COVID-19 Employment Insurance - Making it Work23-Mar-20
By McLennan Ross Labour & Employment Team
The COVID-19 pandemic has ushered in new economic realities, which we are assisting our clients navigate. In doing so, one theme that we are seeing is employers desiring to help mitigate the impacts of the crisis for employees when faced with workplace reorganizations.
Below are some of the Employment Insurance (“EI”) options available to employers when considering workplace reorganizations.
Supplemental Unemployment Benefit
Employers can use a Supplemental Unemployment Benefit (“SUB”) plan to increase their employees’ weekly earnings when they are unemployed due to a temporary stoppage of work, training, illness, injury, or quarantine.
Payments from SUB plans that are registered with Service Canada are not considered earnings and are not deducted from EI benefits. An acceptable SUB plan is one that:
- Identifies the group of employees covered and the duration of the plan;
- Covers a period of unemployment caused by one or a combination of the following:
- temporary stoppage of work,
- illness, injury or quarantine;
- Requires employees to apply for and be in receipt of EI benefits in order to receive payments under the plan;
- Requires that the combined weekly payments from the plan and the portion of the EI weekly benefit rate do not exceed 95% of the employee’s normal weekly earnings;
- Requires it be entirely financed by the employer;
- Requires that on termination, all remaining assets of the plan will be reverted to the employer or be used for payments under the plan or for its administrative costs;
- Requires that written notice of any change to the plan be given to Service Canada within 30 days after the effective date of the change;
- Provides that the employees have no vested right to payments under the plan except during a period of unemployment specified in the plan; and
- Provides that payments in respect of guaranteed annual remuneration, deferred remuneration, or severance pay will not be reduced or increased by payments received under the plan.
Information regarding SUB plans and requirements can be found here.
Employers who provide top-ups to maternity, parental (including adoption), or caregiving benefits (including compassionate care, family caregiver benefit for children, and family caregiver benefit for adults) are also not deducted from EI benefits. Information regarding supplementing maternity, parental, compassionate care, or family caregiver benefits can be found here.
Federal Work-Sharing Program
The Work-Sharing Program is designed to help employers and employees avoid layoffs when there is a temporary reduction in the normal level of business activity that is beyond the control of the employer.
A Work-Sharing agreement is a three-party agreement involving employers, employees, and Service Canada. Employees on a Work-Sharing agreement must agree to a reduced schedule of work and to share the available work over a specified period of time.
To be eligible for a Work-Sharing agreement, employers must:
- Have been in business in Canada year-round for at least two years;
- Be a private business, a publicly-held company, or a not-for-profit organization;
- Demonstrate that the shortage of work is temporary and beyond their control, and is not a cyclical/recurring slowdown;
- Demonstrate a recent decrease in business activity of approximately 10% (or more); and
- Submit and implement a recovery plan designed to return the Work-Sharing unit(s) to normal working hours by the end of the Work-Sharing agreement. There must be a reasonable expectation that recovery (that is, a return to normal work hours for all participating employees) will be achieved by the end of the agreement.
Employees being proposed for a Work-Sharing agreement must:
- Be “core employees” (that is, year round permanent full-time or part-time employees who are required to carry out the everyday functions of normal business activity);
- Be eligible to receive EI benefits; and
- Agree to a reduction of their normal working hours in order to share the available work.
Additional considerations also include:
- A Work-Sharing unit is a group of core employees who have agreed to participate in the Work-Sharing Program and to reduce their normal working hours. A Work-Sharing agreement may include more than one Work-Sharing unit. There must be a minimum of two employees in a Work-Sharing unit.
Equal Sharing of Work
- All members of a Work-Sharing unit must agree to reduce their normal work hours and to share the available work. If, during the period of the Work-Sharing agreement, work activity increases, the additional hours of work must be shared equally among all members of the unit. For example, a group of machine operators and a group of shipper/receivers can only form part of the same Work-Sharing unit if both groups share the available work and reduce their hours equally (that is, same percentage reduction).
Expected Work Reduction
- Work-Sharing agreements must include a reduction in work activity of the employees' regular work schedule between a minimum of 10% (one half day) and a maximum of 60% (three days). In any given week, the work reduction can vary depending on available work, as long as the work reduction on average over the life of the agreement is between 10% and 60%.
- Work-Sharing agreements must have a minimum duration of 6 weeks. The maximum initial agreement duration is 26 weeks with a possible extension of up to 12 weeks. Please note that the Federal Government introduced temporary special measures that extend the maximum duration of Work-Sharing agreements from 38 weeks to 76 weeks across Canada.
- The employer must maintain all existing employee benefits (for example, health/dental insurance, pension benefits, vacation, group disability, etc. for the duration of the Work-Sharing agreement). However, employees should be made aware that benefits (including any subsequent payout of benefits) may be reduced if calculated based on earnings or hours of work.
- Businesses are not allowed to increase their workforce during a Work-Sharing agreement, but may replace core-employees who choose to leave. Note: For businesses with multiple departments, the departments that are not participating in Work-Sharing sharing (that is, no employees form part of a work-sharing unit) may increase staff as required.
- Participants do not have to serve a waiting period for Work-Sharing benefits. However, as these benefits are processed through the EI payment system, it may take a few weeks after the employer has submitted the first Utilization Report for benefits to arrive. The Utilization Report is the reporting form that tracks, among other things, the total hours worked for employees due to their participation in Work-Sharing.
- The benefits payable are based on the employee’s normal average weekly earnings, as calculated at the start of the agreement. If the employees work irregular hours, the average weekly wages are calculated by averaging the hours worked per week over the two years preceding the application.
- For most people, the basic rate for calculating EI benefits is 55% of your average insurable weekly earnings, up to a maximum amount. As of January 1, 2020, the maximum yearly insurable earnings amount is $54,200. This means that you can receive a maximum amount of $573 per week.
- So, for example, if the employee now works 3 days under the work-sharing program whereas before he or she worked 5, the remaining 2 days will be paid by EI based on the EI weekly benefit rate for that employee. If the employee earns $573 (the maximum), he or she would get $229.20 from EI ( ($573/5)*2=$229.20).
Although the Federal Government has introduced special temporary measures in response to COVID-19 for this program, an application for a work-sharing agreement still must be submitted a minimum of 30 days prior to the requested start date. Information regarding the Work-Sharing Program can be found here.
Working While Receiving EI
Employers can employ and pay employees who have served their waiting period and are receiving EI benefits. Employees who earn money while receiving EI benefits can keep 50 cents of their benefits for every dollar they earn, up to 90 percent of their previous weekly earnings. Above this cap, the EI benefits are deducted dollar-for-dollar.
Employees are not eligible to receive EI benefits if they work a full week, regardless of the amount they earn. However, this will not reduce the total number of weeks payable on their claims. Since the employees are already receiving EI, they do not need to apply for working while on a claim. They simply need to declare their earnings here.
Information regarding working while on a claim can be found here.
Please also see our primer on proper ROE coding that can be found here.