Final answer:
Annual maximum EI premiums depend on rates and maximum insurable earnings, with both employer and employee contributions. For Social Security and Medicare, each pays a fixed percentage, but the employer's share might be offset by lower wages, impacting total compensation.
Step-by-step explanation:
The calculation of the annual maximum employee and employer Employment Insurance (EI) premium is based on established rates and the maximum insurable earnings. For both the employee and the employer, EI premiums are calculated by multiplying the employee's insurable earnings by the EI rate, up to a yearly maximum. In the case of payroll taxes such as Social Security and Medicare, both the employer and the employee are responsible for a certain percentage; for Social Security, it is 6.2% each, and for Medicare, it is 1.45% each. However, economists argue that employers may pass on the cost of their share of these taxes to employees through lower wages, which implies that employees might effectively bear the entire cost of these payroll taxes. It is important to consider the total compensation per hour, which includes not just wages but also benefits like health insurance, retirement plans, Medicare, and other benefits.