What is Employment Insurance (EI)?

Employment Insurance is the federal program that pays temporary benefits to workers who lose their job through no fault of their own, or who take leave for illness, pregnancy, parenting or caregiving. It is funded by premiums from employees and employers. Each pay period, the employer deducts the employee premium from insurable earnings and contributes its own share, then remits both with CPP and income tax to the CRA.

The employee rate is set per $100 of insurable earnings and changes each year, along with the Maximum Insurable Earnings (MIE), the annual ceiling after which no more premiums are due. The employer normally pays 1.4 times the employee premium. Employers in Québec use a lower EI rate because Québec runs its own parental insurance plan (QPIP), which has separate premiums. Employers with a qualifying short-term disability plan can apply for a reduced employer rate.

Unlike CPP, there is no age limit and no basic exemption: EI applies from the first dollar of insurable earnings. Some employment is not insurable, such as work by a person who controls more than 40% of the voting shares of the corporation, and certain related-party arrangements. When an employee leaves or has an interruption of earnings, the employer issues a Record of Employment so Service Canada can assess their claim.