Hours-Based System
- Effective January 1997, EI eligibility is based on hours of insurable employment rather than weeks worked.
- For regular benefits, claimants need 420 to 700 hours instead of 12 to 20 insured weeks.
- For special benefits, claimants need 700 hours instead of 20 insured weeks.
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- Introduces a fairer and more equitable measure of time worked by making all hours count.
- Removes inequities and anomalies of the weeks system by:
- recognizing the intense work patterns of some employees;
- correcting the anomaly that existed under UI, when a week of 15 hours or a week of 50 hours each counted as one week; and
- eliminating the 14-hour job trap as, under UI, those working fewer than 15 hours (either all of the time or some of the time) with a single employer were not insured or not fully insured.
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New Entrants and Re-Entrants
- Effective July 1996, new entrants and re-entrants to the labour force needed 26 rather than 20 weeks of work to qualify for EI. In January 1997, the 26 weeks were converted to 910 hours.
- This rule applies only to those who have had minimal or no labour market attachment over the past two years. Workers who have at least 490 hours of work in the year prior to unemployment need only 420 to 700 hours the next year to qualify for EI. Time on EI, workers’ compensation, disability benefits and sick leave counts as time worked.
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- Discourages a cycle of reliance by ensuring that workers, especially young people, develop a significant attachment to the labour force before collecting EI benefits.
- Reintroduces insurance principles to the system by ensuring that workers make a reasonable contribution to the system before collecting benefits.
- Strengthens the relationship between work effort and entitlement to benefits.
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Reduction in Maximum Insurable Earnings (MIE)
- The MIE was reduced to $39,000 per year ($750 per week) in July 1996 and frozen at this level until 2006. This reduced the maximum weekly benefit to $413 (55% of $750), from $448 in 1995 and $465 for the first six months of 1996.
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- Adjusted the MIE to a level where EI benefits would no longer be competitive with wages in some parts of the country and in some industries.
- Was based on a formula that took into account average wage increases over the eight years before the reduction. Because the high inflation and wage increases of the 1980s continued to be considered in setting the MIE, it had escalated faster than wages.
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Reduced Maximum Benefit Duration
- Effective July 1996, the maximum length of a claim was reduced from 50 to 45 weeks.
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- Reflects the fact that most claimants find work within the first 40 weeks of receiving benefits.
- Affects workers in high unemployment regions who work for long spells prior to unemployment.
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Benefit Calculation
- Weekly benefits are calculated based on total earnings over the 26-week period preceding the establishment of the claim, divided by the number of weeks of work in this period or the minimum divisor of 14 to 22 (depending on the regional rate of unemployment), whichever is higher. The result is multiplied by 55% to determine the weekly benefit.
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- Creates a strong incentive to work more than the minimum amount of time to qualify for benefits (at least two more weeks than the old entrance requirement).
- Provides an incentive to work in the “shoulder” season.
- Ensures a better relationship between the flow of benefits and normal earnings.
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Family Supplement
- Claimants with children and annual net family incomes of up to $25,921 receive a top-up of their basic insurance benefits.
- The Family Supplement increased the maximum benefit rate to 65% in 1997, to 70% in 1998, to 75% in 1999 and to 80% in 2000.
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- Improves assistance to those most in need, because:
- the old 60% dependant rate under UI was very poorly targeted—about 45% of low-income families did not qualify; and
- about 30% of those who did receive the 60% rate had family incomes over $45,000.
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Allowable Earnings While on Claim
- Effective January 1997, claimants can earn $50 or 25% of their weekly benefit, whichever is higher, without a loss of their EI benefits.
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- Helps low-income claimants.
- Encourages claimants to maintain work attachment and increase their earnings from work.
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Benefit Repayment (Clawback)
- Benefits were repaid at the rate of $0.30 for every $1 of net income above the threshold.
- For those who had collected 20 or fewer weeks of benefits in the last five years, the threshold was $48,750 of net income (the former level was $63,570). The maximum repayment remained at 30% of benefits received.
- For those with more than 20 weeks of benefits in the last five years, the threshold was $39,000 of net income. The maximum repayment varied from 50% to 100% of benefits received, depending on previous use.
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- Made benefits fairer and more accurately reflective of insurance principles.
- Discouraged repeated use of EI by those with high levels of annual income.
- The Benefit Repayment provision was revised in Bill C-2 (2001).
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Intensity Rule
- The intensity rule reduced the benefit rate by 1 percentage point for every 20 weeks of regular or fishing benefits collected in the past five years.
- The maximum reduction was 5 percentage points.
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- Introduced an element of experience rating to the program, since heavy users of the system bore more of the costs.
- Discouraged use of EI as a regular income supplement rather than insurance for times of unpredictable job loss, while not excessively penalizing those who made long or frequent claims.
- Created a better balance between contributions made and benefits received.
- Repealed in Bill C-2 (2001).
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First-Dollar Coverage
- Effective January 1997, all earnings from the first dollar are insurable up to the annual MIE. There are no weekly minimums or maximums for determining earnings.
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- Creates a more equitable and balanced system—all earnings are insurable.
- Decreases paper burden for employers.
- Helps guard against “gaming” the system to avoid paying premiums.
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Premium Refunds
- Since 1997, workers earning $2,000 or less per year have had their premiums refunded.
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- Helps workers who must pay premiums but do not have enough hours to qualify for benefits.
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Increased Sanctions for Fraud
- Effective July 1996, penalties for fraud by employers and claimants were increased.
- Since January 1997, claimants who committed fraud after June 1996 have faced higher entrance requirements.
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- Protects the integrity of the EI program.
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Part II of the Employment Insurance Act: Employment Benefits and the National Employment Service
- Part II of the Employment Insurance Act provides authority for three types of arrangements for employment program implementation and delivery with support from EI funds.
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- The Canada EI Commission is authorized to:
- establish federal employment programs, coupled with a duty to work with provincial governments regarding their design, delivery and evaluation;
- Authority for the Commission to enter into agreements for the administration on its behalf of its employment benefits and support measures; and
- Authority to enter into agreements with provinces and other entities to contribute toward the costs of their similar benefits and measures/programs (Labour Market Development Agreements).
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