Canada: What Do The New Extended EI Parental Benefits Mean For Employers? Are You Ready For December 3rd?

Last Updated: November 16 2017
Article by Mary Lou Brady

She's having a baby!

In March 2017, the federal government announced its intention to extend employment insurance parental benefits to 18 months. This change takes effect on December 3, 2017.

While many Canadian employers are not thrilled with this change, it's not all bad news.

Same Total Maximum EI Benefits

Parents currently receive up to 50 weeks of employment insurance benefits when they take time off work because of pregnancy, childbirth or adoption. The maternity benefit – paid to biological mothers because they are pregnant or have recently given birth – is up to 15 weeks, whereas the parental benefit – paid to biological or adoptive parents who are caring for a newborn or newly adopted child – is up to 35 weeks. The 1-week benefit waiting period is only served by the first parent collecting benefits for the same child. Such benefits are currently paid at the rate of 55% of the employee's average insurable weekly earnings – capped at the maximum benefit payment of $543 per week as of January 1, 2017.

As of December 3, 2017, parents will have the option of having these benefits extended over an 18-month period. Maternity benefits will technically remain at 15 weeks and it will be the parental benefits that can be extended up to 61 weeks. The catch, however, is that the total benefit payments will not change. Parents who opt to extend parental benefits will receive a lower benefit rate – namely at the rate of 33% of their average insurable weekly earnings, subject to a reduced cap of $325 per week.

"You either use up your benefits as a family over 12 months or you stretch that same amount of money over 18 months. People are going to max out when they max out" says Nora Spinks, Chief Executive Officer of the Vanier Institute of the Family.

Because of this, we anticipate that many employees will find the extended parental benefits not to be a financially feasible option. Simply put, many Canadian families already struggle to make ends meet at the current benefit rate – so the option of taking 18 months at an even lower rate would simply not work for them.

No Obligation for Provincially-Regulated Employers to Allow for Extended Parental Leave

While employees will have the option as of December 3, 2017 to extend parental benefits, this doesn't mean they have the right to take extended parental leaves from work. This is because parental benefits are provided by the federal government – but the right to take the actual time off work is, for most Canadians, a matter of provincial legislation.

For provincially-regulated workplaces in Ontario, that legislation is the Employment Standards Act, 2000 ("ESA"), which at present provides for up to 17 weeks of pregnancy leave and up to 35-37 weeks of parental leave (up to 35 weeks for biological mothers who have already taken pregnancy leave, but up to 37 weeks for birth fathers and adoptive parents).

Of surprise though is the fact that the Ontario government doesn't appear to have plans to change the ESA to align its parental leave requirements with the extended EI parental benefits. The 419-page Final Report of The Changing Workplaces Review released on May 23, 2017 made no mention of extended parental leave. Similarly, neither did the Fair Workplaces, Better Jobs Act, 2017 introduced on June 1, 2017 and having passed second reading on October 18, 2017, which will make other extensive changes to the ESA once passed.

So – unless and until legislation is passed requiring provincially-regulated Ontario employers to allow their employees to take extended parental leave – most Ontario employees will only be able to take extended parental leave if agreed to by their employer. And employers have no obligation to agree!

Employers Must Carefully Review Parental Benefit Top-Up Programs

Don't forget to pay careful attention to policy language for parental leave top-up programs. Employers may need to change those programs to avoid spending more on the top-up than intended.

For example, let's consider a parental leave top-up program that tops up to 100% for the full period of parental leave. If an employee's average insurable weekly earnings is $800, then the employee's parental leave benefit would be $440 per week (i.e. 55% of $800). The top-up would then be $360 per week for up to 37 weeks, costing the employer up to $13,320 for that parental leave top-up.

If the same employee were to choose to extend parental benefits over the 61-week period, the employee's parental leave benefit would be reduced to $264 per week (i.e. 33% of $800). Unless the employer changed its policy language for the top-up program, the top-up would be increased to $536 per week for up to 61 weeks – costing the employer up to $32,696 for that parental leave top up! Even if the top-up was only continued until 37 weeks, the cost to the employer of that top-up would still be significantly more ($19,832).

Employers have several options to limit the impact of the extended parental benefits on its top-up programs. These include language changes to existing top-up programs to make it clear that the top-up is:

  • limited in duration (e.g. no more than 35-37 weeks);
  • subject to a maximum percentage of average insurable weekly earnings (e.g. 45%); and/or
  • capped at a maximum amount which the employee may choose to spread over the duration of the parental leave (e.g. $13,320, but no more than a top-up payment to 100% in any given week of parental leave).

Whatever you decide to do – any policy language changes should be clearly communicated to your employees in advance of December 3, 2017.

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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