Please correct me if I am mistaken, but I am trying to understand CRA Special EI Regulation for Barbers and Hairdresser. QuickBooks Blog provides some guidance with this calculation however I believe it is incorrect and is misguiding business owners. Given the Blog is using 2017 figures, my examples will contain the same.
Link: https://quickbooks.intuit.com/ca/resources/running-a-business/employing-barbers-hairdressers/
What You Need to Know About Employing Barbers and Hairdressers >
Self-Employed Barbers or Hairdressers >
At the time of posting this discussion it is written as such:
“… If you don’t have those numbers, multiply the number of days worked that week times 1/390 of the maximum annual insurable earnings. Then, multiply the total by 1/78. Let’s say a self-employed barber works five days in 2017, and that year the maximum pensionable earnings is $55,300. In this instance, your calculation looks like the following: 5 * $51,300 * 1/390 * 1/78 = $8.43. That’s the EI payment for the week”
CRA Explanation:
Link: https://www.canada.ca/en/revenue-agency/services/tax/canada-pension-plan-cpp-employment-insurance-ei...
“… 2. If the owner or operator of the establishment does not know how much the barber or hairdresser earned and/or the amount of the expenses incurred in generating those earnings, the amount of the barber or hairdresser’s insurable earnings for each week during that employment is deemed by the IECPR to be the lesser of:
-the number of days worked in that week multiplied by 1/390 of the maximum of the yearly insurable earnings; and
-1/78 of the maximum yearly insurable earnings.”
Problem: The method of calculation on QuickBooks Blog is very different than my interpretation of CRA. CRA states for the method calculate the LESSER of:
“-the number of days worked in that week multiplied by 1/390 of the maximum of the yearly insurable earnings; and
-1/78 of the maximum yearly insurable earnings.”
Therefore using QuickBooks Blog example, “5 * ($51,300 / 390) = Insurable earning of $657.69 for the week, OR $51,300 / 78 = Insurable earning of $657.69 for the week. In that example they are only equal because the self-employed barber worked five days (full-time). The LESSER of those two calculations would be subject to payment of BOTH the Employee (1.63% in 2017) and Employer (1.4 x) EI Premiums. The result is a Combined EI Premium of $25.73 ($10.72 + $15.01).
This is very different than “5 * $51,300 * 1/390 * 1/78 = $8.43” as identified on QuickBooks Blog.
Have I misinterpreted CRA’s instruction?
Thanks!
