Feds cut EI rate for employers, employees

But businesses charge the premium is still too high and is piling more money on the EI surplus
By
|hrreporter.com|Last Updated: 09/02/2005

The federal government is reducing the employment insurance (EI) contribution rate for employers and employees on Jan. 1, 2005.

The rate for employees will drop to $1.95 per $100 of insurable earnings, down from the current level of $1.98 per $100. The rate paid by employers will drop to $2.73 from $2.77 per $100 of insurable earnings.

“Today’s announcement represents the 11th consecutive reduction in the EI premium rate since 1994 when the rate was $3.07,” said Minister of Finance Ralph Goodale. “As a result of these rate reductions, employers and employees will pay $10.5 billion less in premiums in 2005 than they would have paid under the 1994 rate.”

Compared to 1994, today’s rate means a savings of $485 for employees who make maximum contributions.

“This reduction in EI premiums, along with recent changes to the program such as those related to seasonal workers announced on May 11, 2004, make the program more responsive to the needs of Canadians and of the Canadian workplace,” said Joe Volpe, Minister of Human Resources and Skills Development. “Canadians can be proud of their efforts to strengthen and grow the Canadian economy. It is that strength and the number of Canadians working that have allowed us to lower the rate again.”

Maximum insurable earnings will remain at $39,000 for 2005

Cut not deep enough: business

The Canadian Federation of Independent Business (CFIB) called the reduction “miniscule” given Canada’s strong economic performance in 2004 and forecasted growth.

“It’s better than a kick in the pants, however it’s not what our members were hoping for or deserve,” said CFIB executive vice-president Garth Whyte. “The government has broken all of its own principles for setting rates in order to continue pouring EI premiums into its budget surpluses. The premium rate setting is not transparent. The rate was not set on the basis of independent expert advice used by the government’s own actuary and the EI premium revenues are more than the expected program costs in 2005.”

Whyte said the announcement was “cooked up” behind closed doors. He said the break-even point for the plan could be up to 10 cents lower than what was announced.

“This means that on top of amassing over $46 billion surplus in EI premiums, and after the auditor general called for better management of the fund, the government is determined to continue this unfair tax on jobs,” said Whyte. “Our analysis shows the government is holding back a minium of $300 million in premiums that will flow into general revenues.”

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