Impact of COVID-19 on Small Business and Their Employees(UPDATED): EI Sickness and EI Regular Benefits
Update on March 31st, 2020:
Canada Emergency Benefit Program (CERB)
The EI benefits listed below the update have been in part replaced by the Canada Emergency Benefit Program (CERB) which will provide a monthly flat benefit of $2,000 to both employees and self employed workers/small business owners who:
Have been laid off or terminated
Are sick, in isolation or taking care of someone with COVID-19
Are working parents who have to stay home to take care of children due to school and daycare closures.
The employee or self employed/small business owner must be unable to or out of work for at least 14 consecutive days in any 4 week period .
No ROE is required to claim CERB.
They should not received any income in this period whether it be self employed income, salaries or EI benefits
The employee or self employed worker must have earned at least $5,000 in 2019 or in the past 12 month period. This means self employment income, salaries or parental/maternity benefits
CERB recipients will receive a flat amount of $2,000 over a maximum of 16 months. The amount will be paid every 4 weeks.
Applications are expected to be available starting April 6th. Those that plan to apply should be registered with CRA My Account as this should speed up the processing time. It is estimated that claims will be paid within 10 days of making the application
If an employee has already applied and have been accepted for EI benefits, they would not apply for CERB until after their benefits have run out. If they are still unemployed at this point, they can then initiate a claim for CERB.
Those who are eligible for EI but have not yet applied should apply for CERB. The government has stated their intention to integrate the processing of EI and CERB claims and as such open EI applications will likely be transferred to CERB.
End of Update
The impact of COVID-19 (caused by the CoronaVirus) is being felt deeply all across the world right now as individuals, businesses, healthcare institutions and governments try to cope with the ongoing and evolving implications. It is a difficult time as individuals try not to panic and governments are endeavouring to decide the best course of action for their citizens. Small businesses are experiencing dramatic slowdowns or are being forced to close as customers stay at home.
There are two situations for employees:
Employees that are actually sick or quarantining themselves due to travel or potential contact with the Coronavirus are entitled to employment insurance (EI) sickness benefits.
Employees who are laid off due to work shortages or closures are entitled to are entitled to employment insurance (EI) regular benefits.
Details of each are provided below:
Employment Insurance (EI) Sickness Benefits
Eligible Workers
Employees who have accumulated 600 hours of work in the past 52 weeks, which is approximately 17 weeks at 35 hours per week, are entitled to sickness benefits. Small business owners and self employed workers, who are registered for the self employed EI program for at least one year are also eligible. Part time workers have to satisfy the minimum requirement of 600 hours in the past 52 weeks as well to qualify under the EI regime.
Proof of Sickness
Normally a medical certificate would be required for a quarantine, however, this is being waived as long as the quarantine is mandated by law or a public health office or even the employer. Quarantined individuals include travellers who have returned to Canada from an international destination or those that may have had contact with an infected person.
Non Eligible Workers
Unfortunately, employees who have not worked for 600 hours since their last EI claim or in total since being employed do not qualify for EI benefits under the regular regime. Nor do small business owners who are also employees of corporations that own more than 40% of the company. Small business owners who have not been a paying participant in the EI program for self employed people for at least one year also do not qualify. However, both the Federal and Quebec government have implemented measures to make benefits available to those who do not qualify. under the EI regime
Benefits
The EI benefit that workers are entitled to is 55% of their average gross salary up to a maximum of $573 per week up to a maximum of 15 weeks.
In terms of the calculation, Service Canada looks at the highest earning weeks over the qualifying period which is 52 weeks. They calculate anywhere between 14 and 22 of your highest earning weeks (depending on a regional rate of unemployment factor) and calculate the average to determine your employment benefits. If you are a salaried worker that earns the same weekly (or monthly) amount for the past 52 weeks, your EI benefit would simply be 55% of your average weekly salary. However, if you work hourly or part time and your earnings fluctuate this will provide a greater benefit since Service Canada will be using your best weeks for the calculation.
Special Waiver due to COVID-19
Normally, an employee who applies for sickness benefits would only be eligible for the benefit in week two. However, the government has waived the one week period of non eligibility due to the coronavirus which means that if an employee is quarantined they will be entitled to the full amount of sickness benefits from day one of their isolation. Note that this does not mean that you receive a cheque right away – an application still has to be completed and processed which might take longer than usual given the sheer number of potential applicants.
How to Apply
Service Canada has established a dedicated toll-free phone number if you are in quarantine and seeking to waive the one-week EI sickness benefits waiting period so you can be paid for the first week of your claim. They can be reached at 1-833-381-2725 (toll-free)
For further information please see Service Canada’s comprehensive guidance on applying for EI Sickness Benefits.
Employment Insurance (EI) Regular Benefits:
Many small businesses have either laid off or are considering laying off workers due to work shortages as a consequence of either having to close their businesses entirely or reduced revenues. In these cases, employees who are laid off will be entitled to EI benefits
For an employee to qualify for EI due to a work shortage, he or she must have worked between 420 and 700 hours of insurance employment (number of hours worked) in a 52 week period or since their last claim. The number of hours is based on the economic region which can be determined by entering the postal code of the region in which you work.
It is best to apply for EI benefits as soon as possible even if you haven’t received your Record of Employment (ROE). Given the current circumstances, ROEs might be delayed depending on the availability of staff to complete them.
The calculation of EI regular benefits are similar to EI sickness benefits at a rate of 55% of your best weekly earnings up to a maximum of $573 per week. Benefits may be received for a period of 14 weeks up to a maximum of 45 weeks
There is potential for a family supplement when the family income does not exceed $25,921 and you have children. The amount of the supplement depends on the number of children.
The process of applying for EI sickness and regular benefits is the same for Quebeckers.
persons not covered by ei
There are special benefits that were announced by both the Government of Canada and Quebec relating to workers and small business/self employed owners not covered by EI. Please refer to my post on this.
How to Apply:
Applications can be initiated online or by mail.
For further information please Service Canada’s comprehensive guidance. on applying for EI Regular Benefits.
record of employment (roe)
When applying for an EI claim it is necessary to have an ROE to accompany your claim. This is is the responsibility of the employer and is prepared by the HR department, payroll provider, accountant and sometimes by the business owner themselves. Even if the layoff is temporary, the employer is required to issue an ROE.
What is an ROE
An ROE essentially provides details on the employment history of the employee and is the most important document required when determining eligibility for EI , the amount of the benefit and the period over which the benefits will be received.
How to Prepare an ROE:
1. Electronically:
The business would sign in and register for “ROE Web” where you will have to create and authenticate your profile. If you are registered for CRA my business account, this should happen fairly quickly. If not you will be sent an authorization code in the mail which should take 5 to 10 business days.
2. Paper Form:
The ROE can be prepared manually by requesting the forms from Service Canada, however, they strongly encourage that the ROE be completed online. You will require your business payroll number as well as the name, address etc. of the business
Once you have registered you can initiate a new ROE request. You will need the following:
employee and business details including the payroll number (which usually has a suffix of RP000x),
pay period type, amount of pay per pay period,
first day worked (which would be the first day after the end of any previous claim periods, if applicable) and last day paid,
total insurable hours and earnings which is a calculation for which there will be detailed instructions,
reason for ROE which requires the input of a code. With respect to COVID-19, the most common codes will be CODE A, which is shortage of work caused by temporary/indefinite layoffs and applies to Regular EI benefits and CODE D, which is illness or injury and applies to Sickness EI benefits. It is very important to reflect the correct insurable code otherwise the employee may not be entitled to EI benefits (eg. in cases where they have quit).
The economic implications of COVID-19 could potentially be felt by small businesses for many months to come. It is expected that more measures will be introduced by the Canadian government over the next few days to help navigate this difficult time.
Ronika Khanna is a Montreal accountant who helps small businesses achieve their financial goals. To receive regular updates of articles pertaining to small business, accounting, tax and other topics of interest to business owners you can sign up here. You can also follow her on Facebook or Twitter.