EI Premiums

Definition

Employment Insurance (EI) premiums fund the federal program that pays benefits to workers who lose their jobs, take parental or sickness leave, or qualify for compassionate care. Premiums are deducted from most employee paycheques and matched, at 1.4 times the employee amount, by the employer. Quebec has a separate Quebec Parental Insurance Plan (QPIP) overlay, so Quebec employees and their employers pay a lower federal EI rate plus a QPIP premium.

Key rules

2026 parameters (outside Quebec; confirm CRA's annual publication):

• Premiums are calculated on gross insurable earnings without any basic exemption, unlike CPP.
• Employment Insurance Act s.5(2) and EI Regulations s.2 exclude from insurable employment any worker who controls more than 40% of the voting shares of the employing corporation. These controlling shareholders neither deduct nor match EI on their own wages.
• Non-arm's length employees (family members) are insurable only if the terms of employment are substantially similar to those that would exist between parties dealing at arm's length. A CRA officer can rule otherwise on a request under EI Act s.90.
• An employer that qualifies for its own short-term disability or wage-loss plan may be eligible for an EI premium reduction program, lowering its 1.4 multiplier.
• Over-remittance corrections follow the same PD24 process as CPP.

Example

An arm's-length employee is paid a $70,000 salary in 2026.

1. Insurable earnings are capped at the MIE of $65,700.
2. Employee EI premium: $65,700 × 1.63% = $1,070.91 for the year, withheld proportionally across pay periods.
3. Employer EI premium: $1,070.91 × 1.4 = $1,499.27.
4. Combined $2,570.18 flows through the PD7A remittance together with CPP and income tax.

Common mistakes

• Withholding EI from a controlling shareholder's salary. The money is not a valid credit on the employee's T1 and has to be refunded through a T4 amendment and PD24.
• Forgetting to tick Box 28 (EI exempt) on the T4 slip for exempt shareholders, which triggers a CRA pensionable and insurable earnings review (PIER).
• Applying a basic exemption. EI has none, unlike CPP.
• Not deducting EI from bonuses, commissions, or vacation pay. All forms of remuneration from insurable employment are insurable until the MIE is reached.
• Paying an arm's-length family member cash with the assumption it is automatically exempt. Only non-arm's-length terms trigger the review, and CRA will examine actual practice.

Related concepts

EI, CPP, and income tax are the three core payroll deductions. An interruption of earnings triggers a Record of Employment (ROE), and year-end totals appear on the T4 slip. The employer remits through the corporation's RP account.