EI - Employment Insurance (Canada)
Canada's federal social insurance program that provides temporary income support to eligible workers who lose their job through no fault of their own, as well as benefits for sickness, maternity, parental leave, caregiving, and fishing-related employment.
- What Is Employment Insurance (EI) in Canada?
- EI Premium Rates and Maximums (2024)
- How to Calculate EI Premiums in Payroll
- Types of EI Benefits
- Record of Employment (ROE)
- What Counts as Insurable Earnings
- Supplemental Unemployment Benefit (SUB) Plans
- Employment Insurance Statistics
- Frequently Asked Questions About Employment Insurance
What Is Employment Insurance (EI) in Canada?
Key Takeaways
- ✓Employment Insurance (EI) is a federal program that provides temporary income replacement to Canadians who lose their jobs involuntarily, funded through premiums paid by employees and employers on insurable earnings.
- ✓The employee premium rate is 1.66% of insurable earnings in 2024, and employers pay 1.4 times the employee rate (2.324%), making EI an employer-subsidized program.
- ✓EI covers more than job loss: it includes sickness benefits (26 weeks), maternity benefits (15 weeks), parental benefits (up to 69 weeks extended), caregiving benefits (26 weeks), and fishing benefits.
- ✓Maximum insurable earnings in 2024 are CAD 63,200, capping the maximum annual employee premium at CAD 1,049.12.
- ✓Over 1.8 million Canadians received EI regular benefits in FY2022-23, with average weekly benefits of approximately CAD 560 (ESDC).
Employment Insurance has been part of Canada's social safety net since 1940 (originally called Unemployment Insurance). It was renamed in 1996 and the program was significantly restructured to include a wider range of benefits beyond unemployment. For payroll teams, EI means another mandatory deduction from every employee's pay. The calculation is simpler than CPP because there's no basic exemption. You multiply insurable earnings by the premium rate. But the administrative side gets complicated when dealing with Records of Employment (ROEs), insurable hours tracking, and the employer premium reduction program. The program is funded entirely by employee and employer premiums. No general tax revenue goes into EI. The premiums flow into the EI Operating Account, which is managed by the federal government. When the account runs a surplus, rates decrease. When it runs a deficit (as during COVID-19), rates increase.
How to Calculate EI Premiums in Payroll
EI premium calculation is one of the simpler payroll deductions in Canada, but year-end maximums and multi-province scenarios require attention.
Per-pay-period calculation
Step 1: Determine the employee's insurable earnings for the pay period (this includes most types of employment income: salary, wages, tips, bonuses, commissions, and taxable benefits). Step 2: Multiply insurable earnings by 1.66% (or 1.32% for Quebec). Step 3: The result is the employee EI premium for the period. Step 4: The employer adds 1.4 times the employee premium as the employer's contribution. Example: Employee earns CAD 5,000 bi-weekly (outside Quebec). Employee EI premium: CAD 5,000 x 1.66% = CAD 83.00. Employer premium: CAD 83.00 x 1.4 = CAD 116.20. Total EI remittance: CAD 199.20.
Annual maximum and year-end
Once an employee's cumulative EI premiums for the year reach the annual maximum (CAD 1,049.12 in 2024 outside Quebec), the employer must stop deducting EI premiums. This typically happens in the last few pay periods for employees earning above the insurable earnings cap. The employer's contribution also stops when the employee's deductions are maxed out. Payroll software should automatically track cumulative premiums and stop deductions at the maximum.
Types of EI Benefits
EI provides income support across seven distinct benefit categories, each with its own eligibility rules and duration.
Regular benefits (job loss)
The core EI benefit. Available to workers who lose their jobs through no fault of their own (layoff, company closure, shortage of work). Employees who quit voluntarily or are fired for misconduct are generally ineligible unless they can show just cause. Benefits are 55% of average insurable earnings, up to a weekly maximum of CAD 668 (2024). Duration depends on hours worked and the regional unemployment rate: 14 to 45 weeks. Employees must complete a two-week unpaid waiting period before benefits begin.
Sickness benefits
Up to 26 weeks (increased from 15 weeks in December 2022) for employees who can't work due to illness, injury, or quarantine. A medical certificate is required. Benefits are 55% of average insurable earnings. The 26-week duration was a significant expansion that reduced the gap between EI sickness benefits and long-term disability programs.
Maternity and parental benefits
Maternity benefits: 15 weeks at 55% of earnings, available to the birth parent only, starting up to 12 weeks before the expected due date. Standard parental benefits: up to 40 weeks at 55% (maximum 35 weeks for one parent), shared between parents. Extended parental benefits: up to 69 weeks at 33% (maximum 61 weeks for one parent). Parents choose standard or extended. The total can't exceed 40 weeks (standard) or 69 weeks (extended) combined between both parents.
Caregiving and compassionate care
Compassionate care benefits: up to 26 weeks at 55% for employees caring for a family member with a serious medical condition and a significant risk of death. Family caregiver benefits for children: up to 35 weeks at 55%. Family caregiver benefits for adults: up to 15 weeks at 55%. These benefits recognize that caregiving responsibilities can force employees to leave work temporarily.
Record of Employment (ROE)
The ROE is a critical document that employers must issue whenever an employee stops working, even temporarily. It triggers the EI claims process.
When to issue an ROE
Employers must issue an ROE every time there's an interruption of earnings: layoff, termination, resignation, retirement, leave of absence, reduction in hours below 60% of normal weekly hours, maternity or parental leave, sickness, injury, or any other break in employment. The ROE must be submitted electronically through ROE Web within 5 calendar days of the last day of work or the first day without earnings, whichever is earlier. Paper ROEs (if used under an exemption) must be issued within 5 days.
Key ROE fields
Block 10 (First Day Worked): The first day the employee worked for this employer. Block 11 (Last Day Paid): The last day for which the employee was paid, even if they didn't work. Block 12 (Final Pay Period Ending Date): The end date of the last pay period. Block 15A (Total Insurable Hours): Total hours worked during the qualifying period. Block 15B (Total Insurable Earnings): Gross earnings in the qualifying period, broken into pay-period amounts. Block 16 (Reason for Issuing): The code indicating why employment was interrupted (A = Shortage of work, E = Quit, M = Dismissal, D = Illness or injury, etc.). Getting Block 16 wrong can delay or deny an employee's EI claim.
Common ROE mistakes
Using the wrong reason code (Block 16). Reporting net earnings instead of gross insurable earnings. Missing the 5-day deadline. Not issuing an ROE for short leaves of absence. Including non-insurable earnings (employer pension contributions, for example). Reporting the wrong insurable hours for salaried employees (salaried employees are typically assigned a standard 7 or 7.5 hours per day). The EI Commission audits ROEs and can penalize employers for persistent errors.
What Counts as Insurable Earnings
Not all payments to employees are subject to EI premiums. Understanding the distinction prevents over-deduction and under-deduction errors.
| Payment Type | EI Insurable? | Notes |
|---|---|---|
| Base salary and wages | Yes | The primary component of insurable earnings |
| Overtime pay | Yes | Included at the overtime rate |
| Bonuses and commissions | Yes | Included in the pay period when paid |
| Taxable benefits (group life insurance, car allowance) | Yes | Most taxable benefits are insurable |
| Tips and gratuities (controlled by employer) | Yes | Tips paid through the employer's system |
| Vacation pay | Yes | Whether paid as a lump sum or accrued |
| Severance pay | No | Payments made because of job loss are not insurable |
| Retiring allowances | No | Amounts paid on retirement for long service |
| Employer pension contributions | No | Contributions to RPP or RRSP are not insurable |
| Supplemental unemployment benefit (SUB) plans | No | If the plan is registered with the EI Commission |
Supplemental Unemployment Benefit (SUB) Plans
Many Canadian employers offer SUB plans that top up EI benefits during maternity, parental, or sickness leave without reducing the employee's EI entitlement.
How SUB plans work
An employer registers a SUB plan with Service Canada. When an employee goes on EI-eligible leave (maternity, parental, sickness, compassionate care), the employer tops up the EI benefit to a percentage of the employee's normal earnings, typically 93% to 100%. The top-up payment is not classified as earnings for EI purposes, so it doesn't reduce the employee's EI benefits. Without a registered SUB plan, employer top-up payments would be considered earnings and would dollar-for-dollar reduce EI benefits.
Plan requirements
The plan must be registered with the EI Commission before benefits are paid. It can only cover employees receiving EI benefits. The total benefit (EI + SUB) can't exceed 100% of the employee's normal weekly earnings. The employer must be the sole contributor (no employee contributions to the SUB plan). The plan must cover a group or class of employees (not just one individual, unless the company has only one employee). The plan isn't required by law, but it's a common competitive benefit, especially for attracting and retaining employees during peak childbearing years.
Employment Insurance Statistics
EI is one of Canada's largest social programs, touching millions of Canadians annually.
Frequently Asked Questions
Can an employee receive EI if they quit their job?
Do all employees pay EI premiums?
How does the EI waiting period work?
What happens when an employee works while receiving EI?
Is EI premium a tax-deductible expense for employers?
How does EI work in Quebec?
Written by Adithyan RK