Employment Insurance Premiums (continued)

Certain types of employment may not be insurable. For example, casual employment for a purpose other than your usual business and employment situations where you and your employee do not deal with each other at arm's length.  Whether you deal at arm's length with your employee is a question of fact, and that includes a determination of whether you are related to the employee.
The courts have generally used the following criteria to determine whether one is or is not dealing at arm's length with another:
  • Is there a common mind which directs the bargaining for both parties to a transaction?
  • Are the parties acting in concert without separate interests?
  • Was there “de facto” control?
An employee who does not deal at arm's length, including one who is related, can be insurable:
  • if it is reasonable to conclude that you would have hired a person who deals at arm's length under a similar agreement. If you are unsure whether you should deduct EI premiums, you can request a ruling up until June 30 of the year following the year of employment;
  • when a corporation employs a person who controls more than 40% of the corporation;
  • when the employment is an exchange of work or services; or
  • when the employment is of a non-resident person, if the laws of that person's country require someone to pay employment insurance premiums in that country.
Most earnings, benefits, and allowances attract EI premiums, with certain exceptions.  See the Payroll Deductions and Remittances Employer’s Guide on the CRA website for more information about the types of benefits and whether they are subject to EI premiums.
You can use the payroll deduction tables to calculate the EI deduction or use the Payroll Deductions Online Calculator.