As they contend with the global crisis caused by COVID-19, employers greatly appreciate such support mechanisms as the Supplemental Unemployment Benefit Plan (SUBP) and the Work-Sharing special measures. But despite the government’s clarifications of these mechanisms, it still isn’t easy making sense of it all. To help guide you, here are four frequently asked questions regarding these support mechanisms and our team’s answers.
Supplementary unemployment benefit plan
1) Can employers pay unemployment benefits to their employees in addition to those paid under employment insurance? If so, how?
- Employers can pay supplemental employment insurance benefits to their employees during the period of unemployment resulting from a temporary layoff that is related to a work shortage, illness or quarantining by establishing an SUBP to that end. Employers will be responsible for financing their SUBPs.
- An SUBP can be registered with Service Canada, provided certain requirements are met and a form is completed to that effect. In all cases, the SUBP must be approved by Service Canada before it comes into effect. Amounts paid under an SUBP that is registered with Service Canada will not be deducted from the employment insurance benefits that employees receive, as they do not constitute “remuneration.”
2) How are supplemental unemployment benefits (SUB) paid under a plan?
- Employers must issue a record of employment indicating that the employee is entitled to SUBs by entering “SUB plan benefit” in the “other monies” section. Before paying SUBs to their employees, employers must verify the employees are in fact receiving employment insurance benefits.
- The value of these SUB payments can be indicated either as a percentage of the employee’s normal weekly earnings or as a fixed amount. These payments must also be made periodically (not as a lump sum).
3) What is the maximum amount that can be paid to an employee under the SUBP without that employee’s employment insurance benefits being reduced?
- The combined weekly payments received from employment insurance and the SUBP put in place by the employer must not exceed 95% of the employee’s normal weekly earnings. At the present time, the basic EI benefit rate is set at 55% of the weekly insurable earnings, up to a maximum payment of $573 per week.
- Here is a sample SUB calculation posted on the federal government’s website:
Example 1: SUB payable when the employee is receiving regular, training or sickness benefits and has no other earnings.
A. Employee's normal weekly earnings: $1,000
B. Employee's other earnings: $0
C. 95% of normal weekly earnings: $950
D. Maximum EI payment: $573
E. Calculation of maximum SUB payment (C – D = E): $377
4) Can an employee be forced to reimburse employment insurance benefits received?
- Usually, payments under an SUBP registered with Service Canada are not deducted from EI benefit payments.
- However, employees whose net income (including employment insurance benefits and SUBs) exceeds $67,750 for 2020 (namely 1.25 times the maximum yearly insurable earnings) may be required to repay some of the EI benefits received.
- The government has yet to clarify how the new Canada Emergency Response Benefit will work with the Supplementary Unemployment Benefit Plan.
Work-Sharing special measures
(1) What are the new Work-Sharing special measures?
- Aside from the new special measures adopted by the federal government, the Work-Sharing program initially aims to prevent layoffs when there is a temporary decrease in the employer’s normal business activity. The goal is to reduce the employees’ normal working hours and share the available work equally amongst them.
- Under a Work-Sharing program, from March 15, 2020, up to March 14, 2021, special temporary measures will be in effect in response to the downturn in business due to COVID-19. These measures (1) extend the maximum duration of a Work-Sharing agreement from 38 weeks to 76 weeks, (2) waive the mandatory waiting period between two applications for Work-Sharing filed with Service Canada, (3) ease the recovery plan requirements, and (4) expand access to the program.
2) Which employers and employees may benefit from the temporary Work-Sharing special measures and how?
To be eligible for a Work-Sharing agreement, employers experiencing a decline in business activity related to the impact of COVID-19 must:
- Be private businesses, publicly held companies, public corporations or not-for-profit organizations;
- Have at least two employees in the Work-Sharing unit; and
- Be year-round businesses in Canada for at least one year.
Employees, for their part, are eligible for a Work-Sharing agreement if they are:
- Members of the “core staff” considered as essential to the recovery and viability of the business (unless they are responsible for the business’s direction and hold more than 40% of the voting shares in the business);
- Are eligible to receive EI benefits; and
- Agree to reduce their normal working hours by the same percentage and to share the available work.
3) What benefits are employees entitled to under a Work-Sharing program?
- Employees participating in a Work-Sharing program will benefit from the equivalent of: (i) what they would have received under employment insurance had they not worked, and (ii) the salary that would have been paid to them by their employer had they been required to work.
- For example, if an employee’s annual salary exceeds $54,200 (namely, the maximum yearly insurable earnings) and is called upon to work two days a week, the employer will pay his or her regular salary for these two work days, and the employee will receive $343.80 in employment insurance benefits for the remaining three days not worked, namely 3/5 of $573 (the maximum weekly insurable earnings).
4) How can you apply for the Work-Sharing program and within what timeframe?
- Revised form – Application for a Work-Sharing Agreement (EMP5100) and
- Revised version of Attachment A – Work-Sharing Unit (EMP5101) must be submitted at least 10 calendar days before the agreement’s requested commencement date. All agreements must come into force on a Sunday.
- Employers must indicate in box 26 of the revised form – Application for a Work-Sharing Agreement (EMP5100) what business activity recovery measures they intend to take.