If your business provides a short-term disability plan, you could be paying more EI premiums than needed. The EI Premium Reduction Program allows eligible employers to pay lower EI premiums when their disability coverage replaces EI sickness benefits. This federal program is managed by Employment and Social Development Canada (ESDC) and is available across Canada.
The EI Premium Reduction Program lowers the employer EI premium rate if you offer a qualifying short-term disability (STD) plan to your employees. If your plan pays sickness benefits, EI pays less, so you get lower premiums.
There is no fixed dollar amount. The reduction is based on government calculations and is updated every year.
To qualify for the EI Premium Reduction Program, your business must meet all of these conditions:
If even one requirement is missing, your application is usually denied.
See also: EI Premium Reduction Program: Employer Eligibility Explained
Applying is straightforward, but your documents must be accurate.
Check that your STD policy meets all EI requirements. Most rejections happen because benefit start dates or coverage terms do not match EI rules.
You will need:
Forms and more details are available on the official program page.
If you’re not sure if your plan qualifies, GrantHub’s eligibility matcher can help you check your benefits before you apply.
A key rule: you must return 5/12 of the employer’s EI premium savings to employees covered by the plan.
You can do this by:
Keep records that show how you returned savings in case of audit.
1. Assuming all disability plans qualify
Many STD plans do not meet the elimination period or benefit duration rule.
2. Missing the employee payback rule
Not returning 5/12 of savings can cause compliance problems.
3. Applying before plan updates are finished
Your plan must already meet EI standards when you apply.
4. Forgetting ongoing compliance
Changes to your benefits plan can cancel your premium reduction later.
Q: How much can employers save with the EI Premium Reduction Program?
Savings depend on your payroll and EI insurable earnings. There is no fixed cap, and reductions are recalculated each year.
Q: Is the EI Premium Reduction Program taxable?
The premium reduction is not taxable income, but returned savings to employees may be taxed depending on how you pay them.
Q: How long does approval take?
Timelines vary. Most applications are reviewed within several weeks once you send all documents.
Q: Do small businesses qualify?
Yes. There is no minimum employee count if you meet all eligibility rules.
Q: Can the reduction be revoked?
Yes. If your plan stops meeting requirements, the government can cancel your premium reduction.
GrantHub tracks hundreds of federal and provincial payroll-related programs—use it to find out which ones match your business.
If you already offer short-term disability benefits, the EI Premium Reduction Program can lower your payroll costs each year. Confirm your eligibility, prepare your documents, and keep your plan compliant to keep your savings. Ready to see if you qualify or want to find more payroll savings for your business? Try GrantHub’s free eligibility checker to get started.
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