Employment Insurance Changes – How They Affect Your Business
Earlier this year, the government announced a number of changes to Canada’s Employment Insurance (EI) program that could require action from employers. These changes are expected to take effect January 1, 2017.
From an employee benefits perspective, the most significant change is to the EI Sickness Benefit waiting period. The EI waiting period is being reduced from two weeks to one week. For employers with an insured Short Term Disability (STD) benefit or self-insured sick leave plan that has a two-week waiting period, an amendment to their plan would be required in order for continued eligibility under the EI Premium Reduction Program. In the case of an insured STD benefit, the insurer may require an increase to the STD rate to reflect the additional risk, as more claims will be paid.
Although the waiting period to receive EI benefits is being reduced by one week, the maximum benefit period will remain at 15 weeks. This means that in the 17th week, if the employee has still not returned to work, they will no longer receive a payment from EI.
Employers offering Long Term Disability (LTD) benefits that coordinate with the EI Sickness Benefit may have a 17-week waiting period for LTD. If an employer does not want an income gap to occur between EI and LTD, the LTD elimination period would need to be reduced to 16 weeks. Insurers may require a small increase to the LTD rate for this change. Most insurers make LTD payments at the end of the month so if the LTD elimination period is left at 17 weeks, a disabled employee will be without any form of income for a minimum of five weeks as a result of this change to the EI Sickness Program.
Employers with an insured STD benefit currently offering a two-week waiting period, along with an LTD benefit that has a 17-week elimination period would need to amend their plan in one of two ways if they do not want an income gap to occur between STD and LTD:
- Change the maximum benefit period from 15 weeks to 16 weeks under the STD benefit.
- Reduce the elimination period from 17 weeks to 16 weeks under the LTD benefit.
Either of the above options may require a rate increase to either the STD benefit under option one or the LTD benefit under option two to reflect the additional claim risk.
Service Canada has indicated that there will be a transition period to allow employers to amend their plans to reduce the waiting period to one week in order to remain eligible under the EI Premium Reduction Program. At this time, the length of the transition period has not been determined.