Employment Insurance (EI) Premiums are not Payable on Some Wages

Wages paid to some shareholders and family members are not insurable, and these employees cannot collect employment insurance benefits.  Some other types of earnings are not subject to EI premiums, such as "direct" tips and gratuities.

a. You may not have to pay EI premiums for employed family members.

The Employment Insurance Act S. 5(2)(i) states that employment is not insurable if the employer and employee are not dealing with each other at arm's length (determined in accordance with the Income Tax Act).  However, the  employment will be deemed to be insurable "if the Minister of National Revenue is satisfied that, having regard to all the circumstances of the employment, including the remuneration paid, the terms and conditions, the duration and the nature and importance of the work performed, it is reasonable to conclude that they would have entered into a substantially similar contract of employment if they had been dealing with each other at arm's length."

LInk to : Meaning of "not dealing at arm's length" for purposes of the Employment Insurance Act

b. Shareholder's wages may not be insurable.

S. 5(2)(b) of the Employment Insurance Act states that "the employment of a person by a corporation if the person controls more than 40% of the voting shares of the corporation" is not insurable employment.