The federal government recently announced changes to the distribution of Employment Insurance ("EI") benefits for employees on parental leave. These changes, which become law on December 3, 2017, may impose an increased financial burden on employers who "top up" employees' EI benefits while the employees are on parental leave. If you are an employer who "tops up" employee earnings while the employee is on parental leave, please read the following message.
Currently, adoptive or biological parents can claim 35 weeks of parental leave EI benefits for a period of 52 weeks after the baby is born or placed with the family. These benefits are paid at the rate of 55% of the employee's average insurable weekly earnings, capped at the maximum benefit payment of $543 per week, as of January 1, 2017.
As of December 3, 2017, parents will also have the option of receiving 61 weeks of Employment Insurance Benefits over a period of 78 weeks after the baby is born or placed with the family. Parents who opt to extend parental benefits will receive a lower benefit rate - 33% of their average insurable weekly earnings to a cap of $326 per week.
This change may have a financial impact on employers who top up salaries during parental leave. This impact will depend on the wording in the employer's policy around top up, or where top up is pursuant to a collective agreement, the agreement provisions that provide for the top up. That is, if an employee chooses to receive lower EI payments over the extended period, the employer may be required to pay the employee more money to top up the employee's earnings while the employee is on the parental leave. Further, this greater financial burden to the employer may be compounded by the fact that the employer is required to pay the employee for a longer period of time.
To protect against this exposure to increased top up payments, employers who top up pursuant to an employer policy can amend their policies. For example, policies may be amended to limit the duration of the wage replacement payment, limit the percentage of the wage replacement payments, or fix the amount that the employees receive in top up payments (e.g. to $10,000), paid out at no more than a top up of 100% of the employee's earning in the period in which the payment is made. Where the top up is pursuant to collective agreement provisions, the problem may be more complex, and we encourage you to get legal advice in respect to the matter.
We are available to answer questions, provide more information or assist with any steps required to address financial exposure arising from this imminent change in the law.