In today’s rapidly shifting job market, job security can often feel uncertain. Whether it’s because of economic changes, company restructuring, or unexpected global events, many people experience the harsh reality of job loss. It’s during these challenging times that having a safety net becomes crucial.
Fortunately, the Government of Canada provides some support to employees who have lost their job through no fault of their own. Employees in Canada who suddenly find themselves out of work can turn to the Employment Insurance (EI) program for temporary income support. In this article, we'll explore how EI functions in Canada and how it can help those who find themselves unexpectedly unemployed.
Ready to know more? Keep reading to see how EI can help you bounce back.
What is the Employment Insurance program?
EI is a government program that provides temporary financial assistance and other benefits to employees navigating an unexpected period of unemployment. It’s a safety net that helps individuals navigate through tough times. But EI doesn’t just stop at job loss; it also offers special benefits for workers who need to take time off due to significant life events, including:
- Illness
- Pregnancy
- Caring for a newborn or newly adopted child
- Caring for a critically ill or injured person
- Supporting a family member who is seriously ill with a significant risk of death
Much like private insurance, both employees and employers in Canada contribute to the Employment Insurance program through regular premium payments deducted each payroll period. Unlike private insurance, however, these contributions are mandatory for almost all employees and employers in Canada, with very few exceptions.
EI premiums are calculated on an employee’s insurable earnings each pay period and deducted directly from their pay, with a corresponding employer contribution calculated separately. Employers are responsible for deducting these premiums and remitting both the employee and the employer portions to the Canada Revenue Agency (CRA).
EI benefits are available to workers who meet the program’s qualifying and entitlement conditions, which we’ll explore in more detail below - including how EI applied to self-employed individuals.
The program is overseen by Canada Employment Insurance Commission (CEIC), with Employment and Social Development Canada (ESDC) responsible for policy and Service Canada handling day-to-day administration.
Employment Insurance in Quebec
The province of Quebec often administers a similar but separate version of many federal programs. Employment Insurance still applies to employees and employers in the province, but there are a few important differences worth noting.
While the EI program operates largely the same across Canada, premium rates in Quebec are typically lower. That’s because Quebec has its own Quebec Parental Insurance Plan (QPIP), which employees and employers are required to participate in. Unlike the rest of Canada, where maternity and parental benefits are provided through the EI program, these benefits in Quebec are administered separately through QPIP.
Who has to contribute to EI?
Nearly all employment in Canada is known as insurable employment, meaning that employees and employers must pay EI premiums. In some cases, certain types of employment - such as work performed for a related employer in a family business - may be exempt.
The concept is similar to how CPP works in Canada, in that contributions are mandatory and shared between employees and employers. However, unlike CPP, there is no age limit for contributing to the EI program, and eligibility is based on the nature of the employment rather than an employee’s citizenship status.
How EI premiums are calculated
Employment Insurance (EI) is fully funded by mandatory contributions from both employers and employees.Self-employed individuals may also contribute to EI on a voluntary basis if they choose to opt into special benefits coverage. Unlike employees, participation is voluntary and provides access only to special benefits, such as maternity, parental, sickness, and caregiver benefits - not regular unemployment benefits.
EI premiums are calculated as a percentage (the contribution rate) of the employee's insurable earnings, up to an annual maximum.Insurable earnings encompass most forms of compensation received from employment, including wages, tips, bonuses, and commissions. The CRA is responsible for determining which types of earnings qualify as insurable for EI purposes.
EI contribution rates and the maximum amount an employee must contribute are set annually and published regularly by the federal government. Employers contribute 1.4 times the amount of the employee's premiums.
For 2026, the employee contribution rate is 1.63%, with the maximum annual insurable earnings set at $68,900. This results in a maximum annual EI premium of $1,123.07 for employees and $1,572.30 for employers.
In Quebec, EI contribution rates are lower due to the province’s separate parental insurance system. For 2026, the employee EI rate in Quebec is 1.30%, with the same maximum insurable earnings of $68,900, resulting in maximum annual premiums of $895.70 for employees and $1,253.98 for employers.
Additionally, employees and employers in Quebec must also contribute to the Quebec Parental Insurance Plan (QPIP). For 2026, QPIP contributions are calculated at 0.455% for employees and 0.636% for employers, applied to maximum insurable earnings of up to $103,000.
Let’s break this down with an example. Suppose an employee in Ontario earns $4,000 semi-monthly (twice per month), resulting in an annual salary of $96,000 over 24 pay periods. For each pay period, the EI premium is calculated as $96,000 × 1.63% ÷ 24 = $65.20. The employer deducts $65.20 from the employee’s pay and contributes an additional 1.4 times that amount, or $91.28, for a total EI remittance of $156.48 per pay period to the CRA.
It is important to note that even if the employee's annual earnings exceed the maximum insurable earnings of $68,900, EI premiums are still deducted each pay period based on actual earnings until the annual maximum contribution - $1,123.07 for the employees and $1,508.47 for employers - is reached.
Once these maximums are reached, both employee deductions and employer contributions should stop for the remainder of the year.
Self-employed individuals who opt into the EI program contribute at the employee rate only, since there is no employer portion. Once enrolled, they are responsible for paying EI premiums on their self-employment income up to the annual maximum and may be eligible for EI special benefits.
What happens when an employee works in two companies within the same year?
If an employee works for two different companies within the same year, each employer is required to deduct EI premiums independently, up to the annual maximum insurable earnings for that year. This applies even if the employee has already reached the maximum EI contribution with a previous employer.
Any overpayment will be credited to the employee when they file their income tax return. Employer EI contributions are not refunded in these situations.
EI benefits
EI provides a few different types of benefits, from maternity and parental benefits to sickness benefits while an employee cannot work due to illness. All EI benefits are designed to provide temporarily financial support when a worker is unable to earn income due to specific qualifying circumstances.
The primary type of EI benefit for individuals who have lost their job is known as regular benefits.
The amount an unemployed individual can receive in EI support is determined upon submitting an application for EI benefits to Service Canada. Benefit amounts depend on the individual’s insurable earnings and the regional unemployment rate in the area where they worked.
Regular EI benefits provide weekly support equal to 55% of average insurable earnings, for up to 45 weeks. Since the maximum amount of insurable earnings in 2026 is $68,900, this translates to a maximum weekly amount of $729 in EI support depending on the employee’s location in Canada. Keep in mind that EI benefits, like regular income, are taxable.
In addition to regular benefits, EI also provides additional benefits:
- Sickness benefits for those who are unable to work due to illness or injury
- Maternity and parental benefits, which we’ve covered in a separate article
- Benefits for individuals caring for seriously ill family members
- Benefits for the self-employed
- Benefits for Canadians living abroad
Applying for EI benefits
When an employee is terminated in Canada, the employer must issue a Record of Employment (ROE) and submit it to the government, with a copy made available to the employee. This document is used by Service Canada to determine the employee’s eligibility for EI benefits and the amount they may receive.
Employees should apply for EI benefits as soon as they stop working, even if they have not yet received their ROE. Delaying an EI application may result in lost benefits, as claims are generally not backdated unless the employee can show good cause for the delay.
To qualify for regular EI benefits, an employee must have lost their job through no fault of their own, meaning they didn’t quit voluntarily or were not dismissed for misconduct. Additionally, the following requirements must be met:
- The employee must have worked in insurable employment
- They must have accumulated the required number of insurable hours, which varies based on regional unemployment rates, in the last 52 weeks or since the start of the last EI claim, whichever is shorter
- They must have gone at least seven consecutive days without work or pay in the last 52 weeks
- They must be ready, willing, and capable of working, and actively looking for employment
When an employee is ready to apply for EI benefits, they can start their application online here.
To remain eligible for payments, claimants must complete bi-weekly EI reports either online or by phone. Failure to submit these reports can result in delayed or suspended benefit payments.
Unemployment insurance in other countries
The United States has a similar program called the Unemployment Insurance, which provides weekly benefits to those who are out of work through no fault of their own.
One of the main differences between the US unemployment insurance program and the Canadian EI program is how each is administered. In the United States, unemployment insurance is a joint federal-state program, with each state responsible for administering benefits and setting eligibility rules within broad federal guidelines. In contrast, EI in Canada is a federally administered program with nationally defined rules..
Just like EI, in the US claimants must also meet eligibility requirements such as wages earned, or time worked during a specific period called the "base period." However, these requirements can vary significantly by state. In Canada, the eligibility rules are set at the federal level, though qualifying thresholds and benefit duration may vary based on regional unemployment conditions.
Another major difference is funding. Unlike EI, which is funded through contributions from both employees and employers, unemployment insurance in the US is primarily funded through employer-paid payroll taxes, with employees generally not contributing.
Thirdsail can help
Navigating payroll and compliance in Canada is crucial to hiring and retaining top talent. If you’re looking for a seamless solution, Thirdsail is here to help.
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