Fixing the way Canada sets EI rates

For more details

CFIB recommendations

EI Whipsaw II

What’s in store for payers of Canada’s Employment Insurance system, and what to do about it

Of further interest:

The federal government launched an EI rate setting review to find out how to avoid surpluses or deficits while ensuring that the program breaks even over time. CFIB President, Catherine Swift, presented to the EI Rate Setting Review Panel on how the EI rate setting mechanism can be improved in order to have stable rates. During the consultation, we underlined that our members are opposed to any increase in EI. 

Our submission focused on five major recommendations:

•  Cap rising EI premium rates but allow them to fall more quickly: We strongly believe that EI premium increases should be capped when rates are rising to help mitigate the impact and limit the financial strain quickly-rising rates could have on employers and employees. However, the EI premium rate should be allowed to fall to break-even levels once any EI deficits are repaid and any reserve target balance is met.
• Hiring credit: We would also like to see the government adopt the EI hiring credit on a more permanent basis to help offset some of the costs of hiring and training, especially among the smallest firms. We are asking that the federal government expands the EI hiring credit to include businesses with at least $15,000 in EI premiums and make it available to businesses in 2012 and beyond.
• 50/50 split in premiums: Any future rate increase should be equal for employers and employees, moving toward a long term goal of a 50/50 split in premiums.
• Reserve fund: Legislation should be amended to allow the Canadian Employment Insurance Financing Board (CEIFB) to slowly build an appropriate reserve fund. CFIB suggests a reserve of between $10-15 billion. This reserve would be for the exclusive use of smoothing rates in periods of higher unemployment, not for expanding benefits.
• Rate smoothing: A better rate smoothing methodology should be put in place for future economic downturns. To avoid the EI "whipsaw" effect, EI premiums should be capped in periods of rising rates, but allowed to fall to break-even levels when any EI deficits are repaid and any reserve target balance is met.