By the time I was ready to get serious about having kids, I hadn’t paid into Employment Insurance (EI) for four years. I was a freelance writer and marketing consultant, lamenting the fact that I wouldn’t get the same cushy mat leave that regular employees get.
But after some Googling, I discovered that self-employed workers do indeed have a mat leave option and hardly anyone knows about it. We can opt-in to Service Canada’s special EI benefits for self-employed workers, which allows us to make the same claims for maternity and parental leave in exchange for paying the same EI premiums that regular employees have deducted from their paycheques.
More and more of us are self-employed today than ever before. The number of self-employed women increased by 15 percent between 2006 and 2016. (The total of self-employed men increased only 6 percent in the same period.) Yet, not many self-employed women are opting in to the special EI benefits they’ve been entitled to since the program began, back in 2010. Only 755 claims across Canada were processed in 2014, for example. Uptake has been slow. Is it because no one knows about it? Or is it because the program isn’t worth it?
Well, it depends.
Family planning meets financial planning
While I was ready to get the baby show on the road, there was a catch. In order to be eligible for the EI benefits for self-employed workers, you have to have registered 12 months prior to beginning your mat leave. It’s no secret that it takes about nine months to gestate a baby, so you’d have to opt in at least three months before you got pregnant. It could also take many months, or even years, to conceive if you face any fertility issues, many of which are totally unpredictable. It can feel a bit presumptuous to register for the EI benefits not knowing when, if ever, you’ll get pregnant.
But if you’re eligible and you’ve registered in time, EI benefits for the self-employed work pretty much identically to those for regular employees, with one big catch: You can’t claim regular unemployment EI benefits if you lose your job. But you can claim a series of special benefits for all the other reasons you might need EI in the future: maternity and parental leave, sickness leave, compassionate care or to care for a critically ill child.
For all of these benefits, including maternity and parental leave, you can earn 55 percent of your previous year’s income, minus any losses (like business expenses) up to the government’s “maximum insurable earnings” cap, which is $51,300 in 2017. (This maximum typically increases a bit each year.) Your insurable earnings are calculated on a weekly basis, based on your total self-employment income for the prior year, divided by 52 weeks. So, the maximum you can collect on an EI claim is $543 per week ($51,300 divided by 52).
To get the payout, you have to pay in. Self-employed EI premiums are $1.63 for every $100 you earn this year, up to the same “maximum insurable earnings” number. So the most you’d pay for 2017, if you make $51,300 or more this year, is $836.19.
Here’s one of the biggest caveats with the program: Once you make any special benefits claim, you’re on the hook for paying premiums on your self-employed income for the remainder of your self-employed career. If you register but never use the benefits, you can opt out at any time (though you wouldn’t recoup the premiums you’ve already paid).
I opted in in September 2014, paid premiums on all of my income from all of 2014 and 2015, got pregnant in May 2015 and made a claim in February 2016, ten days before I became a mom.
Is it worth it?
The challenge with the program isn’t so much what’s offered, it’s more how well it aligns, or doesn’t, with the nature of self-employment and with your situation in particular.
Shannon Lee Simmons, a financial planner, founder of The New School of Finance and a mom-to-be, works with a lot of self-employed people. She often tackles the question of whether or not to register for these benefits, and even then, whether to make a claim at all.
The most important question Simmons asks her clients who are considering having kids in the near future is whether or not they can take a full year off their work. If it’s a yes, then great, the special EI benefits may be of value, depending on where their income falls within the maximum insurable earnings. (If your business earns less than $30,000/year, the payout gets a bit dismal.) If they’re planning to have more than one child and hoping to get two or more mat leaves out of it, it can be even more valuable.
But that’s certainly not always the case.
“A lot of the sole proprietors that I see are their business and they don’t have the ability to take a year off of work because the business they’re coming back to would die,” Simmons says. “If they don’t keep putting coal on the fire, so to speak, what happens to their customers and their clients? They go somewhere else.”
Earning money while on leave
You can earn some money while you’re on parental leave, but there are restrictions. The Working While on Claim Pilot Project allows you to earn up to 90 percent of your pre-baby average weekly earnings and the government will reduce your weekly benefit payout by 50 percent of what you earned that week. You would report any income on the EI reports you’re required to submit online throughout your leave. (Regular EI claimants can opt-out of the reports, but self-employed claimants have to submit them every two weeks.) Anything you earn over that 90 percent is clawed back from your benefits dollar for dollar, but at that point, you’re likely working nearly full-time anyway and if that’s what you need to do more often than not, the EI program probably isn’t for you.
This essentially means you could return to work part-time, perhaps the equivalent of about two days a week, earn a bit of money and effectively top up your benefit amount by 50 percent of whatever you earn.
Here’s an example: Let’s say you’re a graphic designer who’s collecting the maximum weekly benefit of $543 per week, and you spend a few days here and there over four weeks working on a project that nets you $2,000. Rather than claiming that lump sum as one week’s earnings, you can split that up into $500 of income over each of those four weeks. Your benefit for each of those weeks would be reduced to $293. Not only would you collect a total of $3,172 ($1000 more than you would have pocketed otherwise) for those four weeks, but you’ve also been able to throw a bit of coal on your fire, keeping your work connections going. Not bad.
Will it work for you?
This approach doesn’t account for all the possible feast-or-famine realities that some self-employed workers face. What if you’re a real estate agent? Or a super in-demand web developer who can charge more for “quicker” work? Goods-based business owners can’t easily predict when purchases will or won’t be made, and then there are seasonal businesses that typically generate more revenue at a particular time of year.
“It’s a very specific type of sole proprietor who qualifies, first of all,” says Simmons. “Second of all, you have to have a high enough income to make it worth it; and third, who has a business they could peace out of for a year and then come back? It’s a very specific type of person.”
If you’ve considered the options and done the math, and self-employed EI benefits don’t seem like a good fit for you and your circumstances, the alternative is self-funding your own leave through savings, or simply returning to work sooner. Many self-employed workers whose partner is in regular employment take some unpaid time off to recover from birth and get through those first few months, and then return to work while their partner takes up to 35 weeks of parental leave. This means the self-employed parent isn’t out of work for as long, both parents get some solo time at home bonding with the new baby, and that the family can still save on childcare costs in that first year and maximize the spouse’s benefits. Simmons recommends parents-to-be start saving for their own DIY mat leave at least a year before they’d like to take a bit of time off, or, at the very latest, as soon as you find out you’re expecting. So, it’s the same kind of pre-planning that going the EI route requires.
When it’s all said and done, deciding whether or not the special EI benefits for self-employed workers are for you comes down to a lot of number crunching and a bit of soul searching around what you, your growing family and your business need.