Jim Flaherty puts 3-year freeze on EI premiums

Finance Minister Jim Flaherty announced a 3 year-freeze on EI premiums for employers and employees on Monday.
Minister of Finance Jim Flaherty takes a look inside a recreational vehicle after announcing a three-year freeze to EI premiums at a business near Ottawa Monday. (Adrian Wyld/Canadian Press)

Finance Minister Jim Flaherty announced a three year-freeze on employment insurance premiums for employers and employees on Monday as a way to support small and medium-size businesses and working Canadians.

"We are able to do this because of the falling unemployment rate — more people are working, fewer people are claiming employment insurance benefits and as a result the employment insurance operating account is on track to return to balance earlier than had been planned," Flaherty told reporters in Ottawa.

Flaherty said cancelling the premium increase the government had announced in the last budget will result in savings of $660 million in 2014 for both employers and employees.

However, maximum insurable earnings will rise to $48,600 in 2014, which means higher-income employees will still pay more in premiums next year, just not as much as they would have under the planned increase. 

Employees earning the maximum insurable amount will pay $913.68 in 2014, an increase of $22.56 over 2013 but $24 less than they would have if the planned increase had gone ahead.

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For employers, the maximum annual premium will rise $31.58 to $1,279.15, $34 less than anticipated thanks to the freeze, according to the Finance Department.

Maximum insurable earnings were frozen at $39,000 for more than a decade, but have been increased annually since 2007.

Maximum weekly benefits have also increased over the period.

Critics denounce EI premiums freeze

While retailers welcomed the three-year freeze, the Opposition New Democrats denounced it as a "desperate attempt" by the Conservatives to cover their mismanagement of the EI program by making it more difficult for unemployed Canadians to access the fund.

"The Conservatives and Liberals robbed the EI fund of a $57-billion surplus and left it with an $8-billion deficit. Now they’re trying to clean up their mess on the backs of unemployed Canadians," said NDP employment and social development critic Jinny Sims in a written statement on Monday.

"Flaherty has the gall to claim he’s doing EI recipients and workers a favour even though drastic Conservative EI reforms mean that fewer Canadians than ever before can access EI benefits," said Sims.

The Canadian Taxpayers Federation was also critical of Flaherty's announcement, saying the federal government should be cutting EI rates, not freezing them.

"After hiking EI rates now three years in a row, it’s pretty convenient now that this is where they want to freeze them until 2017," said CTF federal director Gregory Thomas.

"We see again today that EI is not an insurance program at all, it is simply a tax grab," Thomas said.

Employees currently pay $1.88 per $100 of earnings up to a maximum annual EI premium of $891.12, while employers pay $2.63 per $100 to a maximum $1,247.57, based on a maximum annual insurable earnings of $47,400.

That will remain the rate for 2014, and the rate will be set no higher than $1.88 per $100 of earnings for 2015 and 2016, Flaherty said.

Without the freeze, EI rates would have risen to $1.93 per $100 of earnings in 2014.   

For residents of Quebec, covered under the Quebec parental insurance plan, the premium reduction will be $0.35 per $100 of insurable earnings in 2014 which means Quebec residents will pay $1.53 per $100 of insurable earnings in that year.

Flaherty said the premium freeze would have no impact on the federal budget because the EI operating account is separate from general budget revenues.

"It is important we get [the EI operating account] back to balance," said Flaherty, adding that reducing the overhead for small business employers and spurring employment is a way to do that.