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How are EI deductions Calculated?

Problem Details:

How is the EI deduction amount on an employee's pay calculated?

 

Solution:

If you want to confirm the amount of the EI premium Sage had deducted on a payroll check, use the following manual calculation procedure:

1) Multiply the employee's insurable earnings amount by the EI premium rate (in 2016 it is .0188).  The pay period frequency is not relevant to this calculation.

     a) for a semi-monthly pay of 2500:  2500 * .0188 = 47.00

     b) for a bi-weekly pay of 2500:  2500 * .0188 = 47.00

     c) for a bi-weekly pay of 2325:  2325 * .0188 = 43.71

These amounts can also be confirmed using the CRA Payroll Deduction Online Calculator PDOC

Ensure the maximum annual amount of the EI premium is not exceeded.  (in 2016 this is 955.04)  If the current payroll calculation will exceed the maximum, only the amount up to the annual maximum should be deducted.

To calculate the amount the employer needs to pay to CRA, take the amount of the employee deduction and multiply by 1.4 and add this amount to the employee amount.  The employer must pay 1.4 times the amount as the employee for EI (unless a special rate is assigned to the employer by CRA).

There is more information on manual calculations at the CRA website CRA's Manual Calculation for EI

For information on how CPP deductions are calculated, see How CPP is Calculated

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