employees and the number of months during the year the plan meets our requirements.
What are the basic requirements of a short-term disability plan?
The plan must:
- provide at least 15 weeks of benefits,
- match or exceed the level of benefits provided under EI,
- pay benefits within 8 days of a disability (the elimination period cannot exceed 7 consecutive days),
- allow employees covered by the plan to claim benefits after an eligibility period of 3 months or less, and
- cover employees on a 24-hour-a-day basis.
What if I have some employees not covered by the plan?
You would not be entitled to a reduction on behalf of these employees. This means that if you were granted a reduction, you would be required to report these employees under a separate payroll deductions account from the one that would be assigned a reduced rate. For more information, refer to Chapter 3 of the Program Guide.
Must I meet other requirements in addition to having an acceptable plan?
Yes, it is your obligation to ensure that employees covered by the plan benefit from the reduction in an amount at least equal to 5/12 of the total savings. For more information, refer to Chapter 5 of the Program Guide.
How much will my reduction be?
As explained in question 2 and 3, your reduction is based on a number of factors. For the year 2019, the best reduced EI rate available to an employer with an acceptable weekly indemnity plan is 1.181. Because the maximum insurable earnings per employee per year is $53,100 for the year 2019, the maximum savings per employee per year is $199.97. You may access the reduced EI premium rates for the current year.
Can I receive a retroactive reduction?
No, the effective date of a reduction is based on the application date. You may ask that your application be 'antedated' if you can demonstrate that you had good cause for not applying earlier.
What happens if I qualify for an EI premium reduction?
If we determine that you meet all the requirements and qualify for a reduction, you will be notified in writing. This letter will indicate the reduced rate you should use for the entire year to calculate your employer EI premiums. Your reduction is a direct result of this calculation.
What if I don't qualify?
If you do not qualify, we will send you a non-entitlement decision letter. The letter will include the reasons why you do not meet the requirements for receiving a reduction.
If you choose to modify your plan so that it meets all the requirements, you will be required to resubmit an Application for Employment Insurance Premium Reduction (NAS5022) along with a copy of your revised plan.
What if I do not agree with the decision made on my application?
You may appeal any decision to the Commission by sending us a letter, giving the reasons for your appeal. Your letter must be sent within one year of the date on our notice of decision.
How will the reduction affect the administration of my payroll?
Because the same EI rate must be applied to remittances made throughout the entire calendar year, once you receive notification of your reduced rate, you will have to recalculate the employer EI premiums already paid retroactive to January 1, based on your new rate. Then, when you make the next remittance of source deductions, you will have to make the necessary financial adjustments by remitting the amount owed for the period less the amount you calculated as being an overpayment due to your new rate. If you have some employees not covered by your plan, this also affects the administration of your payroll.
Do I have to reapply for an EI premium reduction every year?
No, once you are granted an EI premium reduction, your entitlement will continue until you change or cancel your approved plan.
What if I want to cover a new group of employees under a plan?
You should contact us immediately. You will be asked to provide proof of short-term disability coverage for these employees and also information regarding how these employees will receive their portion of the reduction (if it is different than the one offered to employees already covered by the plan).
What if I make changes to
- my plan or cancel it?
- my address or payroll deductions account?
- ownership or a change to the organizational structure?
You must notify us. Please refer to Chapter 6 of the Program Guide.
Guides and help
- Employer Guide — Automated Earnings Reporting System (AERS)
- Guide for the Supplemental Unemployment Benefit (SUB) program
- How to complete the Record of Employment (ROE) form
- Supplement to the guide "How to complete the Record of Employment (ROE) form" for all school boards
- The EI Premium Reduction Program – A guide for employers offering short-term disability plans to their employees
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