The Perks (and Quirks) of EI and Being Self-Employed
Curious about employment insurance (EI) benefits available to self-employed business owners? Wondering if it’s possible to take parental leave? Read on.
By Nadia Lambo, CHRP, CHRL
Many Canadians are embracing their true passion, starting a business and creating a life they love. Here, we explore what it really means to own your own enterprise including the pros and cons that comes with EI benefits and parental leave.
There are many benefits to being self-employed in Canada. It’s probably why the number of self-employed Canadians is staggering and continues to grow exponentially. Stats Canada reports that there were 2.8 million self-employed individuals in 2018; of those, 1.1 million were living in Ontario.
Here is a quick list of the advantages of being self-employed. It includes the ability to:
a. Enjoy a flexible work schedule
b. Write-off business expenses
c. Work remote
d. Be your own boss (except to your customers)
e. Develop your own processes and ways of doing things
f. Pick and choose your clients
g. Hire the employees you choose
h. Vacation when you like and for the duration you choose
The disadvantages are perhaps a little less obvious but duly worth noting. The list includes:
a. Fewer free benefits and an unworkable maternity leave for most
b. Paying for your own vacation time
c. Funding your own retirement
d. Buying your own health, dental, disability and life insurance
e. The sole responsibility for doing all the paperwork and paying your taxes on time
f. Being fully accountable for the success or failure of your company
g. Managing invoices, collections and the dreaded tax filing
Here are a few need-to-know tips from the Canadian Federation of Independent Business (CFIB) about EI benefits:
1. There are six Employment Insurance Special Benefits that can be utilized for self-employed Canadians: Maternity, Parental, Sickness and Compassionate Care benefits as well as Family Caregiver Benefit for Children and Family Caregiver Benefit for Adults.
2. You need to enter into an agreement with and register with the Canada Employment Insurance Commission through Service Canada.
3. You can register with Service Canada if:
a. You operate your own business, or if you work for a corporation but cannot access EI benefits because you control more than 40 per cent of the corporation’s voting shares
b. You are either a Canadian citizen or a permanent resident of Canada
4. To take advantage of the special EI benefits, you will need to wait 12 months from the date of your confirmed registration with Service Canada. This includes maternity leave and daycare subsidies, so plan ahead if you can (or maybe hire a psychic!). Another caveat to remember is that once you begin paying into EI, you have to continue to subsidize it for the rest of your self-employment career, so weigh the costs carefully! There is a very detailed article in Today’s Parent that weighs the pros and cons of taking parental leave for those who are self-employed that I highly recommend.
5. Once you receive notification that your registration was successful, EI premiums will be calculated based on your income tax and benefit return for that year.
If you are interested in learning more, please feel free to contact us at LD Human Resources. Our professional HR consultants would be happy to assist with this process.
About the author
Nadia Lambo is an HR consultant with LDHR and senior level manager with over 15 years’ experience in management and human resources. She has proven success working with executive teams developing and integrating the human resource function with the organizational strategy. When not working, you can catch Nadia enjoying “the now” with friends, family and a glass of wine!