Are You Overpaying Employment Insurance Premiums?

If you employ family members in your business, do you review whether employment insurance (EI) premiums should be paid? We continue to hear of situations where the EI status of family employees is determined for the fi rst time when the family member applies for EI benefits. If the government rules at that time that the employment relationship is non-arm's length in nature, then benefits are denied (a refund can be requested for some or all of the premiums previously paid).

For business people who employ family members, it makes more sense to determine their EI status now. Here are some suggestions: Where a family member is employed in a manner similar to that for arm's-length employees, and the family member wants to be eligible for EI benefits in the future, the goal will be to strengthen and document the arm's length characteristics of the relationship to ensure that the employment relationship is insurable.

In addition, applying for an EI ruling before you start paying premiums may make sense so that you know where you stand. If the government will insist the relationship is non-arm's length in nature, it is better to know that now. If a family member won't apply for EI benefits in the future, or the employment relationship has non-arm's length characteristics, the goal will be to document why the relationship is non-arm's length so that it won't be necessary to pay EI premiums. When you analyze a family employment situation, it's usually possible to identify factors indicating that the relationship is not arm's length.