Archived - Backgrounder on EI Rate Increase Limit
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The Government has taken three steps to support the economic recovery and to improve the Employment Insurance (EI) rate-setting mechanism.
- Premium Rate for 2011
The maximum increase in EI premiums for 2011 will be reduced from 15 cents to 5 cents per $100 of insurable earnings.
This will mean that the 2011 premium rate cannot exceed $1.78 per $100 of insurable earnings, near its lowest level since 1982.
This change is expected to save employers and employees $1.2 billion in 2011, relative to a 15-cent increase.
For a worker earning $43,000, this would represent a savings of $43, assuming the Canada Employment Insurance Financing Board would have increased the rate by the maximum allowed of 15 cents in 2011.
- Premium Rates for Subsequent Years
The maximum increase in premium rates for subsequent years will be reduced to 10 cents per $100 of insurable earnings.
This will save employers and employees $600 million relative to a 15-cent increase.
The Canada Employment Insurance Financing Board remains responsible for setting premium rates to ensure that the program just breaks even over time and managing a cash reserve.
The Government is simply adjusting one parameter in the rate-setting regime.
The 15-cent limit on annual rate changes was developed during a time of sustained economic expansion.
A 5-cent limit in 2011 and 10 cents thereafter strikes a balance between supporting the recovery and ensuring that the EI program breaks even over time.
The Government continues to support the principle that the EI system should break even over time. The current rate-setting mechanism, together with the cumulative deficit built up over the last two years, would require steady increases in EI premiums over a number of years to repay the deficit.
The Government will therefore launch consultations on ways to address this challenge. The consultations will explore ways to do this while building on the strengths of the current rate-setting regime. Details on these consultations will be announced shortly.
Canada Employment Insurance Financing Board
The Canada Employment Insurance Financing Board (CEIFB) is a Crown corporation established by the Canada Employment Insurance Financing Board Act in 2008. The CEIFB reports to Parliament through the Minister of Human Resources and Skills Development.
The creation of the CEIFB improves the governance and management of EI financing. The CEIFB is responsible for:
- implementing an EI premium rate-setting mechanism that will ensure that EI revenues and expenditures break even over time; and
- managing a separate bank account, where any excess EI revenues from a given year will be held and invested until they are used for EI purposes only.
The CEIFB ensures:
- independent decision-making regarding the management of EI financing; and
- that premium rates reflect actual program costs so that Canadians pay the right premium rates—just sufficient to cover the cost of benefits received.
Human Resources and Skills Development Canada continues to have policy responsibility for EI benefits, as well as responsibility for program delivery, to ensure that the EI program remains responsive to the needs of Canadians and that it is delivered efficiently and effectively.
Members of the CEIFB
The CEIFB is run by a representative board of seven directors, including a chairperson, with the necessary skills and expertise to effectively carry out the organization’s mandate.