Industry News

Payroll Deduction: Employment Insurance (EI)

(Article is based on information available at the time it was written: 2022-03-28) 

What is EI? 

Employment Insurance (EI) is a benefit provided to individuals who have lost their employment and are able to work, but unable to find work. The loss of employment must be due to factors not deemed to be the fault of the individual. In addition to the loss of employment, Service Canada also administers benefits for maternity/paternity leave, caregiver benefits as well as sickness benefits, among others. The EI rate and structure are similar across all provinces and territories except for Quebec (the rate is different and is administered through different organizations).  

How do I make contributions and how much should I contribute to EI?  

As an employee, you do not need to take any steps to contribute. EI is a standard source deduction and the employer is required to withhold the EI from their employee’s gross earnings when completing each payroll run and remit it to CRA. For 2022, the EI rate is 1.58% and this amount is applied to the employee’s gross earnings. Employers are required to contribute 1.4x the amount of EI that the employee is contributing. For example, if an employee contributes $500 to EI, the employer must contribute 1.4x that amount which would be $700. The EI rate is applied to all insurable earnings up until a maximum of $60,300 for 2022. The maximum amount you can contribute to EI in 2022 is $952.74 ($1333.84 for the employer). To summarize, the employer or payroll service provider (on behalf of an employer) will automatically make the EI deductions/calculations and remit them to CRA.

Who needs to contribute to EI? 

Almost any individual who receives remuneration/benefits for work has to contribute to EI. There is no age restriction for this. EI generally does not apply to owners of a business and so EI deductions are not taken off their pay. If, as an employee, you are related to the employer, you may also not be eligible to contribute/receive EI benefits (there are factors that determine this, it will not be the same for all circumstances). Certain EI benefits are also available for self-employed individuals who make contributions (not the “regular” benefits).    

How much can I receive from the EI benefit?  

The amount to be received will vary and will depend on the application that is provided to Service Canada. The maximum amount you could receive in 2022 is $638 per week. The general calculation for the benefit is to take 55% of your average insurable weekly earnings (up to a maximum). Many factors are taken into consideration in the application including insurable earnings, length of employment and the regional rate of unemployment. An ROE is issued once employment is terminated and Service Canada uses the information on the ROE to determine your earnings. ROEs are provided to Service Canada by your employer (or by a payroll service provider on behalf of the employer).  

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