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Part I: Plan requirements

Items under Identification of Employees Covered to Other Remuneration, inclusive, are mandatory (with the exception of SUB payments when an employee is not in receipt of EI benefits) and must appear in the plan description.

A sample SUB plan is found in Part II.

Identification of employees covered

The plan must identify the group(s) of employees covered.

For example:

  • all employees
  • hourly paid employees
  • employees at a certain plant or location
  • union group(s)

It may also identify an employee position such as:

  • accountant
  • administrator
  • lawyer

Any employee may be covered; however, individuals must not be identified by name. When employees of affiliated companies are covered, the names of these companies must be included.

Types of unemployment

The plan must indicate that it covers unemployment caused by one or a combination of the following:

Temporary stoppage of work

SUB plans are intended for periods of unemployment caused by a temporary stoppage of work. Termination of employment caused by a re-organization or a shutdown of a plant or operation is not considered temporary unemployment.

SUB payments may not:

  • form part of a separation package
  • be used to bridge to retirement
  • form any part of a work sharing agreement or short-week benefits

Recall rights do not necessarily constitute a reason for determining a lay-off to be temporary. The employer should be able to estimate the date of the employee's return to work.

EI benefits paid for temporary lay-off are regular benefits and are paid to claimants who are available for, able to and looking for work. Claimants must continue to meet all EI requirements even though they are on temporary stoppage of work.

Training

Employees must be in receipt of Employment Insurance benefits.

Illness, injury or quarantine

The employee must be in receipt of EI sickness benefits.

Receipt of Employment Insurance (EI) benefits

The plan must indicate that the employee must apply for and be in receipt of EI benefits.

SUB payments when employee is not in receipt of EI benefits

The plan may provide SUB payments up to a maximum of 95% of the normal weekly earnings when the employee is not in receipt of EI benefits, and:

  • is serving the 1 week EI waiting period, or
  • has insufficient hours of insurable employment to qualify for EI benefits, or
  • has exhausted the EI benefit entitlement

The employer decides which, if any, of the above situations are covered by the plan. An employer can introduce a SUB plan to offset the EI 1-week waiting period only. However, a complete description of the plan must be submitted for approval.

Supplemental Unemployment Benefit (SUB)

SUB payments

The SUB plan must indicate the value of the payments, either as a percentage of the employee's normal weekly earnings, or as a fixed amount.

The plan cannot provide that the SUB payment will be made in one lump sum payment; payments must be made periodically (for example, weekly, bi-weekly).

The weekly SUB payment plus the weekly EI benefit rate applicable to this employment must not exceed 95% of an employee's normal weekly earnings.

There are 2 acceptable methods of calculating the amount of SUB payments in order to meet the 95% requirement:

  • the gross weekly EI benefit (benefit rate) is deducted from the 95% calculation
  • the EI benefit amount (after earnings are deducted) and any other money considered earnings are deducted from the 95% calculation

At the present time, the basic EI benefit rate is equal to 55% of the employee's weekly insurable earnings up to a maximum payment of $668 per week. Changes to the basic rate of EI benefits could influence the amount of the SUB payments. The plan may provide for an automatic adjustment of the SUB payments when the EI rate is increased or decreased. It should be noted that the basic EI benefit rate can be altered based on the following:

  • a legislative change could increase or decrease the EI rate
  • a family income supplement can increase the EI rate to more than 55% because the employee is in a low-income family and in receipt of the Canada Child Tax Benefit (CCTB). If the employee is entitled to receive the family income supplement, the EI rate will be adjusted automatically

SUB calculation - No other earnings

Example 1: SUB payable when the employee is receiving regular, training or sickness benefits and has no other earnings.

  1. Employee's normal weekly earnings $1,500
  2. Employee's other earnings $0
  3. 95% of normal weekly earnings $1,425
  4. Maximum EI payment $668 Footnote 1
  5. Calculation of maximum SUB payment (C – D = E) $757

SUB calculation - With other earnings

Under Working While on Claim, a claimant is allowed to retain up to 50% of their earnings. Once the claimant has earned 90% of the average weekly earnings amount used to calculate their benefit rate, then the earnings are deducted dollar for dollar. The claimant must report all earnings. The employer may wish to consider these other earnings and the EI benefit amount when calculating the SUB payment. Refer to example 2 below for the difference in the SUB payments.

Example 2: SUB payable when the employee is receiving regular, training or sickness benefits and also has other earnings.

  1. Employee's normal weekly earnings $1,500
  2. Employee's other earnings $225
  3. Maximum EI payment $668 Footnote 1
  4. 50% of the earnings ($225 x 50%) $113
  5. EI benefit [C - D = E] [$668 -$113] $555

Scenario A: SUB payable without consideration of other earnings

(Sample Plan – Part II - item 5 option A or B)

  1. 95% of normal weekly earnings $1,425
  2. Maximum EI payment $668 Footnote 1
  3. SUB (A - B = C) $757

Scenario B: SUB payable if the employer includes other earnings and EI benefit

(Sample Plan – Part II - item 5 option C)

  1. 95% of normal weekly earnings $1,425
  2. EI Benefit (as per E above) $555 Footnote 1
  3. Other earnings $225
  4. SUB (A - B - C = D) $645

Benefit duration

The plan must indicate the maximum number of weeks for which the SUB payments will be payable. Some plans pay benefits for varying periods based on years of service, salary or employee groups. The Regulations do not set a minimum or maximum number of weeks for the payments.

Plan

Duration of plan

There is no minimum or maximum duration of a SUB plan; however, the plan must indicate a start date.

Acknowledgement of registration from the Service Canada-SUB Program must be received before the implementation date of the plan. If the plan is contained within a collective agreement, it will be considered valid until the expiry date of the agreement.

Subsequent changes

The plan must indicate that a written notice of any change will be given to Service Canada-SUB Program within 30 days of the effective date of the change. This also includes changes to the administrators or contact persons.

If there is a major reorganization in the company, such as a merger or a take-over, the employer must submit details of the changes including the new or updated plan description.

Financing

The plan must indicate the method used to finance the SUB payments. The employer is 100% responsible for financing and must choose:

  • making the payments from the general revenues of the company
  • making deposits into a trust fund established to provide the SUB payments, or
  • paying the total of the insurance premiums that are required to finance the SUB payments

Separate records

The plan must indicate that the employer will keep a record of all SUB payments.

Other remuneration

Payments in respect of guaranteed annual remuneration, deferred remuneration or severance pay must not be reduced or increased by SUB received under the plan.

These amounts include any benefits to which the employee is entitled such as:

  • sick leave
  • vacation leave
  • commissions
  • bonus

Repayment of EI benefits

An employee whose net income (including EI and SUB) is above 1.25 times the maximum yearly insurable earnings may be required to repay some of the EI benefits received.

The employer may offset the repayment of EI benefits under the SUB plan. The amount of the offset when added to the previous payments (SUB and the gross EI benefits from that employment) must not exceed 95% of the employee's normal weekly earnings.

Example:
The SUB plan has supplemented to 70%. The maximum amount of the offset cannot exceed 25% of the employee's normal weekly earnings multiplied by the number of weeks in which EI benefits were received.

The amount of repayment is calculated when the employee completes the Income Tax return and is based on a taxation year. For more information on repayment of EI benefits visit our Employment Insurance and Repayment of Benefits at Income Tax Time page on our website.

Trust fund

Termination clause

When the plan is administered through a trust fund, it must indicate that upon termination of the plan, all of the remaining assets will:

  • be reverted to the employer
  • be used for ongoing payments under the plan and/or
  • be used for the administration costs of the plan

Vested rights

The plan must indicate that the employee has no vested right to SUB payments, except during periods of unemployment specified in the plan.

Note:
SUB plans may specify any other requirements imposed by the employer for the receipt of the SUB, notably:

  • the minimum period of employment required before payments are made
  • that the employee must return to work for a specified period after supplemental unemployment benefits are paid
  • conditions set by a collective agreement

The employer may provide for varying benefits (for example, benefit duration, payments, type of coverage) for certain employee groups within the plan.

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