The federal government has announced that it will grant a one-time tax credit based on the increase in an employer’s employment insurance (EI) premiums paid in 2011 over those paid in 2010. The credit will be calculated on the employer’s 2011 T4.

The business that are eligible for this tax credit are those who paid $10,000 or less in EI premiums in 2010. This effectively means that the credit is only available to smaller companies that don’t have a large number of employees. This is because a larger employer would pay more than the $10,000 in EI premiums. For example, a company with 11 employees earning $38,000 each would be too big to qualify for the credit.

The practical outcome of this is that an employer could hire an additional employee at $40,000 per year or two additional employees at $20,000 per year and not have to pay any additional EI premiums for 2011.

This is a useful tax credit because it will put more money in the hands of some small business owners who will in turn send it through the rest of the economy by buying goods and services.

While the tax credit is welcome, make sure you base all of your hiring decisions on what makes sense for your business and not on tax policy.