EI factor is calculating wrong rate, overcalculating employer expense

Question

I received a PIER review from CRA for the 2019 T4 filing. The discrepancy was with Employer portion of EI premiums, after much searching and troubleshooting to figure WHY it was overcalculating the Employer's portion, I was able to figure this much out: Sage 50 is calculating the worker's EI amount correctly at 0.0162 of the gross earnings. The Employer's portion would be 1.4% of the worker's amount. But what is happening is it is actually taking 1.62% of the worker's EI calculation (so it's using 1.62% both times, instead of 1.62 for the worker and then 1.4 for the employer). 
 Example: Employee paid $1000, Sage calculates $16.20 in EI is owed by employee. The employer's portion should be $16.20 x 1.4 = $22.68. BUT Sage is instead doing $16.20 x 1.62 = $26.24. This results in a small overcalculation of the employer's EI expense and liabliity, resulting in my overpayment of EI in 2019. 
 My payroll settings are as follows: 
 For the Employees settings, under the Taxes tab for each infividual, the EI box is checked and set to calculate a rate of 1.62 for the worker (the 2019 rate) 
 For the Employer settings, under Setup>Settings>Payroll>Taxes, the EI FACTOR is set at 1.4 
 So why would it be using a factor of 1.62 instead? I have been using Simply/Sage for a very long time, did I miss a bulletin or something? Does that EI factor setting not work anymore? Do I have to go through every individual employee record and change the EI calc to 1.4? And if I DO THAT, how will Simply know what EI rate to use for the employee portion? Won't I just end up with same problem except on the worker's side instead? (which would be much much worse). 
 I would also like to note that this problem is still happening in 2020, and that in spite of current payroll taxes and updates, my EI rates and factor HAVE NOT been updated to the 2020 changes. 
 I can make a manual adjustment to correct our books to reconcile with what CRA says we owe, and will now have to re-submit amended T4 summary, but I need to fix this going forward as we are overpaying every month.

Richard S. Ridings · Accepted Answer

The rate you have on the Employee Ledger, Taxes tab is for the calculation of the Employer portion of EI, not the employee. It should be 1.4 not 1.62.

Alwyn · Answer

The reason it is set up for the employer's rate on each employee is because there can be reduced rates depending on the benefits package when short term disability is included. The employer has to apply for the discounted rate and it may apply only to employees with the specific coverage and not all employees. I am aware of a company with three factors for the employer's portion as they have a varying plan for employees in different groups.

Richard S. Ridings · Answer

Technically you shouldn't need to enter the Employer portion rate either because you send for new employees you have the proper 1.4 set up in Setup, Settings, Payroll, Taxes. If the rate never changes, you don't have to make any changes. The Help on these screens could be improved quite a bit. 
 BTW, the employee rates are what you are paying Sage for every year. 
 Open the sample file and play with an employee's ledger settings. Setup a paycheque and check out the journal entry on the Report menu without posting so you can see how the rates you change will affect the amount of the expenses and the payable amounts.

Sage 50 Canada

EI factor is calculating wrong rate, overcalculating employer expense

Top Replies

COMMUNITY

COMPANY

PARTNERS

SUPPORT & TRAINING