EI Benefits for the Self Employed

Today we’re going to cover the employment insurance (EI) benefits that you can receive, as a self-employed individual.

Perhaps the most important thing to understand, is that while you can receive a significant amount in EI benefits as a self-employed person, you are not automatically signed up to receive them, and you do not receive them for free.

Hence, the big decision that you have to make as someone that is self-employed, is whether you want to pay into the premiums in order the receive the EI benefits when you need them. 

How Much Can I Expect to Receive?

According to the Government of Canada: 

“If you are eligible for maternity, standard parental, sickness, compassionate care or family caregiver benefits you can expect to receive 55% of your earnings from self-employment up to a maximum amount. 

For extended parental benefits you can expect to receive 33% of your earnings from self-employment, up to a maximum amount.

In 2020, you can receive up to $573 per week for maternity, standard parental, sickness, compassionate care or family caregiver benefits, based on the maximum insurable earnings of $54,200 for that year. 

For extended parental benefits you can receive up to $344 per week. (The amount of $344 can be increased if you are eligible to receive the Family Supplement).

The amount of your benefits may decrease if you continue to work or if your business generates earnings while you are collecting EI special benefits.”

(You can get the source and their full details here)

While that definitely sounds great, you do actually have to register for EI and continuously pay into it in order to receive these payouts. 

So, how much will these benefits cost you every month?

Your Cost to Receive the EI Benefits:

According to the Government of Canada, in 2020, for every $100 you earn, you will need to contribute $1.58 in EI premiums up to a maximum of $856.36 (for the year 2020).

A common misconception is that since you are both the owner and employee of your own business, you have to pay both the employer portion of the EI, and the employee portion of the EI (i.e. paying it twice). This is not the case. You do not have to pay the employer’s portion of the EI. 

Before moving forward, it is important to mention that there are numerous nuances when it comes to EI for the self-employed, depending on your situation.

For example, the rules are different if you are in Quebec, if you have a specific type of job, if you are a shareholder of the company with a specific percentage of voting shares, and others. Therefore, since the premiums that you are paying are significant, and since it can be difficult to cancel (more on that later), definitely be sure to read through the details here, as well as call Service Canada if you are not sure about something as it pertains to your specific situation.

Can You Cancel if You No Longer Wish to Pay the Premiums?

This is perhaps one of the biggest considerations to think about as you can’t simply cancel whenever you want, and once you start, you may actually be forced to pay the premiums for the rest of your self-employed career!

The way the rules work, is that once you sign up, you have 60 days to cancel (in case you changed your mind). If you do this, you won’t have to pay any premiums. 

After this 60 day period however, the rules get very strict. According to the Government of Canada:

“After this 60-day period, you may still terminate your participation if you have never received EI special benefits as a self-employed person. In other words, after you receive EI special benefits, your participation will continue and you will have to continue to pay EI premiums for the entire duration of your self-employed career, regardless of any change in the nature of your self-employment.”

(Source)

It’s also worth mentioning that they do not issue refunds on any EI premiums that you may have paid. 

So in other words, not only do you not get any of the money back that you contribute (if you don’t make a claim), but you also can’t leave the program if you ever do receive any of the EI benefits.

My Thoughts?

Personally, not being able to leave (if benefits have ever been paid out) is what scares me the most when it comes to this proposition. Life changes, things happen, and so to potentially be stuck paying these premiums for as long as I want to be self-employed sounds like a very inflexible thing that I take great reluctance in participating in.

Obviously this all depends on your situation and personal preferences and so I’m not saying that you should or shouldn’t participate in this program. 

I am however saying, that it is something where the pros and cons have to be really thought about, as it’s definitely not a free lunch, and it is a commitment (with significant payments) that you may be stuck in for decades.

All-in-all, I’m happy that a program like this exists for Canadians. More options is definitely better than no options, and it’s nice to not be forced to fully self-insure against major disruptions in your ongoing income. 

Like home and auto insurance, I find that it also does provide a good piece-of-mind against some catastrophic events (in this case, disruptions in your income). 

However, personally, I do feel more comfortable with self-insuring against such distributions, as I tend to shy away from the inflexibility of potentially multi-decade long financial commitment that I have no way of getting out of. I also don’t like the guaranteed and immediate cashflow drain for something that I may never actually use. 

Keep in mind though, that our situation is different than average since we already hit our financial independence number and can just live off our portfolio indefinitely. If on the other hand, we were a single income family with multiple kids, maybe more kids on the way, and a small cash cushion, then my decision may be entirely different. 

Once again, it really depends on your situation, your plans for the future, and the level of uncertainty that you feel comfortable with. For example, whether you plan on having more kids and want to continue receiving some income while you are busy taking care of them. 

Who Is Eligible for Self-Employed EI?

In order to be able to register, there are also certain conditions that must be met. 

I’ve taken the list of conditions below directly from the Government of Canada Site:

• Your registration for access to the EI Program must still be valid (that is, not terminated), and
• You must have reduced the amount of time devoted to your business by more than 40% because of:
  • the birth of a child
  • the need to care for your newborn or newly adopted child or children
  • illness, injury, or quarantine
  • the need to provide care or support to a gravely ill family member, or
  • the need to provide care or support to your critically ill or injured family member
• You must have earned a minimum specified amount of net self-employed earnings during the calendar year before the year you submit an EI claim (for claims filed in 2020, the minimum amount of 2019 net income is $7,279)

Also, once you are part of the program, there are only a certain number of conditions in which you are entitled to receive the benefits.

I’ve included them below for easy reference (they are copied and pasted right from the government’s site). 

Also keep in mind that to actually receive the benefits, you have to provide the sufficient proof such as medical certificates, the birth date of the child, etc. (depending on the reason for claiming these benefits).

Here they are, from the Government’s EI special benefits for self-employed people guide):

• Maternity benefits are for people who are away from work because they’re pregnant or have recently given birth (up to 15 weeks).
• Parental benefits are for any parent (mother or father) to care for their newborn or newly adopted child or children. The benefits are available to biological, adoptive, or legally recognized parents. There are two options available for receiving parental benefits: standard or extended.
• Standard parental benefits can be paid for a maximum of 35 weeks and must be claimed within a 52 week period (12 months) after the week the child was born or placed for the purpose of adoption. Standard parental benefits are paid at a weekly benefit rate of 55% of the claimant’s earnings from self-employment, up to a maximum amount.
• Extended parental benefits can be paid for a maximum of 61 weeks and must be claimed within a 78-week period (18 months) after the week the child was born or placed for the purpose of adoption. Extended parental benefits are paid at a weekly benefit rate of 33% of the claimant’s earnings from self-employment, up to a maximum amount.

Either parent can receive parental benefits, or they can share the benefits between them. If both parents share the benefits, they must receive them under the same option.

• Sickness benefits are for people who cannot work due to injury, illness, or the need to be isolated in quarantine because they may be carrying a disease (up to 15 weeks).
• Compassionate care benefits are for caregivers who must be away from work temporarily to provide care or support to a person who is seriously ill with a significant risk of death (up to 26 weeks). The 26 weeks of benefits can be shared between different caregivers who applied and are eligible to receive them.
• The family caregiver benefit for children is for caregivers who must be away from work to provide care or support to a critically ill or injured child under 18. Either one or more caregivers can share up to 35 weeks of benefits between them.
• The family caregiver benefit for adults is for caregivers who must be away from work to provide care or support to a critically ill or injured adult. Either one or more caregivers can share up to 15 weeks of benefits between them.

How Do You Register for EI When Self-Employed?

This is all done through your “My Service Canada” account. Once you are logged in, select “Employment Insurance for the Self-Employed” on the main page to begin the process.

If you are having trouble, you can contact them and receive additional information here.

Your Thoughts?

I’d love to hear your thoughts about this benefit in the comments section below. Is this something that you think would be a good fit for you? Do you think the pros outweigh the cons in most cases?