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Employment Insurance: A Double Win For The Canadian Chamber!

As the biggest and most important businesses constituency in the country, the Canadian Chamber of Commerce and its network across the country issued a resounding call to action in the wake of proposed changes to the Employment Insurance (EI) program, and plans to increase EI premiums by the maximum allowed under federal legislation. Its voice was heard loudly.

The issue
In early September, the Canadian Employment Insurance (EI) Financing Board recommended that EI premium rates be increased by the maximum allowed under federal legislation to begin to eliminate deficits (any excess of EI benefits over premiums) accumulated in the EI account since 2009. The Canadian Chamber has supported the government’s efforts to balance its books in five years. At the same time, the Canadian Chamber has been clear that this should be accomplished by cutting spending. Economic recovery would be severely shackled by increasing taxes-including payroll taxes, like EI premiums, which discourage employers from hiring and reduce workers’ take-home pay. The burden falls disproportionately on workers with low and modest incomes.

What the Canadian Chamber got for its members
On September 29, 2010, members of Parliament defeated Bill C-308-a bill that would have added over $2 billion to the costs of the EI Program, increased work disincentives, hindered labour force mobility and constrained job creation.

On September 30, the government announced it will be scaling back planned increases in EI premiums. For 2011, EI premiums will rise 5 cents per $100 in insurable earning for employees and 7 cents for employers instead of the maximum 15 cents and 21 cents, respectively. In 2012, premiums will rise by an additional 10 cents for employees and 14 cents for employers instead of the maximum amount.

How does this benefit business?
According to Human Resources and Skills Development Canada (HRSDC), each cent collected in EI premiums represents $110 million in government revenue. Employers pay 58.3% of total EI premiums, or $64.2 million for each cent in EI premiums collected. As a result of the decision not to increase premiums by the maximum amount, Canada’s businesses will save over $640 million in 2011 and $320 million in 2012. A business with 100 employees will save as much as $6,100 next year and $3,100 in 2012.