Series of policy changes ahead for New Year
Beginning next month, employers will see changes to the Employment Insurance (EI) program that will affect their premium rates and could impact their short-term disability and supplementary benefit plans.
The next year may also bring more information on possible changes to the Record of Employment (ROE) and federal labour standards rules for maternity, parental and caregiver leaves.
As of Jan. 1, the federal government will lower premium rates from $1.88 per $100 of insurable earnings to $1.63 for employees outside of Quebec. For employees in Quebec, the rate will decrease from $1.52 to $1.27. Employers pay 1.4 times the employee rate unless Employment and Social Development Canada (ESDC) has lowered their rate under its EI Premium Reduction Program (PRP).
For the first time, the Canada Employment Insurance Commission (CEIC), a tripartite organization made up of representatives from business, labour and the federal government, set the EI rate.
Under amendments to the Employment Insurance Act that apply as of 2017 rate-setting, the CEIC is responsible for determining the rate each year using a new mechanism called the seven-year break-even rate.
That rate is one that the EI chief actuary forecasts will raise enough premium revenue to result in a balance of $0 in the EI operating account in seven years, including the elimination of any cumulative surplus or deficit.
With the exception of the 2017 rate, the CEIC will not be able to increase or decrease the premium rate by more than five cents when making annual adjustments.
While the 2017 rate change brings the first drop in EI premium rates since 2008, it does not go far enough for some in the business community. In this year’s federal pre-budget consultations, the Canadian Chamber of Commerce suggested called for an EI rate of $1.47 for 2017, as the previous government forecast in its 2014 budget.
EMPLOYER RATES
Beyond lowering the employee EI rate, some business groups have called on the government to change the way it sets employer rates. Both the Chamber and the Canadian Federation of Independent Business (CFIB) say they want the government to reduce the employer EI premium rate so that it is equal to the rate that employees pay.
“There is no reason for employers to pay more for (EI) benefits than employees do,” says the Chamber in a policy resolution that it passed this year. “The federal government should gradually (i.e., over a five-year period) reduce the employer EI premium rate to equal that paid by employees.”
In a 2016 research paper on EI, the CFIB states that, “Having employees and employers equally contribute to the EI system would help reduce the tax burden on small business owners and allow them to hire more staff, improve wages and continue to grow their business.”
The organization also wants the government to consider implementing a permanent, lower EI premium rate for small businesses. It suggests a rate of 1.2 times the employee rate.
The CFIB says another way to bring about a lower rate for employers would be through a permanent tax credit similar to the Small Business Job Credit that the previous federal government implemented for 2015 and 2016. The current government has not extended the tax credit beyond those years.
“As a result of the elimination of this job credit, small business owners are facing a slight increase in EI premiums in 2017,” the CFIB says.
So far, the government has not said whether it will accept any of the Chamber or CFIB recommendations.
WAITS REDUCED
Another EI change for 2017 that will affect some employers is the government’s plan to reduce the waiting period for EI benefits from two weeks to one week as of Jan. 1. The two-week waiting period has been in place since 1971.
Employers who take part in the EI PRP will have to revise their plan if it includes a waiting period (also called an “elimination period”) of more than seven consecutive days or the plan will no longer qualify them for a reduced premium rate.
The PRP allows qualifying employers to pay EI premiums at rates that are less than the standard rate (i.e., 1.4 times the employee rate). To qualify, an employer must provide employees with a short-term disability plan that meets specified criteria, including a requirement that the plan must not make employees wait more than 14 consecutive days before starting to pay benefits.
ESDC is proposing to reduce the maximum waiting period requirement from 14 days to seven days for the plans to ensure that eligibility rules under the PRP align with the new one-week waiting period for EI benefits.
To give employers affected by the change time to adjust their plans if they want to continue to qualify for the program, ESDC says it will allow existing plans that have a waiting period of more than seven consecutive days to continue to qualify for a premium reduction until Jan. 3, 2021.
ESDC statistics show that about 15 per cent (or 4,700) of employers taking part in the program have plans with a waiting period of more than seven days.
ESDC is proposing a similar transition period for employers who provide benefits to employees under plans that top up EI benefits, such as supplementary unemployment benefit (SUB) plans or plans that pay benefits to employees receiving EI benefits while taking a maternity, child care or compassionate care leave.
If an employer has a plan that tops up EI benefits for employees on maternity, child care or compassionate care leave, ESDC does not consider benefits paid from the plan to be earnings to be deducted from an individual’s EI benefits as long as the top-up payments combined with the employee’s weekly EI benefits do not exceed the individual’s normal weekly earnings from that employment.
ESDC states that the change to a one-week waiting period could result in some individuals having a combined payment that exceeds the maximum amounts allowed for SUB or other top-up plans in the week after the waiting period.
To give employers time to change their plans to reflect the new one-week waiting period, ESDC proposes to provide a temporary exception to the rules for maximum combined payments for employers with existing plans. They would have until Jan. 3, 2021 to update their plans to incorporate the new one-week waiting period.
ROE REVIEWS
Another EI area where employers could see changes in coming years is the ROE. Over the summer, ESDC held consultations on EI service quality. The review focused on streamlining applications, reducing wait times for service delivery and reducing the administrative burden for employers.
Organizations such as The Canadian Payroll Association and the CFIB have called on the government to replace the ROE with a system that uses current payroll data to administer the EI program. The government is expected to release a summary report on the consultations soon. ESDC has not said when the government may act on any recommendations put forward in the report.
ESDC is also considering other EI and EI-related changes that could impact employers next year or in coming years. During October and November, it asked for feedback on possible amendments to the Employment Insurance Act and Canada Labour Code that would provide more flexibility for individuals taking time off work for maternity, parental and care giving leaves.
While the EI Act provides benefits for eligible employees taking time off work, the Code gives federally-regulated employees the right to take the time off. When the federal government makes EI changes affecting leaves, provincial/territorial governments often amend their labour standards laws to harmonize them with the new requirements.
PARENTAL LEAVES
One proposal ESDC is considering would allow an eligible parent or parents to take a longer combined leave of absence from work and receive reduced EI parental benefits over a longer period (e.g., up to a maximum of 18 months when combined with maternity benefits and maternity leave allowed under the Code). With this option, employees would have more time off work, but would receive less money per month from EI.
Another option would allow for the current amount of parental benefits and unpaid leave, but let employees take the leave in smaller blocks of time over a period of up to 18 months rather than over 12 months as is now the case.
For example, an individual could receive maternity and parental benefits for six months, go back to work for six months, and then go back on parental leave and receive benefits for another six months.
The duration of EI maternity benefits and the amount of leave allowed under the Code would not change with either option.
