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New year, new money: A quick overview of the EI Premium Reduction Program

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New Year’s has always been a time to reflect. As employers, such reflection often leads to consideration of things that can help to impact the bottom line. And one of the best levers to do that – cost savings!

I’m always surprised to discover that many employers are not aware of the Employment Insurance (EI) Premium Reduction Program. In essence, if you provide your employees with a short-term disability (STD) plan, you may be eligible for a premium reduction.

The premium reduction program is intended to recognize that, in addition to regular EI benefits, the EI program also offers special benefits in the event of sickness. Where an employer offers similar benefits to its employees through a STD plan, employees may not have recourse to EI sick benefits. For this reason, Service Canada offers the premiums reduction program to return the savings to both the employer and its employees.

In order to qualify for a premium reduction, your STD plan must meet a number of criteria, specifically the plan must:

  • provide at least 15 weeks of benefits for short-term disability;
  • match or exceed the level of benefits provided under EI;
  • pay benefits to employees within 14 days of illness or injury (with recent changes to the EI program, this may soon be reduced to seven days);
  • be accessible to employees within three months of hiring; and
  • cover employees on a 24-hour-a-day basis.

If your STD plan meets these criteria, the premium reduction program could result in cost savings of up to $172.87 per year per employee. However, as part of the program, an employer must undertake to return a portion (5/12th) of these savings to the employees. This need not take the form of a cash remittance – it can be invested in new employee benefits or upgrades to existing benefits. Regardless of the method chosen, this return must take place in the same year in which the savings accrued to the employer.

It is important to note that a qualifying STD plan includes a number of different plans: accumulated sick leave policies as well as, self and group-insured plans would all qualify.

The application process is simple and straightforward so you really have nothing to lose. All the information you require in order to apply is available in a program guide issued by Service Canada, which is available here. Since the new year is intended to celebrate a new beginning, what better way to begin than to start saving money.

Adrian Ishak

About the Author: Toronto Employment Lawyer Adrian Ishak’s practice focuses on all aspects of employment law including employee relations, terminations, wrongful dismissals, employment contracts, and employment policies. He provides strategic counselling on a number of human resources, privacy and human rights issues. With a joint Ontario and Québec call and with experience in both jurisdictions, Adrian guides his clients through employment standards matters, pay and employment equity, and human rights obligations in Canadian common law and Québec’s civil law jurisdiction. Adrian represents clients in both English and French.