To Pay Or Not To Pay - The Rules Of Employment Insurance
September 21, 2015
When it comes to having employees & payroll, you have to keep in mind that you must deduct employment insurance (EI) from each dollar of insurable earnings (up to a yearly maximum) for each of your employees. However, you also have to contribute 1.4 times the amount of EI premiums that you deduct. This is a large, and complicated, aspect of conducting your own payroll. It’s really important to know the rules. For example, if you have a family member (by marriage, adoption, or blood) working for you, they may not be insurable at all in terms of employment.
The Canada Revenue Agency decides based on four circumstances, whether a person is eligible or not for employment insurance: Remuneration paid, terms and conditions of employment, duration, and nature/ importance of the work performed. If you are not sure whether a relation’s employment is insurable, call the CRA at 1.800.959.5525. If they conclude that you would have hired a non-related person under the same circumstances, then your employee/relative is insurable. If not, EI premiums should not be paid.
Managing your own payroll is a complicated task. There are a lot of rules to monitor and apply. Be sure to keep your finger on the pulse of the situation so that you’re not giving out unnecessary money, or paying penalties for disobeying rules you didn’t even know existed.