How to reduce the EI premium rate if you provide your employees with a short-term disability plan
Some employers provide a wage-loss replacement plan for short-term disability to their employees. If the plan meets certain standards established by the Employment Insurance Regulations, the employer's EI premiums could be paid at a reduced rate (less than 1.4 times the employee's premiums).
To benefit from a reduced employer premium rate, you have to register with the EI Premium Reduction Program by submitting:
- an initial application, which you can find in Service Canada's publication called the Employment Insurance premium reduction program; and
- a copy of the short-term disability plan provided to your employees.
The employer's EI premiums are reduced only in respect of employees covered by the approved plan (this includes employees serving an eligibility period under the plan of three months or less).
These employees will continue to be reported under the current payroll program account, which will be set at a reduced rate. An officer of the EI Premium Reduction Program will ask you to open an additional payroll program account under your business number (BN) to make a separate remittance for employees not covered by the plan.
You have to file a separate T4 information return for each payroll account under your BN:
- For employees covered under an approved plan, report their income and deductions using your payroll program account at the reduced EI premium rate (for example, RP0001).
- For employees who are not covered by the plan, report their income and deductions using your payroll program account at the standard rate of 1.4 times the employee's premiums (for example, RP0002).
Where an employee was transferred between both accounts in the same calendar year, file a separate T4 slip for each account.
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