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Reforming Canada’s Employment Insurance program

From: Employment and Social Development Canada

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Your input is important

We plan to modernize the Employment Insurance (EI) program:

  • to better meet the evolving needs of Canadian workers and employers
  • to offer greater support to Canadian families

The EI program needs to take into account the realities of today's labour market and workforce, where an increasing number of Canadians are working in non-traditional forms of employment and work arrangements.

This could lead to the most comprehensive and complex upgrades to the program in a generation and build a program that better responds to emerging labour market trends and the evolving needs of workers and employers.

Our goal is to build a modern EI program that is:

  • resilient
  • accessible
  • adequate
  • financially sustainable

A crucial part in shaping this EI reform will be input from Canadians on key issues and priorities for the EI program, which will be sought through an online consultation open to all Canadians.

In order to learn more about how workers and employers might benefit from a reformed EI program, we will also seek direct input from:

  • employee associations
  • unions
  • employer associations
  • academics
  • other experts

We will invite the representatives of these groups to meet in a series of virtual roundtables. We will also seek input from Indigenous people, as well as the provinces and territories.

Equally important are the ideas and opinions of individuals such as:

  • Canadians starting families
  • workers in seasonal industries
  • self-employed workers

The consultation process includes an online questionnaire (closed on November 19, 2021). Roundtables with stakeholders and experts were launched in summer 2021. They will resume late in 2021 and extend into winter 2022.

What's on the table

In Budget 2021, we committed $5 million to consult Canadians over the next 2 years to inform future, longer-term reforms to the EI program. These future reforms will need to take into account of the following key objectives:

  • allowing more Canadian workers to access EI as temporary income support
  • ensuring EI benefits are adequate to support Canadian workers during periods of unemployment or critical life events
  • promoting an efficient labour market that enables unemployed workers to return to work when possible, and
  • ensuring the program is affordable and financially sustainable for the workers and employers who pay into it

First round of consultations

The first round of consultations focus on improving access to EI and centre on the immediate question of how to follow the temporary EI changes announced in Budget 2021. These changes are set to expire in September 2022.

Later phases of the consultation

Later phases of the consultation process will take a deeper dive into these issues and focus on the key issues of EI premiums and adequacy of benefits.

The aim is to make EI more accessible to more Canadians. The consultations will address issues of:

  • improving EI access by simplifying the rules for workers and employers
  • making EI more consistent and reliable for workers in seasonal industries
  • supporting self-employed and gig workers
  • improving support for Canadians during birth, adoption and other life events
  • reducing the cost of the Premium Reduction Program for workers and employers

Improving access to EI and simplifying the rules for workers and employers

There are several benefits Canadians may access within the EI program:

All of them require claimants to meet qualifying conditions. These requirements are intended to ensure that those who claim benefits:

  • have been working in insurable employment
  • have a valid reason for leaving their last job (for example, quitting or being fired for misconduct do not count as valid reasons for job separation)

They are also necessary to keep program costs affordable for the workers and employers who jointly finance the EI program.

Prior to the pandemic, EI regular benefits for the unemployed operated under variable entrance requirement (VER) rules. This meant that claimants applying for regular benefits would normally be required to show that they worked between 420 and 700 insurable hours in the qualifying period (usually the 52 weeks before the claim).

The number of hours is variable because it is based on the monthly unemployment rate in the EI region where claimants live; the higher the regional unemployment rate, the fewer insurable hours required to qualify. This reflects the reduced work opportunities associated with higher unemployment rates.

Under VER rules, 2 people with the same number of insurable hours, but living in different regions of Canada, can face different qualifying conditions. This can lead to one getting easier access to benefits compared to the other even though, as individuals, their circumstances might be the same.

Pre-COVID (2019) statistics show that:

  • 82.4% of unemployed Canadian workers who contributed to the EI program qualified for regular benefits
  • the remaining 17.6% were disqualified because they did not have enough insurable hours

Consult chart 13 and table 14 of the 2019 to 2020 EI Monitoring and Assessment Report.

Making EI more accessible to everyone

To make EI more accessible to workers during the pandemic, we introduced temporary flexibilities. These flexibilities gave all workers a:

  • one-time credit of 300 hours for regular benefit claims, or
  • 480-hour credit for special benefit claims

This meant that workers only needed 120 insurable hours to qualify for EI benefits. We also reduced the earnings thresholds for fishers, and for self-employed workers who have opted into the EI special benefits. These temporary measures ended in September 2021.

New temporary measures

We have implemented new temporary measures to permit continued and easier access to EI while the economy recovers. As of September 2021, a new common national 420-hour entrance requirement is in place for 1 year for both regular and special benefits. This means that workers would need the same number of insurable hours to be eligible for EI benefits no matter where they live. However, the number of weeks of income support they could access, and their benefit rate, continue to vary depending on the unemployment rate where they live.

Corresponding reductions were also made to the earnings thresholds for fishers and for self employed workers who have registered for access to special benefits.

We have also implemented 1-year measures to:

  • support multiple job holders and those who switch jobs by ensuring that all of their insurable hours and employment count towards EI eligibility, as long as the last job separation is found to be valid
  • allow claimants to start receiving EI benefits sooner by simplifying rules around the treatment of severance, vacation pay, and other monies paid on separation

Pre-pandemic rules

Without further changes, the pre-pandemic rules would come back into force in September 2022, including:

  • the full VER system
  • 600‑hour requirement to access EI special benefits
  • previous earnings thresholds for fishers and the self-employed
  • any job separation in the qualifying period can impact the calculations for the claimant’s eligibility and benefit rate
  • requirement that claimants wait until their separation monies are used up before receiving EI benefits

How to provide Canada's workers in seasonal industries with consistent and reliable benefits

Work in seasonal industries in Canada can be unpredictable, which can impact workers' access to EI benefits. Providing predictability and reliability that responds to their unique circumstances will be an important part of the consultation process.

Fluctuations in regional unemployment rates and the availability of work during their season of work can affect:

  • the number of insurable hours they need to qualify
  • the number of weeks they are entitled to receive benefits
  • their weekly EI benefit rate

In areas with higher proportions of seasonal work, there are more unemployed workers looking for fewer available jobs during the off-season. This makes it especially difficult to find work after being laid off from a seasonal job.

EI seasonal pilot project

The EI seasonal pilot project was designed to test an approach to target additional income support in these circumstances by providing up to an additional 5 weeks of EI regular benefits to workers in seasonal industries who:

  • meet the measures' seasonal claimant definition
  • reside in 1 of the 13 targeted regions

Budget 2021 announced that the parameters of the current pilot project for workers in seasonal industries will be in place until October 2022, while the Government examines the effectiveness of the approach used in the pilot project.

Supporting self-employed and gig workers hit by unemployment

Of the gaps in the EI program highlighted by the COVID-19 pandemic, none was more evident than the circumstances facing Canada's self-employed and gig workers.

In 2019, roughly 2.9 million people—approximately 15% of the labour force—identified self-employment as their main job. This did not include the hundreds of thousands of additional Canadians who combine traditional jobs with some self-employment including gig work.

Currently, the only self-employed coverage options under the EI program are limited. Certain occupations are specifically included in insurable employment and therefore may access EI benefits, for example:

  • taxi drivers
  • hairdressers
  • barbers

Other self-employed occupations may access the optional special benefits for the self-employed program; however, take-up is low (consult: Special benefits: New claims established).

Without the introduction of CERB and then the Canada Recovery Benefits, many of these hard-working Canadians would have had very limited or no income for an extended period of time, because they did not qualify for EI regular benefits.

Exploring flexibilities within the existing EI program to better support self-employed Canadians, and the need for a permanent and workable income support program for these workers, will be a major item on the agenda during the EI consultations.

Improved support for Canadians during "life events"

EI maternity and parental benefits

EI maternity and parental benefits are key supports to parents welcoming a new child into their home. In 2019 to 2020, there were about 168,000 claims for maternity benefits and 213,000 claims for parental benefits.

Because adoptive parents are eligible only for parental benefits but can't access maternity benefits, we have committed to introduce a 15-week benefit for adoptive parents, including LGBTQ2 families. Differences in provincial/territorial definitions, laws, and regulations require consultation and analysis to ensure equity of access.

EI maternity and parental benefits are available across Canada, except in Quebec where the provincial government provides benefits via the Quebec Parental Insurance Plan. Workers and employers in Quebec receive an EI premium reduction in recognition that there is lower demand on the EI program in the province.

Working Canadian parents have legislated access to maternity and parental job-protected leave and employers may top-up their employee's EI maternity and parental benefits.

Some stakeholders have called for improvements in these programs, both in terms of access and flexibility.

Premium Reduction Program

Improvements to the Premium Reduction Program (PRP) will be required as part of the Government's extension of EI sickness benefits from 15 to 26 weeks. This will be another important item on the consultation agenda.

The PRP allows employers to apply for a reduction of EI premiums if they offer income-protection coverage to employees through a short-term disability plan that is similar to EI sickness benefits.

Employer-sponsored short-term disability plans can reduce the financial and administrative load on the EI program, hence the premium reduction. Employees also receive a portion of the employer's savings directly from their employer.

Currently, there are more than 25,000 of these employer plans registered with Service Canada, representing approximately 8 million workers. We are interested in feedback on how to enhance awareness of the PRP regime, and opportunities to increase take-up.

Background information on the EI program

EI is wholly funded by employers and employees and has been a critical feature of Canada's social safety net and stabilizing the economy during since 1940. The demands of a growing, economically diverse country have brought many changes to the program, but its purpose has always remained essentially the same: To provide temporary income and work transition support to eligible workers who:

  • involuntarily lose their jobs
  • are absent from work due to specific life circumstances, for example:
    • sickness
    • pregnancy
    • care for a newborn or newly adopted child
    • care for a critically or gravely ill family member

Employers pay 1.4 times the employee premium rate to reflect their greater control over employment decisions. Workers and their employers pay premiums regardless of:

  • where they live
  • the industry in which they are employed
  • whether they expect to use the program

This insurance model is intended to:

  • provide a revenue base for funding benefits, which pools risk
  • ensure that premium rates can be kept low and stable under changing economic circumstances

The Canada Employment Insurance Commission plays a leadership role, with Employment and Social Development Canada (ESDC), in overseeing the Employment Insurance (EI) program. It is mandated with annually monitoring and assessing the EI program. It is also responsible for ensuring financial transparency and rate setting for EI.

As part of the Government's economic response to the COVID-19 pandemic, the premium rates for 2021 and 2022 are frozen at the 2020 level. This means that the employee premium rate for that period will be $1.58 per $100 of insurable earnings. The employer rate will be $2.21.

The EI program provides significant financial support to workers each year. In 2019 to 2020, a total of $17.5 billion was paid in EI benefits to Canadian workers. This included:

There were 1,874,480 new EI claims during that period. An increase of claimants driven by the COVID-19 pandemic and temporary measures established in September 2020 and announced in Budget 2021 are expected to increase total expenditures for the EI program for 2020 to 2021 and 2021 to 2022. However, with premium rates frozen through 2022, neither employers nor employees will see an impact on their premiums until 2023.

The maximum weekly benefit rate for 2021 is $595, and the maximum yearly insurable earnings stand at $56,300. This is indexed to changes in year over year average weekly earnings as published by Statistics Canada.

Workers receive EI benefits if they have worked in insurable employment for the past year and meet other conditions, such as losing their job through no fault of their own. The EI program is designed to support labour market transitions. The program provides temporary income support to help the unemployed find a new job and remain attached to the labour market. Maintaining incentives and supports to successfully transition back to work is a critical aspect of the EI program.

The temporary income replacement EI provides to unemployed workers also benefits:

  • consumers
  • employers
  • the economy

Through stabilizing the income of individuals and families in periods of economic downturns, it helps them to keep paying their bills, which in turn benefits local businesses and economies.

Additionally, the EI Program helps facilitate labour market reattachment. Canadians are supported to reconnect to good jobs regardless of where they are in the country through features like:

Why now

The COVID-19 pandemic highlighted significant gaps in the EI program. Millions of Canadians lost their jobs because of rapidly emerging business reductions and closures, but many of those workers were not eligible for EI. This included the self-employed and gig workers who needed to self-isolate or whose work was impacted by COVID-19 or workers who had to take leave from work to care for children or family members when schools or facilities closed due to COVID-19.

In March 2020, the Government responded to the onset of the COVID-19 pandemic and increasing unemployment rates by introducing the Canada Emergency Response Benefit (CERB) outside of the EI program. When the CERB ended last fall, we introduced 3 new temporary Canada Recovery Benefits, as well as a series of temporary changes to the EI program, to further support Canadian workers and their families.

More than 8 million Canadians benefited from the CERB.

More than 2 million benefited from the Canada Recovery Benefit (CRB) 497,000 from the Canada Recovery Caregiving Benefit (CRCB).

780,000 from the Canada Recovery Sickness Benefit (CRSB).

The COVID-19 pandemic brought to the forefront a number of pre-existing issues with the EI system and has prompted a need to consider reforms to EI.

The technological challenge

While we are committed to developing a modern EI program, getting the job done will require a new information technology (IT) structure to manage the program.

The current technology supports the needs of millions of Canadians but it is also 50 years old and is made up of a mix of 150 system solutions that have been added over the years to deliver benefits. As a result, new changes to the program can take between 6 and 18 months to:

  • prepare
  • rigorously test
  • implement

The highest vulnerability this presents is a serious disruption of service to Canadians if the IT system is unable to keep up with program changes. This means that new measures will need to be carefully sequenced and implemented over time.

Building a new infrastructure

We are building a new IT infrastructure to provide more flexibility and resiliency, while the existing system continues to process and deliver benefits. The work on the new IT infrastructure is underway and is a multi-year modernization program. The transition from old to new will take several years.

In the meantime, implementing the EI changes committed in Budget 2021, including, for example, a permanent extension of EI sickness benefits to 26 weeks, will take the Government's full operational attention and capacity until mid to late 2022. As a result, any changes that follow the consultations could not be put in place until after that time.

Past evaluations, reviews and reports

EI Monitoring and Assessment Report

The EI program is assessed and evaluated on a regular basis through a number of avenues including the EI Monitoring and Assessment Report, which is publically released each year on the Department's website.

Coverage survey

The program is also reviewed through departmental evaluations and monitored through the EI Coverage Survey.

EI service quality review and parliamentary review

Recent reviews include the EI Service Quality Review (February 2017), as well as a recent parliamentary review of the EI program by the Standing Committee on Human Resources, Skills and Social Development and the Status of Persons with Disabilities (HUMA) (2021).

The HUMA review includes 20 recommendations on modernizing the EI program. The Government is in the process of carefully reviewing the recommendations and will provide a response.

Consultations

Online and stakeholder consultations were also put in place to hear Canadians' views on more flexible and inclusive EI maternity, parental and caregiving benefits (2016). Engagement with workers and employers on various aspects of the program, including measures for workers in seasonal industries, and Labour Canada's consultations on self-employed and gig workers also took place in recent years.

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