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Archived - Backgrounder: Supporting Jobs and Growth through Employment Insurance Premium Rates
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To protect the economy and jobs during the global financial crisis in 2008, Employment Insurance (EI) premium rates were frozen for two years as part of the Economic Action Plan.
Last fall the Government took steps to continue to support the economic recovery. The Government reduced the maximum increase in EI premium rates from 15 cents to 5 cents per $100 of insurable earnings in 2011 and 10 cents in subsequent years.
The Government is now taking additional action to help Canadian workers and employers overcome challenges posed by the fragility of global economic growth and to improve the EI rate-setting mechanism.
1. Premium Rate for 2012
The maximum increase in EI premiums for 2012 will be reduced from 10 cents to 5 cents per $100 of insurable earnings, the same maximum increase as in 2011.
This will mean that the 2012 premium rate cannot exceed $1.83 per $100 of insurable earnings, near its lowest level since 1982.
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 has simply adjusted one parameter in the rate-setting regime—the limit on annual rate changes for 2012. All other aspects of the rate-setting regime remain unchanged.
This change is expected to save employers and employees $600 million in 2012, relative to a 10-cent increase.
2. Premium Rates for Subsequent Years
The maximum increase in premium rates for subsequent years will be maintained at 10 cents per $100 of insurable earnings.
A 5-cent limit in 2012 and 10 cents thereafter strikes a balance between supporting the recovery and ensuring that the EI program breaks even over time.
3. Consultations
The Government is currently conducting consultations that are focused on how the EI rate-setting mechanism can be further improved to ensure more stable and predictable rates, while:
- ensuring the EI program breaks even over time;
- avoiding large cumulative surpluses or deficits; and
- maintaining a transparent rate-setting process.
A number of roundtable discussions between the Parliamentary Secretaries to the Ministers of Finance and Human Resources and Skills Development and invited key stakeholders and experts have taken place over the past few months.
In addition, a web-based consultation process is in place to receive written recommendations up to November 30, 2011.
The Government will report on these consultations in the coming months.
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.
