Canada Pension Plan and Employment Insurance Explained

Employees and self-employed workers – Responsibilities, benefits, and entitlements

Introduction

The Canada Pension Plan (CPP)/Employment Insurance (EI) Rulings Program issues a decision, which is called a ruling, about a worker’s employment status, when it is requested by the payer, the employer, the self-employed worker, the employee, the Canada Employment Insurance Commission (CEIC), or the Minister of Employment and Social Development.

Employees and self-employed workers have different responsibilities, benefits, and entitlements, and it is important for both, as well as for their employers and payers, to be aware of these differences.

Employees

Employees have certain entitlements, such as CPP and EI benefits and protection under employment standards and health and safety and workers’ compensation laws.

Under CPP and EI legislation, both the employer and the employee may be obligated to contribute to the CPP when the employee is in pensionable employment and to EI when the employee is in insurable employment. Employers make CPP contributions and pay EI premiums for each employee and deduct CPP contributions and EI premiums from amounts they pay their employees and remit these amounts to the Canada Revenue Agency (CRA). For CPP contributions, the employer and employee portions are the same. For EI premiums, the employer portion is generally 1.4 times the employee portion.

When the employment is in Quebec, the employer and the employee may be obligated to contribute to:

• the Quebec Pension Plan (QPP); and
• the Quebec Parental Insurance Plan (QPIP) for access to maternity, paternity, parental, and adoption benefits

Most businesses or industries have to follow employment standards under provincial or territorial employment standards legislation; however, some businesses or industries are federally regulated, in which case the employment standards that regulate an employee’s conditions of work are defined by the Canada Labour Code.

Federal and provincial/territorial employment standards cover minimum wage, vacation pay, holiday pay, and overtime pay. For more information, go to Federal Labour Standards or Provincial and Territorial Ministries of Labour.

Employees may be entitled to deduct certain employment expenses, including motor vehicle expenses. All legislative requirements must be met, including having the employer fill out and sign Form T2200, Declaration of Conditions of Employment. For more information, go to Guide T4044, Employment Expenses.

Self-employed workers

A self-employed worker may operate a business on his or her own as a sole proprietorship or with others under a partnership.

All self-employed workers pay both the employer and employee portions of CPP contributions when they file their T1 income tax and benefit return using Schedule 8, CPP Contributions on Self-Employment and Other Earnings.

Self-employed workers do not pay EI premiums unless they opt into the EI program for access toemployment insurance special benefits, which include maternity, parental, sickness, compassionate care, and parents of critically ill children benefits. If they want to opt in, they have to register with theCEIC.

When self-employed workers opt into the EI program to access EI special benefits, they pay the sameEI premium rate as employees pay. These EI premiums are paid when the self-employed worker files his or her T1 income tax and benefit return using Schedule 13, Employment Insurance Premiums on Self-Employment and Other Eligible Earnings. Unlike with the regular EI program, self-employed workers do not have to pay the employer’s portion of EI premiums.

All self-employed residents of the province of Quebec pay Quebec Parental Insurance Plan (QPIP) premiums for access to benefits for maternity, paternity, parental, and adoption leave.

Self-employed workers may be entitled to deduct certain expenses. For more information on these expenses, go to Business expenses.

For more information, go to Small businesses and self-employed, Contributions to the Canada Pension Plan, and Employment Insurance Benefits for Self-Employed People.

How to request a ruling

If a worker or a payer is unsure of the worker’s employment status, either party can request a ruling from the CRA to have the status determined.

Rulings can be requested for many reasons, not only to determine a worker’s employment status. More information on these reasons and the ruling process is available at

 How to obtain a ruling for Canada Pension Plan and employment insurance purposes.

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