Employment Insurance and WSIB exemptions for family members

What are Employment Insurance and WSIB Premiums?

Employment Insurance premiums are required to be paid on all employee wages. If the employee becomes unemployed, they are then able to collect Employment Insurance if they paid into it long enough when they were employed. The Workplace Safety and Insurance Board (WSIB) works similarly. Printing companies are required to pay WSIB premiums on their employee’s wages. If the employee becomes injured while working on the job and they cannot work for a period of time they are eligible to receive money from WSIB.

How Much are Employment Insurance and WSIB Premiums?

For every $100.00 earned, $1.88 in Employment Insurance premiums are deducted from an employee’s earnings. In addition, the employer must match the employee’s Employment Insurance premium contribution by a factor of 1.4. Therefore for every $100 in Employee Insurance paid by an employee the employer must match it by 1.4 X $1.88 = $2.63

An employer’s WSIB rate depends on the industry and the number of WSIB claims submitted by the employer. Using the WSIB rate chart, the posted rate for printing companies is 1.75%. Therefore for every $100.00 paid to an employee $1.75 must be paid to WSIB.

Here is a summary of payroll taxes payable:

Employee Employer

Earnings $100.00 $100.00

EI Premium $1.88 $2.63

WSIB Premium $ 1.75

Total Premiums$1.88$4.38

What are Employment Insurance Maximum Premiums Per Employee?

For 2016 employees are required to pay Employment Insurance premiums on wages up to $50,800.00, for a maximum of $955.04. In addition, the employer must contribute up to $1,337.05.

WSIB is payable on employee’s gross pay up to $88,000. Therefore the maximum amount of WSIB paid at 1.75% per employee is $1,540.00.

Employment Insurance and Family Members

If you are a family member working for a family business you need to be aware of how Employment Insurance and WSIB affects you. Many family members of business owners are shocked to find out that the Employment Insurance they have been paying into for years does not cover them. In addition to not being eligible to collect Employment Insurance benefits, the government will only reimburse family members for the last three years that Employment Insurance premiums were paid.  In addition, family members are entitled to WSIB exemptions. If you are working for a family member or have family members working for you, it is important to learn everything you can about payroll taxes so that you are not needlessly paying them.

Employment Insurance and Business Owners

All business owners who own 40% or more of a company are not eligible for Employment Insurance. If you are a business owner who is currently paying Employment Insurance premiums on your wages you should stop making payments immediately. To get back any Employment Insurance premiums you have paid retroactively on your wages over the last three years you will need to file a “Request for Ruling” form:

http://www.cra-arc.gc.ca/E/pbg/tf/cpt1/cpt1-08b.pdf

Once this is reviewed by the government you will receive a cheque for any Employment Insurance premiums paid by you. The company will receive all Employment Insurance premiums paid by the company on your behalf, less any applicable taxes.

Employment Insurance Exemption for Family Members

Before you stop paying Employment Insurance for your family members, you will need to decide if the family members qualify for Employment Insurance benefits should they become unemployed. In order to make a decision you must determine if a non-family member would have been hired in a similar position if the family member was not. If the answer to this question is “no”, file for the “Request for Ruling”.  If you are successful it will save you thousands of dollars per year.

WSIB Exemptions

If your family members do not require WSIB coverage, that is they would be paid by the company if they could not work for a long period of time, it is recommended that you take the steps necessary to make your family members WSIB exempt. This requires making your family members Directors in your company, and recording this in your minute book. Once this is done, you can stop paying WSIB premiums on family member’s wages.

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Bonny Koabel CPA, CGA is President of AKR Consulting Canada a Mississauga, ON firm specializing in Government Grants, Subsidies, Tax Credits, Refunds and Rebates since 2003.