Canada: Federal Budget 2017: How To Plan For Changes To Parental Employment Insurance Benefits

On March 22, 2017, the federal government tabled the 2017-2018 federal budget. The budget not only included an increase in employment insurance premiums (increasing by $0.05 to $1.68 per every $100 of insurable earnings), but also included a proposal to allow parents to extend receipt of parental leave benefits for up to 18 months by spreading out the benefits they previously would have received during a 12-month leave over an 18-month period.

Parents who elect to receive their benefits over an 18-month period will receive benefits at a lower rate of 33% of average weekly earnings. Parental benefits will continue to be available at the existing benefit rate of 55% over a period of up to 12 months (subject to applicable maximums).

In addition, further changes will allow expectant mothers to begin claiming maternity benefits up to 12 weeks before their due date, an increase from the current eight weeks.

Extended benefits does not equal an extended leave

It is important to note that just because employment insurance benefits can be extended for up to 18 months does not actually mean that an employee is entitled to 18 months of statutory job-protected leave. The length of the leave permissible for an eligible employee is still governed by applicable employment standards legislation. Increased statutory job-protected leave won't be available until and unless applicable employment standards legislation is amended.

In most jurisdictions, employment standards legislation provides for a certain amount of pregnancy or maternity leave and an additional amount of parental leave which together totals 12 months (52 weeks; subject to certain exceptions).  In some jurisdictions, the parental leave portion is shared by the parents, and time taken by one parent reduces the time available to the other parent.

In provinces where the statutory parental leave does not have to be shared, parents may be able to divide their employment insurance benefits over a longer period, opening the door for more fathers to take paid leaves in these jurisdictions. For example, it is possible that, in some jurisdictions, parents could opt for the 18-month benefit rate and divide their employment insurance benefits in order to enable the mother to take 12 months and the father to take an additional six months.

Considerations for employers

In jurisdictions where parental leave can be shared between parents, employers should immediately review any top-up plans to ensure that there are no unexpected additional costs arising from an employee electing the reduced employment insurance benefit.

In the event that applicable employment standards legislation is amended to provide for up to 18 months of statutory job-protected leave, employers will need to consider the costs involved in maintaining benefits for a longer period. If employers voluntarily allow employees to take a longer leave (which of course employers are free to do), they will need to carefully consider how the top-up will work (i.e. will it cover a shorter period at a higher rate) and who will pay the cost of benefits after the end of the statutory leave. Employers should also obtain the consent of their benefit providers for an extension beyond the period of the statutory leave.

Likewise, vacation entitlements are calculated annually, and an 18-month leave may create additional issues with respect to accruals and carry-over while an employee is on leave. Vacation policies and accrual practices will need to be reviewed and may need to be adjusted for the longer leave.

What happens next?

Whether the change has a negative or positive impact remains to be seen. In some cases, employees struggle to come back after 12 months of leave. Some employers are faced with requests for accommodation based on family status because child care arrangements are not firmly established or are considered inadequate. An 18-month leave may allow employees to be in a better position to return to the work force. In addition, it may be easier to attract quality candidates as a replacement for a longer leave.

On the other hand, if employment standards legislation is amended to allow for an 18-month leave, the chance of an employee taking successive leaves with either a short or no period of re-employment between them would increase. This could be extremely disruptive for smaller businesses or where the employee holds a specialized role.

So, how soon will 18 months of statutory leave become a reality? We expect that the federal government will quickly amend the Canada Labour Code. Ontario is in the middle of the Changing Workplaces Review and is considering other amendments to employment standards legislation. Adding a longer parental leave entitlement could become part of that amendment.  As for the other provinces, if the change proves popular, it would not be surprising to see most provinces move to amend applicable legislation to allow parents to take advantage of the extended benefit.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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