When employees have access to short-term disability plans in the workplace, they may not have to collect EI benefits, or may collect EI benefits for shorter periods. As this reduces demand on the EI program, Service Canada offers the EI Premium Reduction Program. Eligible employers pay EI premiums at a lower rate than the standard 1.4 times the employee EI premium rate. A portion of the savings is shared with employees.
- Provide at least 15 weeks of benefits for short-term disability
- Match or exceed the level of benefits offered by EI
- Pay benefits to employees within 14 days of illness or injury
- Be accessible to employees within 3 months of employment
- Cover employees on a 24-hour basis
The potential savings depends on a few factors, including:
- The type of short-term disability plan
- The amount of employees’ insurable earnings
- When the employer applies and when Service Canada approves the application
To illustrate the savings potential, in 2016 the best reduced employer EI rate was 1.219 times the employee EI premium rate.
Employees’ savings are five-twelfths (5/12) of the employer’s savings. Employers return savings to employees through a cash remittance, new employee benefits or improved benefits, or another method approved by Service Canada.
If your company’s short-term disability plan appears to meet the criteria, learn about the application process. Once approved, the EI premium reduction continues until the employer changes or cancels the approved plan. If denied, employers have up to one year from the decision date to submit an appeal in writing.