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Blue Canvas is ALWAYS on the lookout to help our clients save money – especially when it comes to payroll. As an employer, you can save money each month by participating in the EI Reduction Program offered by Service Canada. It is quite easy to sign up with a one page application and start saving. And, since the program is ongoing, you are able to save year after year.
The EI Reduction Program aims to eliminate the duplicated insurance costs to both employers and employees who also have to pay premiums for the Short Term Disability (STD) benefits to an outside party, (Blue Cross, Manulife, etc). Because employees will utilize the benefits through their employer’s plan, Service Canada will allow a reduction to the EI premiums they request.
What’s in it for me?
In order to efficiently administer the program, the premiums will be calculated and a lower employer portion of EI benefits will be sent to the government each month as usual. You do not make adjustments to the employees EI calculations. However, the saving from what you used to pay and what you now pay has to be allocated to the employer and employee. The formula is 5/12 to the employee and 7/12 to the employer. So, if the premium reductions per month are $1200, then the savings to the employer is $700 and the employees get $500. At some point, you have to give this back to your employee, (4 months after year end), and there are many ways to reimburse them which is acceptable to the government. You are specifically asked on the application, “as the employer you are required to return 5/12 of the reduction to the employees. How will you return this portion of savings?”
Ways to Give Back
The most obvious way to give back the premium reduction would be by way of a payment through payroll. If you do decide to return the funds, this refund would be taxable to your employees.
As an employer, you might also want to provide your employees with a new benefit – say perhaps an enhancement to an existing benefit, (better vision or dental benefits?). What about spending the funds on a company picnic? A new appliance for the lunchroom? Offering free coffee or drinks instead of charging? A better venue for the annual Christmas party? The benefit must be accessible to all employees who could participate in the reduced EI program, (that is, participate in the STD plan with your company).
How Much in Savings are we Talking About?
The maximum amount of the rebate can be up to $104 per employee per year to the employer and up to $74 per year for the employee. This of course, depends on the earnings of your employees. Considering that the cost of using a payroll provider per employee can hover around $100 per year, utilizing this program can essentially get your payroll done for free, (or at a considerable discount)!
Sound confusing? Not at all! Contact Blue Canvas to find out more about how your payroll can be processed correctly AND at a discount by using the EI reduction program.