As the ranks of self employed Canadians increases, there is a growing problem of employment insurance coverage. What is the problem? Self employed business owners previously were not eligible for employment insurance coverage. As it’s especially applicable to the female entrepreneurs, business income could dry up quickly while on maternity leave. With no business income or employment insurance benefit, the financial situation could get ugly unless there is substantial savings.
This has recently changed however with a new bill introduced for employment insurance for the self employed. This bill extends to maternity, parental, sickness and compassionate care leave for the self employed.
According to The Telegram, here are some of the details:
..entitled the Fairness for the Self-Employed Act, would provide the following:
Maternity benefits of up to 15 weeks for mothers, beginning up to eight weeks before the expected birth date.
Parental benefits of up to 35 weeks for biological or adoptive parents while they are caring for a newborn or newly adopted child; they may be taken by either parent or shared between them.
Sickness benefits of up to 15 weeks for those unable to work because of sickness, injury or quarantine.
Compassionate-care benefits of up to six weeks for those who have to be away from work temporarily to provide care or support to a family member who is gravely ill with a significant risk of death.
The article goes on to state that the self employed individual would have to pay the same premium as a salaried worker. However, I assume that the business would have to cover the employer portion of the EI premium.
For example, the maximum insurable earnings for 2010 is $42,300. The employee rate is 1.73% ($731.79) with the employer rate being 2.422% ($1024.51). If a self employed person were to opt into the employment insurance program, I would suspect that they would have to pay the full 4.152% or $1756.50 per year.
Another important point is that self employed individuals can also opt in or out of the program at the end of any tax year unless they have claimed benefits. If they have claimed benefits, they must continue to pay EI premiums as long as they are self employed. Depending on how long term the business is expected to last, paying the premiums can get expensive.
I may be 100% self employed someday and it’s always comforting to know that there is a safety net out there.
What are your thoughts on employment insurance for the self employed??