Employment Insurance (EI) in Canada.
A Guide for Employers.
When hiring in Canada, one of the key payroll deductions you need to understand is Employment Insurance (EI). As an employer, you're legally required to contribute to EI on behalf of your employees, in addition to their contributions.
Whether you're running payroll through a local entity or using Bridgewater TI as your Employer of Record (EOR), compliance with Canada’s EI rules is mandatory. Here’s what you need to know.
What Is Employment Insurance (EI)?
Employment Insurance (EI) is a government-run program that provides temporary income support to workers who lose their jobs through no fault of their own, or who are temporarily unable to work due to:
- Job loss
- Sickness
- Parental or maternity leave
- Compassionate or caregiver leave
To fund this program, both employers and employees contribute a set percentage of earnings, which is remitted via payroll.
Who Needs To Contribute To EI?
In most cases, all employees working in insurable employment in Canada are required to contribute to EI. The exception is employees in Québec, who contribute to the Québec Parental Insurance Plan (QPIP) for parental benefits, while still contributing to EI for other benefits.
Employers are responsible for:
- Deducting the employee portion of EI from each pay
- Paying the employer portion, which is 1.4x the employee contribution
- Remitting both portions to the Canada Revenue Agency (CRA)
- Reporting EI earnings and deductions on year-end T4 slips
At Bridgewater TI, we automate and manage this process to ensure accurate, compliant EI handling across all provinces and territories.
2025 EI Contribution Rates
As of 2025 (subject to annual government review):
- Employee contribution rate: 1.66% of insurable earnings (outside Québec)
- Employer contribution rate: 2.32% of insurable earnings (1.4x employee rate)
- Maximum annual contribution (employee): ~$1,049 CAD
- Maximum annual contribution (employer): ~$1,469 CAD
These amounts and thresholds are updated annually by the Government of Canada.
Why EI Matters For Employers
EI is more than just a payroll deduction it’s a compliance obligation and part of your broader employee risk management strategy.
Failure to correctly deduct and remit EI contributions can lead to:
- Fines and penalties from the CRA (Canada Revenue Agency)
- Liability for back payments (including both employee and employer portions)
- Risk of audit or reputational damage
- Statutory holidays
- Disruption to employee access to benefits
Bridgewater TI’s payroll system is built to automate compliance with EI regulations, no matter where your employees are located in Canada.
EI And Freelancers: Important Distinctions
EI only applies to employees in insurable employment. If you're working with freelancers or independent contractors, you're not required to deduct EI contributions. However, if the contractor is later deemed an employee by the CRA, you could be retroactively liable for unpaid EI (and other) deductions.
Refer to our Deemed Employment in Canada guide to gain a better understanding of this risk.
How Bridgewater TI Helps
When you work with Bridgewater TI, we manage the full lifecycle of your Employment Insurance obligations, including:
- Registering your business for EI (if needed)
- Calculating and deducting contributions correctly
- Remitting on schedule to the CRA
- Filing year-end T4S
- Monitoring updates to EI rates and thresholds annually
- Avoiding compliance risk in cross-province or deemed employment situations
Whether you have one employee in Ontario or 50 across multiple provinces, we’ve got your back.
If you’re employing in Canada through your subsidiary or as part of an expansion strategy, we’ll help you stay compliant with EI and all other payroll tax obligations.
Candian Employment Insurance Resources
We’ve put together a handy resources to guide you through Canada's Employment Insurance.
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