Digest of Benefit Entitlement Principles Chapter 5 - Section 5
5.5.0 Specifically excluded from earnings under EIR 35
Some moneys, even though they are earned by labour, or resemble moneys earned by labour because they are related to or attached to employment, are expressly excluded from being considered earnings, and do not affect a claimant's entitlement to EI benefits (Digest 5.2.0; Digest 5.3.2). The following moneys are excluded from earnings under EIR 35(7):
- disability pensions (EIR 35(7)(a); Digest 5.13.14)
- a lump sum or pension made in full or final settlement of a claim made for workers' compensation payments (EIR 35(7)(a); Digest 5.11.3)
- payments under a sickness or disability wage-loss indemnity plan that is not a group plan (EIR 35(7)(b); Digest 5.11.1; Digest 5.11.2)
- relief grants in cash or in kind (EIR 35(7)(c); Digest 5.5.1)
- payments received under a supplemental unemployment benefit plan (EIR 37; Digest 126.96.36.199)
- retroactive increases in wages or salary (EIR 35(7)(d); Digest 5.5.3)
- pension payments, if pension requalifier insured hours are accumulated (EIR 35(7)(e); Digest 5.13.13)
- payments made by reason of pregnancy, for the care and/or support of: one or more children (EIA 23(1)), a family member (EIA 23.1(2)), critically ill children (EIA 23.2) or critically ill adults (EIA 23.3), if the payments meet specific conditions (EIR 38; Digest 188.8.131.52), and
- disability benefits or allowances that are excluded as income under Subsection 6(16) of the Income Tax Act (EIR 35(7)(f); Digest 5.5.4)
5.5.1 Relief grants
A relief grant is assistance freely given to alleviate hardship. Hardship includes, but is not restricted to, circumstances of personal destitution, emergency, or disaster. Hardship may also include the broader circumstance of financial or other difficulty, which does not necessarily amount to destitution, emergency or disaster (FCA A-597-94, CUB 25472).
A relief grant is usually monetary, but sometimes may be non-pecuniary. It can be received from a federal, provincial or municipal authority; a charitable organization; a welfare agency; an employer; or other persons. A relief grant may be a one-time payment made for a special situation, such as where an individual encounters a family emergency or disaster, or it can be an ongoing payment from a welfare agency because the claimant's income is insufficient to meet basic needs. Payments that are in the nature of relief grants are not earnings. This is so even if the payment is non-pecuniary, or the claimant is required to perform work as a condition to receive that payment.
Following are factors that may be considered when determining whether a payment constitutes a relief grant (FCA A-597-94, CUB 25472):
- the simple presence of hardship does not automatically qualify moneys as a relief grant
- a payment is more likely to be a relief grant if the circumstances giving rise to it are unusual or rare
- the fact that a situation may be sympathetic does not alone mean that moneys paid constitute a relief grant
- the link between the loss suffered and the compensation offered must be considered
- the nature of the connection to employment must be examined, and
- consideration of whether the payment is made voluntarily, or if there is a legal obligation to make it
Relief grants originating from an employer are not as easily identified, due to the connection with employment. Therefore it is important to examine the true nature of the payment:
- whether the purpose of the payment is to assist in a personal situation or a disaster
- whether the payment is conditional on the recipient providing some sort of service to the employer for the assistance, and
- whether the assistance is freely given by the employer, without any legal obligation
An example of a relief grant is an employer freely giving monetary assistance to an employee whose house has burnt down and does not expect any additional service from the employee for the assistance.
5.5.2 Payments supplemental to employment insurance benefits
Often, a claimant may receive a supplement to their EI benefits during a period of unemployment, to make up the difference between the EI benefits and their normal wages while employed. As these payments are moneys arising out of employment, they would normally be earnings and therefore deducted from EI benefits. However, the Commission has recognized the benefit of such payments which have advantages for all parties. It helps the employee maintain a standard of living during a period of unemployment, and it may help the employer maintain a skilled work force during a period of temporary lay-off. As a result, the Commission has made regulations that exempt these types of payments from being considered earnings under certain circumstances. This does not mean that a claimant who is laid off and receiving supplemental payments from their employer is exempt from the requirement to be available for, and making efforts to find, other suitable employment (Digest 10.8.1).
Two types of payments intended to supplement EI benefits, have been specifically excluded from consideration as earnings. The first type relates to those supplemental payments that are made by an employer to an employee during a period of unemployment due to a temporary stoppage of work, training, illness, injury or quarantine (EIR 37; Digest 184.108.40.206). The second type relates to supplemental payments made by an employer, or another person, to an employee, by reason of:
- pregnancy (EIA 22), or
- caring for one or more children (EIA 23(1)), or
- caring for or supporting a seriously or critically ill family member (EIA 23.1(2), EIA 23.2, EIA 23.3), or
- any combination of those reasons (EIR 38; Digest 220.127.116.11)
18.104.22.168 Approved supplemental unemployment benefit plans
Payments may be made to an employee to supplement EI benefits during periods of unemployment due to a temporary stoppage of work, training, illness, injury or quarantine. Payments made by an employer to supplement EI benefits are excluded as earnings if they are made under a Supplementary Unemployment Benefit (SUB) plan which meets specific conditions (EIR 37).
SUB plans are reviewed at the national level to determine if all required conditions are met, and a list of plans that meet the conditions, is maintained. Any payment made under a SUB plan that does not meet all of the conditions, is treated as earnings and allocated to the period for which it is payable, depending on whether it is paid for a period of incapacity (EIR 36(12)(a), Digest 5.11.7), or for one of the other reasons (EIR 36(5), Digest 22.214.171.124).
The combined weekly amount of the SUB payment, plus the EI benefit rate from that employment, cannot exceed 95% of the claimant's normal weekly earnings. When there is dual employment, only that portion of the benefit rate and the normal weekly earnings from the employer that pays the SUB, are considered.
126.96.36.199 Payments by reason of pregnancy, for the care of one or more children, or for the care or support of a family member
Payments may be made by an employer, or another person, during a period of leave for maternity, the care of one or more children, or for the care or support of a family member. In order for these payments to be excluded from consideration as earnings, they must meet the following conditions:
- the payments must be made by reason of pregnancy, for the care of one or more children referred to in EIA 23(1), or the care or support of a family member as per EIA 23.1(2), EIA 23.2, EIA 23.3, or any combination of these reasons
- when combined with the claimant's weekly rate of EI benefits, the payment does not exceed the claimant's normal weekly earnings from their employment, and
- the payment does not reduce the claimant's accumulated sick leave, vacation leave, severance pay or any other accumulated credits from their employment (EIR 38)
Any payment made under a plan that does not meet these conditions, is treated as earnings and is allocated to the weeks for which the payments are paid or payable (EIR 36(12)).
However, with respect to the second condition (i.e. that the combined total cannot exceed the claimant's normal weekly earnings) it must be emphasized that:
- when the total of supplemental payments and EI benefits exceed the claimant's normal weekly earnings from employment, only the part that exceeds that total constitutes earnings which will be deducted from benefits (CUB 60638)
- when there is dual employment, only that portion of the benefit rate and the normal weekly earnings from the employer that pays the top-up are to be considered
5.5.3 Retroactive increases in wages or salary
An increase in wages or salary means that the wage or salary amount is augmented, enlarged, or expanded. This implies that an amount was added to the previous wages or salary, therefore resulting in a newly agreed rate of pay for the work performed. Often an increase of salary is given retroactively. This may be the case when workers continue to perform their duties at their former rate of pay while a new contract is negotiated. When the contract is finally signed and there is a new agreement that includes an increased salary, that new salary is often effective at an earlier date. In this case, payment must be made retroactively to compensate for the difference in pay under the old contract, and the increased salary under the new contract. In other cases, an employer may unilaterally give an increase in salary that may also be retroactive. These retroactive increases in wages or salary are specifically excluded from consideration as earnings during the benefit period and for interruption of earnings purposes, as they are considered to have been earned over the period worked (EIR 35(7)(d)). However, these earnings could have an impact on the calculation of the amount of the claimant’s weekly EI benefit because they may be insurable.
A retroactive increase in wages or salary must be differentiated from a retroactive adjustment of wages or salary, which is considered to be earnings. A retroactive adjustment is a payment that is made to adjust the wages or salary so it reflects a salary that was already in place at the time that the work was performed. It is made to bring the employee's salary to the pay level that was in existence at the time the work was performed, but for some reason was not paid. This late payment may be due to a mistake or a delay by the employer; a disagreement between the employer and the employee as to the applicable rate of pay for the duties performed; or it could be due to an agreed condition that must be met before a higher rate of pay becomes applicable.
For instance, substitute teachers may have their salary retroactively adjusted to the first day worked after having worked more than twenty days. Other situations may involve an employee who wins a grievance regarding the applicable salary for the work that was performed. In all of these situations, the adjustment of salary is not the result of a new agreement between the employer and the employee as to the rate of pay that must be paid for the work performed. In the case of a grievance, the settlement does not constitute a new work agreement, but rather a clarification of the original one.
For the purposes of determining a claimant’s benefit rate, a retroactive pay adjustment or increase is included in the pay period in which it is paid (EIR 23(1)(b)). If the payment is made after the claimant has returned to work, the benefit rate will not be adjusted as the earnings will be allocated to the period in which they are paid. Should the claimant be unemployed at the time of the payment, the earnings will be allocated to the last week in which the claimant had earnings (EIR 23 (1.1)). The benefit rate may need to be recalculated. For purposes of allocation of earnings to be deducted from EI benefits, the retroactive pay adjustment would be allocated to the period for which it is paid (period worked), and generally not to weeks during which EI benefits are claimed. However, if the claimant was or is in receipt of benefits during the period for which the pay adjustment is paid, the adjustment will be deducted from benefits.
5.5.4 Employment income excluded pursuant to subsection 6(16) of the Income Tax Act
Subsection 6(16) of the Income Tax Act excludes certain employer-provided benefits or allowances from taxable income. The employer only provides these benefits or allowances, to employees with severe or prolonged disabilities. These payments can include moneys for transportation to and from work, parking near the work location, or other items that reduce barriers to labour force participation by disabled workers.
Any payments made by an employer which are excluded from taxable income under subsection 6(16) of the Income Tax Act are excluded from consideration as earnings for EI purposes (EIR 35(7)(f)).
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