The Canada Employment Insurance Commission (CEIC) has announced a minor reduction in Employment Insurance (EI) premiums for 2025. The decision sees the premium rate for employees set at $1.64 per $100 of insurable earnings, a slight decrease from the 2024 rate of $1.66. Employers, who pay 1.4 times the employee rate, will now contribute $2.30 per $100 of insurable earnings, down from $2.32.
The adjustment, although modest, is expected to provide some financial relief for both workers and employers while addressing a longer-term deficit in the EI Operating Account, which has been significantly impacted by the COVID-19 pandemic.
Every year, the CEIC sets the annual EI premium rate based on a detailed forecast provided by the EI Senior Actuary. The goal is to maintain a balance in the EI Operating Account over a seven-year period, ensuring that premium revenues cover projected EI expenses. This approach is a strategy to ensure that the EI program remains sustainable without creating surpluses or deficits over an extended period.
The rate change for 2025, though small, adheres to a legislated limit that restricts annual premium adjustments to no more than five cents. This year’s reduction of two cents for employees and employers follows a forecast by the EI Senior Actuary that outlines how the program’s expenses will balance against revenues over the next several years.
According to the Actuarial Report, the cumulative deficit in the EI Operating Account, driven primarily by the economic impact of the COVID-19 pandemic and temporary support measures, is projected to reach $15.8 billion by the end of 2025. However, the new rate is designed to gradually reduce this deficit, with a forecast that the account will balance by 2031.
While the premium rate for most Canadians will drop to $1.64, residents of Quebec, who are covered under the Quebec Parental Insurance Plan (QPIP), will see a slightly lower rate of $1.31 per $100 of insurable earnings. Employers in Quebec will pay $1.83 per $100 of insurable earnings. This discrepancy exists because Quebec administers its own parental insurance program, which is funded independently of the federal EI program.
For workers in Quebec, the new rate means a higher maximum annual contribution in 2025. Employees will see their maximum contributions increase by $26.43 to $860.67, while employers will face an increase of $37.00, bringing their maximum contributions to $1,204.94 per employee.
In addition to the premium rate adjustments, the CEIC announced an increase in the maximum insurable earnings for 2025. This threshold, which determines the maximum annual income subject to EI premiums, will rise to $65,700 from $63,200 in 2024. This means that both workers and employers will pay premiums on up to $65,700 of annual earnings.
With the increase in insurable earnings, the maximum annual contribution for workers across Canada will rise by $28.36, reaching $1,077.48 in 2025. For employers, the maximum contribution will increase by $39.70, reaching $1,508.47 per employee. These adjustments are part of the government’s strategy to keep the EI program aligned with inflation and wage growth, ensuring that benefits are based on current economic realities.
Employers offering qualified wage-loss plans will continue to benefit from the Premium Reduction Program, which offers reductions in EI premiums to recognize the savings generated for the EI program by these plans. The CEIC estimates that registered employers and their employees will see approximately $1.37 billion in total premium reductions in 2025.
The savings will be shared between employers and employees, with seven-twelfths of the reduction going to employers and five-twelfths to employees. This initiative encourages employers to offer wage-loss plans that help mitigate the need for EI benefits during short-term absences from work, thus reducing strain on the federal program.
The next few years will be crucial in determining how quickly the EI program can return to a fully balanced state. Still, for now, Canadians can take some comfort in knowing that their contributions are being carefully managed with an eye on both immediate economic needs and long-term fiscal health.