Impact of Canadian Pension Plan and Employment Insurance Contributions by Employers


The objective of this paper is to study the impact of mandatory Employment Insurance and Canada Pension Plan employer contributions on the labour market. It will be shown that the requirement of employees to contribute for employees, under both statutes, have a negative impact on the labour market. This impact creates an uncorrectable unemployment situation and lowers the utility for some workers. The purpose of both federal statutes is to protect labour in the event of employment and provides an increase in utility to all workers.



Research Paper

On April 3, 1965 The Canada Pension Plan (CPP) received royal assent and came into force on May 5, 1965. Under the leadership of Prime Minister L. B. Pearson contributions for the plan commenced on January 1, 1966 and benefits began on January 1, 1967.1

The Plan covers practically everyone who is working regardless of his or her occupation. Included in the plan are seven types of benefits: a) pension for retirement; b) pension for permanently disabled workers; c) benefits for children of permanently disabled workers; d) pension for widows; e) benefits for orphaned children; f) pension for disabled widowers; g) lump sum payment to the worker’s estate upon death.

Both employee and employer make contributions, by deducting the employee’s portion off wages earned and the employer matching that amount, up to a maximum amount of contributions. The contribution rate is approximately 3.6% of the employee’s annual earnings. Since inception CPP required the employers to contribute the same amount as the employee. For example, in 1968 a worker earning $2,400 per year, less the exemption of $600, multiplied by the CPP rate of 3.6% would pay $43.20, and the employer would remit to Revenue Canada, (then known as Department of National Revenue) an equal amount, therefore, the total remittance was $86.40. … READ MORE

error: All Content is copyright protected. To obtain content for republishing, please purchase a non-exclusive publication license for our store.