Crunching the EI Premium Numbers

Last week we reported on the New Small Business Job Credit will provide savings to small businesses through a reduction in EI premiums. This week, we’ll show you how employers will benefit.

The employer’s EI premium deductions and remittance to CRA in 2015 and 2016 will be submitted as per usual. However if the small business qualifies for the proposed Small Business Job Credit the business will receive a cheque or a credit (if an amount is outstanding to CRA) from CRA after the T4 slips and summary are processed. There is a time limit for small businesses to receive this credit – CRA must receive all T4 slips and summaries (originals or adjustments) before January 1, 2019 for tax year 2015 and
January 1, 2020 for 2016.

Here’s an example of how it will work:

Currently: An employer pays 1.4 times the premium paid by an employee. For example a small business in 2014 with 10 employees who earn $45,000 each, would pay $1,184.40 ($846 x 1.4) per employee. The total EI premium to be paid by the small business for 2014 would be $11,844 ($1184.40 x 10).

Proposed Change: In 2015 the same employer with the same number of employees and no change to their annual earnings would remit the same amount to CRA ($11,844) for the employer’s portion of EI premium.

However because the employer annual premium is less than $15,000 the small business will receive a refund of the difference between the employer premiums paid at the legislated rate ($1.88 per $100) x 1.4 and the premiums calculated under the reduced small business rate ($1.60 per $100) x 1.4. The Small Business Job Credit refund amount would be $1,764 ($11,844 - $10,080). This represents a savings of approximately 15%.

Reported by Jenifer Profitt, DFA-Bookkeeping Service Specialist. Jenifer is based in Pickering, ON and provides support to students of the Knowledge Bureau Advanced Payroll course.