You may have noticed that Box 14 on your T4 slip lists insurable earnings. What does this figure mean and, if it is different from your overall earnings, why? Here’s what you need to know about insurable earnings and how they affect your contributions to Employment Insurance (EI).
What are Insurable Earnings?
Insurable earnings are the portion of your income that is used to calculate your contributions, and your employers’ to employment insurance premiums. These premiums allow you to take advantage of Canada’s employment insurance plan should you become unemployed. It is therefore important to make sure that you are contributing the correct amount.
What Counts as Insurable Earnings?
You may have questions about what specific money you receive from your employer counts as insurable earnings. All wages, salaries, tips and gratuities are considered insurable earnings. Any payment that is controlled by your employer is typically considered an insurable earning. Insurable earnings are all of those reported on your earnings statement prior to your deductions.
Other types of payments from an employer that are considered insurable earnings include (to name just a few):
- Bonus payments
- Compassionate care leave
- Deferred salary leave
- Paid maternity leave and parental leave by your employer
- Paid sick leave
- Vacation Pay
What are the Insurable Earnings Maximums in tax-year 2020?
Starting January 1, 2020, the maximum insurable earnings and benefit rate for employment insurance are both going up. For all of Canada except for Quebec, maximum insurable earnings amounts are rising from $53,100 to $54,200. That means you will pay your employment insurance premiums on all money made up to $54,200. However, this is the cap on insurable earnings, which means that any money you make above this threshold will not add to the employment insurance premiums you need to pay.
On every $100 of insurable earnings you make, you will pay $1.58 in employment insurance premiums. This means that the maximum you can pay in insurance premiums in 2020 is $865.36.
What About in Quebec?
Quebec has its own employment insurance plan, which also covers maternity, parental and paternity leave, called the Quebec Insurance Plan. Those who work in Quebec have a lower premium, set to $1.20 per every $100 dollars of insurable earnings.
When Do I Need to Know My Insurable Earnings?
Your employer includes your insurable earnings on your T4 automatically, and they withhold your premiums in every pay period. Unless you are self-employed, you will not actually see your employment insurance premiums in your bank account. You therefore do not need to collect them to hand them over as this is already being done for you; why do you need to know your insurable earnings amount then?
It is always wise to check your T4 and ensure that your employer has not made an error and collected too much or too little for your employment insurance premiums. You should check that your insurable earnings are correct and that your total premiums for EI are correct.
Also, when you are applying for employment insurance you will need to know your total insurable earnings. The company that let you go will provide this figure to you on your Record of Employment (ROE). Service Canada will use the information in your ROE to determine whether you should receive EI and how much. It is therefore important that you make sure every detail is correct.
You may also receive a ROE if you have experienced an interruption of earnings for another reason, and this ROE should also list your insurable earnings and the total of premiums you have paid to EI and other programs.