Feds scale back EI hikes, table economic bill

The federal government has announced it will scale back previously announced increases to Employment Insurance (EI) premiums, after intense pressure from unions and businesses.

The employee-paid premium will rise by five cents per $100 of insurable earnings, starting in 2011, and 10 cents for subsequent years. The employer-paid premium will rise by seven cents in 2011, and 14 cents in subsequent years.

The premium is set by the Canada Employment Insurance Financing Board (CEIFB), which was expected to raise the rate by 15 cents per $100.

“To maintain the momentum of Canada’s economic recovery, our Government will reduce the recommended EI rate increase by two-thirds,” said Jim Flaherty, Minister of Finance. “At a time when every dollar counts to individual families, this could mean almost $75 extra in the budget of the average Canadian family next year. Canada-wide, it will amount to $1.2 billion back in the pockets of workers and job creators.”

Premiums paid by employees will rise to no more than $1.78 per $100 of insurable earnings in the new year. Employers will contribute 1.4 times the employee’s premiums.

The government is seeking input on how it can improve the EI rate-setting mechanism to ensure more stable, predictable rates. Details on these consultations have not been announced.

“Our plan balances the genuine importance of preventing large EI rate increases, which would jeopardize our fragile economic recovery, and the unavoidable need to bring the EI account back to balance over time,” Flaherty said.

The Canadian Federation of Independent Business was prompt in its praise of the decision.

“There is no doubt that the worry and frustration expressed by tens of thousands of CFIB business owners and their employees over a maximum increase in EI payroll taxes has been heard by government,” said Catherine Swift, CFIB’s president & CEO. “While not a complete freeze, we are pleased to see the government take a major step on this critically important issue to help lessen the impact on small businesses and thereby the economy overall.”

It’s been a busy day for Flaherty. Earlier, he rolled out a new bill to bolster the “Economic Action Plan.”

“We are meeting the challenges of the global economic crisis head-on with Canada’s Economic Action Plan,” he said. “We continue to move forward with the Plan through the Sustaining Canada’s Economic Recovery Act, which will provide real benefits for families, consumers, businesses and taxpayers.”

The new act is largely an implementation bill for elements contained in the 2010 Federal Budget, including promises that allow RRSP proceeds to be transferred to a Registered Disability Savings Plan on a tax-deferred basis.

But there are some items on the list of measures that do not appear in the 2010 Budget. The new bill promises to improve the complaint process for consumers when dealing with the financial services industry. The Working Income Tax Benefit will be indexed to inflation.

Among the previously announced budget measures, the act would allow a 10-year carry forward of Canada Disability Savings Grant and Canada Disability Savings Bond entitlements.

(09/30/10)