Employment insurance (EI) for the self-employed

Effective April 10, 2010, the self-employed people were given the option to access to special employment insurance benefits under the Fairness for the Self-employed Act. This is a good thing for the self-employed. However, whether it is beneficial to join the program depends on individual personal situation. As a self-employed, you should be aware of the pros and cons before you opt into it. This article outlines a few points in hope that it can help you decide whether or not to take part in this special employment insurance program for self-employed.

EI Special Benefits

The EI benefits available to the self-employed people are limited benefits. They do not cover regular EI benefits due to lay-offs or business slow-downs. (What are employment insurance special benefits for self-employed?)

Need to register

You must register with the Canada Employment Insurance Commission on-line through Service Canada. You are considered self-employed if you operate your own business, or if you work for a corporation but cannot access EI benefits because you control more than 40% of the corporation’s voting shares. You must also be either a Canadian citizen or a permanent resident of Canada. 

12 months waiting period

You must wait 12 months after the day you register before you can apply for EI special benefits. For example, if you register on October 12, 2014, you will not be able to apply for EI special benefits until November 12, 2015. So plan ahead!

The cost of taking part in this EI program

The premium is calculated by multiplying your income by a prescribed rate. And the premium is capped by a maximum amount. In 2014, the rate is 1.88% and the maximum is $913.68. That means for every $100 you earn, you will need to pay $1.88 and the most you pay for 2014 is $913.68.

The premiums are calculated based on your income tax return. For example, if you sign up for the program in 2014, your premiums will be based on your 2014 tax return.

How much money can you get?

The benefits are 55% of your average weekly earnings up to a defined annual limit. In 2014, you can receive up to $514 per week, based on the maximum insurance earnings of $48,600 for that year.

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

Can you cancel your registration?

It is possible to opt out if you don’t make any claim. Once you made a claim, your are locked in. (see Can I opt out of EI program for self-employed). So you need to think carefully before you jump in. 

Canada Pension Plan (CPP) for the self-employed