Updated for 2025 · Employer rate 1.4x employee · Premium reductions
Employment Insurance (EI) is a federal program providing income support during unemployment, illness, parental leave, and other life events. Both employers and employees pay EI premiums. Employers pay a premium equal to 1.4 times the employee premium — making EI a significant payroll cost. Employers who offer qualified benefit plans may be eligible for EI premium reductions.
| Rate Component | 2025 Rate | Maximum Insurable Earnings | Maximum Premium |
|---|---|---|---|
| Employee rate | $1.64 per $100 of insurable earnings | $65,700 | $1,077.48/year |
| Employer rate | $2.296 per $100 (= 1.4x employee) | $65,700 | $1,508.47/year per employee |
Note: 2025 rates confirmed by ESDC. Quebec employees pay lower rates due to provincial parental insurance (QPIP): employee $1.31/$100; employer $1.834/$100.
EI premiums are calculated on "insurable earnings" which includes most forms of employment income:
Not included in insurable earnings: most non-cash taxable benefits (company car, parking), retiring allowances, or amounts above the maximum insurable earnings ceiling.
Employers pay exactly 1.4 times what each employee pays in EI premiums. There is no cap on the number of employees — the employer cost scales with the workforce. For payroll planning, every dollar of EI premiums paid by employees adds $1.40 in employer cost.
Employers who provide a qualified short-term disability plan that reduces reliance on EI sickness benefits may apply for an EI premium reduction. This is one of the most financially significant but underutilized employer benefits in Canada.
Service Canada administers the EI premium reduction program. If an employer's STD plan meets specific criteria, the employer receives a reduced EI premium rate. The criteria include:
Approved employers receive a reduced employer EI rate (typically around $2.00/$100 rather than $2.296/$100), generating meaningful savings across the workforce.
Employer responsibilities for T4 reporting include:
The employer's own EI premiums are not reported on the T4 — they are a business expense claimed on the corporate tax return.
Quebec has its own parental insurance program (QPIP) that covers maternity, paternity, parental, and adoption benefits. Quebec employers and employees pay separate QPIP premiums in addition to (reduced) federal EI premiums. In 2025:
Understanding the full cost of an employee helps with hiring decisions. For a $75,000 employee in Ontario in 2025:
| Cost Component | Approximate Annual Employer Cost |
|---|---|
| Base salary | $75,000 |
| Employer CPP (CPP1) | $4,034 |
| Employer EI | $1,508 |
| Employer Health Tax (Ontario, over $450K payroll threshold) | ~$1,200 (1.95% x $75K prorated) |
| Benefits (health, dental, LTD, life) | $3,000-$8,000 estimate |
| Total | ~$84,742-$89,742 |
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Get KOHO Free — Use Code 45ET55JSYAYes. EI applies to all employees earning insurable earnings, regardless of hours worked, as long as they are in insurable employment. The premium is calculated on actual insurable earnings, so part-time employees' lower earnings result in lower premiums proportionately.
No. True independent contractors are not in insurable employment and do not contribute to EI (and cannot collect EI). However, misclassifying employees as contractors is a serious CRA audit risk with significant consequences.
No. EI is mandatory for all insurable employment. There is no opt-out. However, certain employment types are excluded from insurable employment by regulation (e.g., employment by a corporation of which you are a majority shareholder).
This guide is for informational purposes. Verify current EI rates with ESDC/Service Canada annually. Consult a payroll professional for specific situations.