Employers across Canada are doing their best to retain employees and to ensure there is no disruption in their employee’s earnings during this challenging time. To that end, we are frequently asked – can I top-up an employee’s Employment Insurance payments (“EI”) during a temporary layoff?

The answer is, “Yes. But…”

An employee who receives money from their employer while they are receiving EI will be required to report that payment as income and, generally speaking, the employee’s EI will be reduced by the amount received from the employer. In other words, the employee would still experience the decrease in earnings and the employer would, effectively, be subsidizing the EI program. There is a solution.

Employers who have established a Supplemental Unemployment Benefits Plan (“SUB Plan”) may provide EI top-ups without the payments causing a reduction in EI. Service Canada has strict requirements for the establishment of a SUB Plan which, if not met, will require the employee to report the payments as income to be deducted from EI payments. At a minimum, a SUB Plan must:

  • Identify the group of employees covered and the duration of the plan
  • Cover a period of unemployment caused by one or a combination of the following: temporary stoppage of work, training, illness, injury or quarantine
  • Require employees to apply for and be in receipt of EI benefits in order to receive payments under the plan
  • Require that the combined weekly payments from the plan and the portion of the EI weekly benefit rate does not exceed 95% of the employee’s normal weekly earnings
  • Require it be entirely financed by the employer
  • Require that on termination, all remaining assets of the plan will be reverted to the employer or be used for payments under the plan or for its administrative costs
  • Require that written notice of any change to the plan be given to Service Canada within 30 days after the effective date of the change
  • Provide that the employees have no vested right to payments under the plan except during a period of unemployment specified in the plan
  • Provide that payments in respect of guaranteed annual remuneration, deferred remuneration or severance pay will not be reduced or increased by payments received under the plan

We do not yet have direction from Service Canada on whether or not SUB Plans can be used to top-up payments under the new Canada Emergency Response Benefits program (“CERB”). Employers should also know that the SUB Plan may need to be approved and registered with Service Canada prior to making any top-up payments.

Contact us if you have any questions about establishing a SUB Plan in your workplace.