Employment insurance premium rebate
As an employer, you may be eligible for a reduction in the employer EI premium rate that you use to calculate your share of the EI premiums if you offer income protection coverage, such as a wage loss replacement plan or other income maintenance plan, to your employees that reduce the EI benefits payable to an employee. For more information, go to How to reduce the EI premium rate if you provide your employees with a short-term disability plan.
If you are granted an EI premium reduction, you will calculate your employer's EI premiums using a rate that is lower than the standard employer rate of 1.4 times the employees' EI premiums.
You have to return 5/12 of any savings to your employees in the year in which you received the EI premium reduction, or within the first four months of the following year. This savings can either be given to your employee in cash, such as a cash allowance or a cash rebate, or indirectly through increased employer contributions to an employee's health and welfare trust, group sickness or accident insurance plan, private health services plan, or in any other manner. These indirect benefits will only be tax-free (i.e. not included in the employee's employment income) if they are given to the employee in the form of a benefit specifically exempt from taxation under paragraph 6(1)(a) of the Income Tax Act.
If the benefit is taxable, you must include it in your employee's income in the year the employee received it. For more information, go to Benefits and allowances chart.
If the benefit is taxable, it is also pensionable. Deduct income tax and CPP contributions. If the taxable benefit is paid in cash, it is insurable. Deduct EI premiums. If it is a non-cash benefit, it is not insurable. Do not deduct EI premiums.
Reporting the benefit
Report the taxable benefit in box 14 "Employment income" and in the "Other information" area under code 40 at the bottom of the T4 slip. For more information, see T4 – Information for employers.
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