I have received many enquiries of late regarding the recently-implemented opportunity for self-employed persons to opt into the Employment Insurance program. It seems to me that the criteria for participation and the impact of opting in are not widely understood as of yet.
Historically, only true employees were eligible for EI coverage. Not having that aspect of our social security net to fall back on was just one of the many risks of being self-employed and operating as an independent contractor.
In late 2009, the federal Fairness for the Self-Employed Act was passed. It permitted self-employed persons to opt into the EI program to receive certain special benefits.
The EI coverage for which the self-employed are now eligible includes maternity, parental, sickness, and compassionate care benefits. They are not eligible for regular EI wage replacement benefits. To be eligible, the applicant must operate his or her own business (or work for a corporation and be in control of more than 40% of the corporation’s voting shares) and be either a Canadian citizen or a permanent resident of Canada. The new eligibility rules were effective as of the beginning of 2010. Due to the way the rules work, however, self-employed persons who opted into the EI program were not able to collect any benefits payments until January of 2011.
Generally speaking, people who operate their own business are considered to be self-employed. Some occupations are, however, ineligible for coverage under this program (including barbers, hairdressers, taxi drivers, certain other drivers of passenger-carrying vehicles, and certain fishers). To become eligible for coverage, a self-employed person must enter into an agreement with the Canada Employment Insurance Commission. This can be achieved on-line.
Once a self-employed person enters into the agreement, he or she has 60 days to reconsider. That window of opportunity should not be taken lightly because the implications of committing to the EI program are significant.
Once the self-employed person has opted into the EI program, he or she can still opt out but only if benefits payments have not been received. If benefits have been received, the person must continue to pay EI premiums on income for as long as he or she remains self-employed. If the self-employed person does opt out (prior to receiving any benefits), he or she must continue to pay EI premiums until the end of that calendar year. No refunds of EI premiums will be made upon opting out.
To qualify to receive these special EI benefits, the self-employed person must have experienced an interruption of earnings due to the birth of a child, the need to provide care to a newborn (or adopted) child, illness, injury, quarantine, or the need to provide care to a gravely ill relative. The self-employed person must also have earned a minimum specified amount of earnings in the year prior to the claim (for 2010 the specified amount was $6,000).
Benefits payments cannot be received until one year after the person opted into the EI program. There is a 2 week waiting period after an application to receive benefits payments is made. EI maternity benefits payments last up to 15 weeks’ duration, parental benefits up to 35 weeks, sickness benefits up to 15 weeks, and compassionate care benefits up to 6 weeks.
It seems me there are several reasons why most independent contractors, or self-employed persons, should consider taking a pass on this entitlement to opt into the EI program.
First, for many of them, avoiding the burden of payments such as EI premiums is one reason they chose to be self-employed to begin with. Second, if they do opt in, they won’t be eligible to receive regular EI benefits in the event of a normal, lack-of-work interruption of earnings. Third, once they have received any benefits at all, they must continue to pay premiums for the entire balance of their self-employed career.
To me, this doesn’t seem like a great bargain. If that’s your view also, consider staying true to your independent contractor roots and avoiding this aspect of the Canada’s social security net.
Related to E.I. Options for the Self-Employed: