By Chioma Ahaneku, LLM, PHRi, CPHR Candidate
Edited by Nizam Shajani, CPA, CA, MBA
Employers are actively looking for ways to support their employees during times of economic difficulties. The government offers two plans that could be considered. The Supplementary Unemployment Benefits Plan and the Work Share Benefit Plan.
Supplementary Unemployment Benefits Plan (SUB)
The purpose of this is plan is to enable employers to increase their employees weekly earning while they are unemployed due to a shortage of work, training, illness, or injury. While it must be indicated in the SUB Plan that employees must apply for and be in receipt of Employment Insurance (EI), nevertheless, the SUB Plan may provide SUB payments up to a maximum of 95% of normal weekly earnings when an employee is not in receipt of EI benefits and has insufficient insurable hours to qualify for EI benefits or has exhausted the EI benefit entitlement.
The SUB plan
- Can be used to increase employee’s weekly earnings during the period of unemployment.
- The combined weekly earnings from both the SUB Payments and the EI should not exceed 95% of their normal weekly earnings before the layoff.
- As long as the SUB Plan has been registered by Service Canada, the SUB payments made by the Employer are not considered insurable earnings and are not deducted from the Employee’s EI benefits.
- The SUB Plan must be registered before the effective date.
- The registration date of the SUB Plan is the date the application is submitted.
- Where the SUB Plan is not registered, the amounts paid by the Employer will be considered as earnings which will be subject to deductions.
- The regulation does not set a minimum or maximum number of weeks for payment, however the plan must indicate a start and an end date.
Where the employee has no other earnings and is receiving regular EI, the maximum SUB payment would be calculated as follows:
95% of normal weekly earnings – Maximum EI payment
It is important to note that where the employee has other earnings and is receiving EI, there will be deductions.
Work Share Plan
The purpose of this plan is to avoid layoffs when there is a temporary reduction in the normal level of business activities that are beyond the control of the employer. This program provides EI Benefits for eligible employees as income support.
The Work Share Plan
- Applies to private business, publicly-held company or a not-for-profit organization that have been in business in Canada year round for at least 1 year.
- The shortage of work is beyond the control of the employer (as is in the case of COVID-19), and there is a recent decrease of business activities by at least 10%.
- The Employer and the Work Share Participant employees must apply to participate in the Work Share Plan together.
- The employees must agree to the Work Sharing Agreement and to a reduction of their normal working hours.
- Only year round permanent full time or part time employees, and temporary employees not employed on a seasonal basis, who have maintained hours similar to permanent full time or part time employees within the last 12 months are eligible.
- The above eligible employees must also be eligible to receive EI benefits in order to participate in the Work Share Plan.
- The duration of this plan must be a minimum of 6 weeks and may last up to 76 weeks due to COVID19.
- The work schedule can be reduce by a minimum of 10% and a maximum of 60% weekly or an average of 10% – 60% for the duration of the program.
- Earnings received by any employee under the Work Share plan shall not be deducted from the Work Sharing Benefit unless the earnings are from another source other than the Work Share employment.
- Where the Work Share Participant has earnings from another source, a percentage of these earnings will be deducted from the Work Sharing Benefit payable the week in which the earnings occurred.
- EI Benefits received by Work Share Participants are taxable.
- Application for this program must be submitted at least 10 calendar days prior to the requested start date. There is not indication that this has been waived due to COVID-19.
- A minimum of two employees is required for a Work Sharing Agreement.
- There is no waiting period for the benefits, however, it is processed through the EI program so it may take a few weeks for the first cheque to arrive.
- The Group Benefits plan must be maintained for the duration of this program though it may be reduced due to participation in the Work Sharing Agreement.
- After the approval of the Work Share Program, the employer is required to submit a utilization report weekly. This is essential for the weekly benefit payment to be made.
The Work Sharing Benefit are based on the employees’ loss of normal hours of work and the regular weekly EI Benefit rate as calculated at the start of the Work Sharing Agreement.
While both plans can assist your employees in receiving earnings that are close to their current salary, the application of the Work Share Plan appears to be more tedious. Also, any employee not eligible for EI Benefits cannot participate in the Work Share Plan. It is not clear how long it would take before either plan will take effect given the increase of applications resulting from COVID-19.
Our team of professionals would be happy to help you navigate this process to see what works best for your particular situation.
This information is for discussion purposes only and should not be considered professional advice. There is no guarantee or warrant of information on this site and it should be noted that rules and laws change regularly. You should consult a professional before considering implementing or taking any action based on information on this site. Call our team for a consultation before taking any action. © 2020 Shajani LLP