Expected EI premium hikes court controversy

Canada’s EI system is facing a shortfall in the wake of the recession, but is increasing premiums during the recovery the way to go?
By Jeffrey R. Smith
|Canadian Payroll Reporter|Last Updated: 11/24/2010

Canada’s employment insurance (EI) system may be at a crossroads. Several years ago, many thought the premiums employers and employees were required to pay into the system were higher than necessary to maintain it. The money taken in from premiums were greater than the cost of benefits and, as a result, the EI fund grew a surplus of $57 billion.

However, in a relatively short time, things completely changed for EI. The $57 billion surplus went into the federal government’s coffers and was used to pay general expenses. In response to the outcry from business and labour groups, a separate fund was created into which money collected from premiums would go, along with a board to oversee it. This money would stay separate from other government revenues and the EI system would be self-funding. However, the previous surplus was gone and the revamped fund started with $2 billion in 2008. In addition, rules were established that if the fund dropped below $2 billion, annual increases to premiums would be automatically set at the maximums — $0.15 per $100 of earnings for employees and $0.21 for employers — until the fund hit $2 billion.