• Last Updated:
  • Jan 7th, 2019 1:23 am
[OP]
Member
Feb 29, 2016
208 posts
21 upvotes
Mississauga

EI under Incorporation

Hi All,

My wife and I opened a business corporation 2 years back; there are only 2 directors of that corporation i.e. her and me. Both of us are working as contractors with a bank. Both of us draw monthly salary from the corporation. We were thinking of applying for EI since we are planning to start a family in a few years time and so we were thinking of paying EI premiums till my wife gets pregnant and then claim EI during maternity leave. The only downside is that we will have to continue paying EI premiums all our lives which we are comfortable with as we are taking the advantage as well.

I read on www.canada.ca that we can apply for EI if we are self employed. In our situation (drawing salary from business), will we be considered as "Self Employed"? If not, is there a way to get covered EI? If not, what is the best way we can cover maternity in our situation?

Thanks a lot for your time,
Rohan.
16 replies
Deal Addict
Jul 3, 2017
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rohan1985 wrote:
Jan 19th, 2018 9:09 am
Both of us draw monthly salary from the corporation.
If you are salaried employees of your corporation, you were required all along to pay personal EI premiums, and the corporation was required to pay the equal employer portion of the EI premiums. If you have not done so to date, you are offside with the CRA and need legal advice.

Maybe you didn't mean to use the word "salary"?
Deal Addict
Feb 5, 2009
2809 posts
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Newmarket
Exp315 wrote:
Jan 19th, 2018 10:39 am
If you are salaried employees of your corporation, you were required all along to pay personal EI premiums, and the corporation was required to pay the equal employer portion of the EI premiums. If you have not done so to date, you are offside with the CRA and need legal advice.

Maybe you didn't mean to use the word "salary"?
No, that's not correct, as controlling shareholders they are exempt from deducting EI, and employer portion doesn't equal employee portion, it is paid at the rate of 1.4 of employee deductions.
Deal Addict
Feb 5, 2009
2809 posts
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Newmarket
rohan1985 wrote:
Jan 19th, 2018 9:09 am


I read on www.canada.ca that we can apply for EI if we are self employed. In our situation (drawing salary from business), will we be considered as "Self Employed"? If not, is there a way to get covered EI?

Thanks a lot for your time,
Rohan.
yes, you can opt into the program, more details below
https://www.canada.ca/en/services/benef ... rkers.html
[OP]
Member
Feb 29, 2016
208 posts
21 upvotes
Mississauga
Homerhomer wrote:
Jan 19th, 2018 11:04 am
yes, you can opt into the program, more details below
https://www.canada.ca/en/services/benef ... rkers.html
But this is for self-employed. In our case, we are not self-employed rather we are employed by our incorporation. There is a clear distinction between the two.

Self employed:https://www.canada.ca/en/revenue-agency ... ncome.html

Note: The page says "If you are incorporated, this information does not apply to you. Instead, see the information at Corporations.:

Incorporated:
https://www.canada.ca/en/revenue-agency ... tions.html
Deal Addict
Feb 5, 2009
2809 posts
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Newmarket
rohan1985 wrote:
Jan 19th, 2018 11:43 am
But this is for self-employed. In our case, we are not self-employed rather we are employed by our incorporation. There is a clear distinction between the two.

Self employed:https://www.canada.ca/en/revenue-agency ... ncome.html

Note: The page says "If you are incorporated, this information does not apply to you. Instead, see the information at Corporations.:

Incorporated:
https://www.canada.ca/en/revenue-agency ... tions.html
below is copy of the paragraph from the link I have provided, it applies to your situation:

Registering
You can register, with the Canada Employment Insurance Commission through Service Canada if you:
operate your own business, or if you work for a corporation but cannot access EI benefits because you control more than 40% of the corporation’s voting shares; and
are either a Canadian citizen or a permanent resident of Canada.
[OP]
Member
Feb 29, 2016
208 posts
21 upvotes
Mississauga
Homerhomer wrote:
Jan 19th, 2018 12:29 pm
below is copy of the paragraph from the link I have provided, it applies to your situation:
This makes sense but I am a little skeptical. Let me check with Service Canada to confirm this. Thanks a lot for your help though!
[OP]
Member
Feb 29, 2016
208 posts
21 upvotes
Mississauga
Slightly confused on the EI premiums. The website mentions that only the employee portion of EI premiums need to be paid and we don’t need to pay the employer portion. However my accountant is saying that in his system, to calculate EI premiums, only 2 options are coming. EI or EI Exempted. If he chooses EI, then EI for both Employee and Employer needs to be paid and EI exempted means no EI.

Any idea on how to tackle this.
Jr. Member
Jan 18, 2017
101 posts
71 upvotes
If you check homerhomer's post history, you'll see he does this stuff for a living. No need to be skeptical - it's the correct answer.

You have two options:

1. Fill out the EI paperwork for self-employed people. You're then stuck paying into it essentially for life, even if you never make use of it. You pay the employer and employee side, just like CPP.

2. The default option is EI-exempt.

Most self-employed people tend to feel that their money is best kept in their own pockets, and not the government's. You should calculate what kind of benefit you are going to get when claiming maternity leave, and then how much you wind up paying into EI post-maternity leave. You'll likely find the numbers don't make sense.
rohan1985 wrote:
Jan 19th, 2018 11:51 pm
Slightly confused on the EI premiums. The website mentions that only the employee portion of EI premiums need to be paid and we don’t need to pay the employer portion. However my accountant is saying that in his system, to calculate EI premiums, only 2 options are coming. EI or EI Exempted. If he chooses EI, then EI for both Employee and Employer needs to be paid and EI exempted means no EI.

Any idea on how to tackle this.
______
Canadian & US tax guy
[OP]
Member
Feb 29, 2016
208 posts
21 upvotes
Mississauga
crossborderguy wrote:
Jan 21st, 2018 11:27 am
Fill out the EI paperwork for self-employed people. You're then stuck paying into it essentially for life, even if you never make use of it. You pay the employer and employee side, just like CPP.
The webpage says:
"Unlike the regular EI program, and because you are self-employed, you will not have to pay the employer's portion of the EI premium."

This is what is causing the confusion.

@Homerhomer Your input will be highly appreciated.
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Feb 5, 2009
2809 posts
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Newmarket
rohan1985 wrote:
Jan 21st, 2018 5:14 pm
The webpage says:
"Unlike the regular EI program, and because you are self-employed, you will not have to pay the employer's portion of the EI premium."

This is what is causing the confusion.

@Homerhomer Your input will be highly appreciated.
Yes, there is plenty of info in that link, indeed you do not have to pay the employer portion in this instance, which makes it more appealing, but you should still weigh all pros and cons, since as Crossborder said, you will be stuck with this for the reminder of your self employed life if you choose to benefit from the program.

As for the payroll system anything can be overridden, don't know what system your accountant is using but that shouldn't prevent anyone from entering the program if they so desire.
[OP]
Member
Feb 29, 2016
208 posts
21 upvotes
Mississauga
Homerhomer wrote:
Jan 21st, 2018 6:24 pm
As for the payroll system anything can be overridden, don't know what system your accountant is using but that shouldn't prevent anyone from entering the program if they so desire.
Thanks a ton! You have been really helpful! Smiling Face With Open Mouth

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