Insurable earnings (EI)

A buyer meets insurable earnings when setting up payroll for inherited staff, and when checking whether the seller deducted EI premiums on the right pay. The term is defined by federal law, so the meaning is the same across Canada, apart from the Quebec premium arrangement described below.

How the definition works

The Employment Insurance Act defines insurable earnings as the total amount of the earnings, as determined in accordance with Part IV, that an insured person has from insurable employment. The CRA adds that, to count, an amount has to be paid in cash by the employer and received and enjoyed by the person in respect of that employment. Section 4 of the Act also sets a maximum yearly insurable earnings amount.

What to check or ask

• Whether each pay item the seller treated as insurable is covered by Part IV
• Whether any employee’s province of employment is Quebec, where the CRA says a reduced EI premium applies
• Whether the seller’s premiums were deducted and remitted for the period before closing

Closing-day payroll is covered in how to handle payroll on closing day. Compare employment insurance premiums and insurable employment.