Self Employment Program Through Ei

Hiring staff to work in your small business marks an exciting time of growth, and it also comes with extra responsibilities, such as completing paperwork and paying taxes. One of the first things you need to do when you hire is determine how to classify each worker as either self-employed or employee. Properly categorizing workers helps you organize payroll to ensure you comply with all of the applicable laws and regulations, which helps keep your business running smoothly.

Self Employment Program Through Ei Learning
Self Employment Program Through Either

Why Employee Classification Matters

The first of the three new benefits is the Canada Recovery Benefit for workers who are self-employed or not EI-eligible and still require income support because their work has not yet returned due.

Whether a person is self-employed or an employee of your company directly impacts the benefits they’re entitled to and the way they’re treated when it comes to income taxes and other legislation. Avoid incorrectly classifying an employee by ensuring that you classify your staff correctly and stay in compliance with regulations, which helps you avoid potential financial penalties to protect your profits. For example, if a staff member should be classified as an employee but you don’t withhold Canada Pension Plan (CPP) contributions and Employment Insurance (EI) premiums, you have to pay those amounts and may owe penalties and interest. But if you correctly classify that worker as an employee and take out all of the required deductions, you keep your business in compliance and reduce your expenses by avoiding potential fees.

Dec 22, 2020 When self-employed persons opt into the EI program to access EI special benefits, they pay the same EI premium rate as employees pay. EI premiums are paid when the self-employed worker files their annual Income Tax and Benefit Return using Schedule 13 (Employment Insurance Premiums on Self-Employment and Other Eligible Earnings).
Self-employed individuals have the option to participate in the EI program. If they decide to participate, they handle all of the costs and processing. Eliminating those responsibilities saves you a significant amount of time on payroll processing.
Jan 09, 2012 As it turns out the Ontario Self-Employment Benefit (OSEB) program shut down in 2016. EI special benefits for self-employed people are still active. These types of programs are outside of what Mentor Works typically works in, however, you may be able to find some additional resources to help you on our startup resources page.

If you hire someone as an employee, you get to decide what they do, how they do it, and when they do it. Self-employed individuals have more control over how they do work and even whether or not they accept work from you. Clear classification helps you understand the expectations you can set for someone who completes work for your company.

How Canada Identifies Self-Employed vs. Employee

Is your latest hire your employee or an independent contractor who qualifies as being self-employed? Sometimes, it’s not always easy to tell. Looking at the relationship helps you determine how to classify each person who works for your company in any capacity. Sometimes, the two types of workers seem similar, which is why the Canada Revenue Agency (CRA) breaks it down into greater detail with a two-step process.

Step 1. Ask the intention of the arrangement when the two parties enter it.

Step 2. Ask questions regarding specific factors.

For the first step, ask if it is an employee-employer relationship where the person is under contract of service, or is it a business relationship where you’re contracting for the services the person provides? That key question can often help you figure out the correct classification, it may take a little more questioning to figure it out for sure.

For the second step, these factors include determining who has control over activities, who provides tools, options to subcontract work, financial risks, responsibility for investment and management, profit opportunities, and other relevant details. The answers to those questions help classify the person doing the work.

In Canada, the qualifications of being self-employed include:

Operating as a business
A business relationship with you as the business owner/payer
More financial risk with the potential for a loss
Greater profit potential than an employee
More independence in their activities than an employee might have
Performs duties that aren’t as integral to the business
Choice in whether or not to accept work from you
Option to hire subcontractors to handle the work
Supplies and maintains their own equipment and tools
Ongoing operating expenses that aren’t reimbursed
Hired for a specific task or project rather than being on staff indefinitely with an ongoing relationship
Markets services and has the option to accept work from other companies

On the other hand, signs that a worker is your employee include:

Subject to more control from you with less independence than a self-employed person might have
Subordinate to you
Handles work as assigned by you without being able to subcontract or refuse the work
No financial risks
Reimbursed for expenses associated with the job
No regular, ongoing operating expenses
Ongoing relationship and continual job duties rather than being tied just to one project and only for the duration of that project

Quebec-Specific Criteria for Self-Employed vs. Employee

While the general approach to classifying employees in Canada is a two-step process, Quebec uses three steps to decide.

Step 1. Decide on the intent of both parties at the start of the arrangement.

Step 2. Use the Civil Code of Quebec to help distinguish between someone who is self-employed versus someone who is an employee.

Step 3. Look at the control the worker has compared to the control the payer has.

For the first step, you must decide if it’s a contract of service as in an employer-employee relationship, or a contract for services that indicates a business relationship between your company and a self-employed individual.

For the second step, the code involves three primary factors, including carrying out the work, remuneration, and relationship of subordination. Carrying out the work is the same for either: whether it’s an employee-employer relationship or a business arrangement, the worker handles the work. Remuneration is also the same for both. You pay the person doing the work with the option to calculate the pay per piece, based on time, or using another method.

The third factor, relationship of subordination, shows more differentiation between being self-employed and being an employee. Many of the factors are similar to the general Canadian qualifications. In Quebec, an employee typically:

Follows instructions from the payer on how the work gets done, the method used, and the results, as the payer is in control of those factors
Works based on the schedule created by the payer
Follows absence policies and uses leave based on the rules established by the payer
May face disciplinary actions created by the payer if the work doesn’t meet standards
Completes the work themselves instead of hiring subcontractors or assistants
Reports to the payer on various activities
Works for a single payer
Gets training from the payer

On the other hand, someone who is self-employed in Quebec might:

Work when, where, and how they want
Work for multiple payers
May work remotely instead of at the company’s physical location
Can decide whether or not to accept work
Has less continuity and subordination in the relationship

The final step in Quebec is to look at the intention of the parties as compared to what’s actually happening in the relationship. For example, if the intention is an employee-employer relationship but what’s happening actually aligns more with self-employment Canada, the province of Quebac may decide that the person is actually not your employee.

Pros of Self-Employed Staff

Many small businesses outsource work to freelancers, especially if they’re not quite ready to hire a full-time staff person for the role. It’s an affordable way to get the work done that you need help with while making it much faster and easier to get that person onboard. You can use the person as much or as little as you need, which helps you control your costs. Here are some additional pros of using self-employed staff:

Cutting out the processing of income taxes, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) for a self-employed staffer. Because an independent contractor or freelancer is considered self-employed, you simply pay the agreed-upon rate without taking out income taxes on behalf of the person.
The worker is responsible for paying their own income taxes. That means much easier payroll processing when you go to pay your independent contractors. Self-employed individuals also pay CPP contributions themselves. Self-employed individuals have the option to participate in the EI program. If they decide to participate, they handle all of the costs and processing.
Eliminating those responsibilities saves you a significant amount of time on payroll processing. You cut out the time it would normally take you to calculate and remit all of those payments on each payroll cycle.
By saving time on payroll, you save money overall. Shortening payroll processing frees up the person who normally handles the task to do other things, which makes their salary stretch further.
You also save money in a few different ways beyond cutting your workload. You don’t have to pay the employer portion of the person’s CPP contributions like you do for employees.
Independent contractors don’t typically qualify for overtime, which keeps those costs under control.
Since self-employed individuals usually already own any tools or equipment they need, you can spend less on those items and the ongoing upkeep and maintenance costs for those items.
The experience and autonomy of the independent contractor. If you choose a professional, well-qualified person for the job, they should come to you with the necessary skill set to perform the job from day one. That means they can jump right in and complete the work quickly and competently without an extensive training period.
You don’t need to assign a mentor to the person or have someone constantly supervising their work since they should have the skills to do the work independently. That can help you conserve resources and get work done more efficiently.
If you decide to end the business relationship, whether due to the quality of the work or no longer needing help with the tasks, it’s much easier when you’re working with someone who is self-employed.
You don’t have to pay severance. If the independent contractor doesn’t fulfill their contractual obligation, you can decide to enforce penalties or hold the person liable for those failed obligations.

By using cloud-based software and apps, you can easily manage any contractors you use to complete work. QuickBooks Online lets you record and track how much you spend to pay your self-employed workers. This can help you track the expense and compare it to what you might pay a full-time employee. If you pay independent contractors by the hour, you can use a time-tracking program such as TSheets Time Tracking to monitor how much time they spend on your project.

The app also helps you know how much to pay them. Even better, the app integrates into QuickBooks to automatically transfer the data to your accounting software. Other apps also help manage your relationship with self-employed workers. For example, project management apps such as Mavenlink let you communicate about and track progress on projects your independent contractors handle.

Cons of Self-Employed Staff

Before using self-employed workers, there are a few things to consider. Here are a few potential cons:

When you enlist the services of an independent contractor, that person has more control over the work. Sure, you can assign certain tasks or projects to your independent contractors, but the contractor decides how they get the tasks done.
Independent contractors can subcontract the work to others, so there’s no guarantee that the person you employ is the one who completes the job.
Self-employed staff may use their own methods to complete the work. If you don’t mind giving up your say in how the job gets done, an independent contractor may be the right choice. But if you have specific processes you want your workers to follow or you don’t want the work passed on to someone else, working with an independent contractor may not be the best fit.
The cost per hour is another consideration. You may end up paying an independent contractor more for each hour of work than you do a regular employee. That doesn’t necessarily mean you end up paying more overall. If you only need a few hours of work completed each week, paying more per hour for just those few hours can save you money over hiring an employee. Even if the hourly rate is lower, you may end up paying an employee for more hours, which adds up to more overall.
You can also end the business relationship and eliminate that expense much easier than you can terminate an employee. So if you only need the help temporarily, you may find it’s worth paying a higher hourly rate for a short time.
Independent contractors often work for multiple companies. That means you’re potentially sharing their time and attention with other companies they may be working with at the same time. Using written contracts with expected delivery dates can push your independent contractors to get your work done on time. But if you prefer someone who only works for you and gives you their undivided attention, you may prefer an employee.
You may have difficulty keeping a particular freelancer for long-term projects. Your preferred freelancer may already be booked the next time you need them to help out, which means you need to look for someone new. With an employee, you have that person in the role indefinitely, so you get the consistency of the same person handling the work every time.
If you want to outsource multiple duties, that often means using different freelancers who each specialize in a particular area. Keeping track of multiple independent contractors can pull your time and attention away from other duties as you track deadlines, agreements, and obligations of each contractor. With an employee, either you or your managerial staff work with your employees to make sure they’re getting their job done. They have set responsibilities, and they see how those duties fit within the company, so they may be more likely to get the work done without you following up with them.

Pros of Hiring Employees

Hiring permanent staff members has many pros. Here are some to consider:

When you hire someone as an employee, you have greater control over what they do. You determine how you pay them, when they work, and what their responsibilities are when they work.
Employees can handle different roles because you control the job assignments. That means if you suddenly get busy in a certain area, you have the staff on hand to fill in as needed. That eliminates the need to search for independent contractors every time a project pops up, especially if you need someone quickly.
You handle training your employees, which means you can mold them to your standards and train them to follow the procedures you want used in your company.
You can cross-train your employees to handle other responsibilities as needed, whereas you don’t typically train independent contractors at all or expect them to take on different roles.
Greater loyalty. An employee is an integral part of your company, especially when you focus on building a strong company culture and sense of team. That buy-in may increase employee productivity and encourage them to produce higher quality work.
Employees also have the potential to advance within your company, which can serve as a motivator for them to work hard. An independent contractor often focuses more on profitability, so their loyalties aren’t as strong and can change at any time.
Sense of familiarity. Your employees understand your expectations and know how things run around the office. They’re familiar with the organizational hierarchy and the procedures they need to follow for certain tasks. That understanding of your company can make it easier for employees to do their job, and it creates a smoother workflow.

Cons of Hiring Employees

Having a dedicated staff can be a good thing, but it also comes with some potential drawbacks to consider. Time and money are two major factors. Since you’re responsible for handling taxes, CPP contributions, and EI premiums, you’re investing more work hours into employees on an ongoing basis. You have to calculate and remit those payments every month, so it goes beyond more work to onboard employees.

The costs come into play in different areas, depending on the situation. When you hire an employee, your financial obligations may include:

50% of the employee’s CPP contribution
Paid vacation pay
Overtime pay
Severance pay if you terminate the employee
Cost of equipment or tools and the maintenance of those items
Reimbursements for work-related expenses

Employees also enjoy more protection from termination than an independent contractor. That’s a good thing for the employee, but it can put you in a difficult situation if you have an employee who consistently performs poorly. You also must meet all of the federal and provincial laws regarding employees, such as how frequently you have to pay, how much you have to pay, overtime requirements, and working conditions.

Taking on more regular employees can increase your managerial load. Independent contractors often feel comfortable working on their own, and they have the expertise to handle the work. Employees may need more guidance, and you likely need to provide continued training, educational opportunities, and licencing if your industry requires it. Taking on the managerial role means you may spend less time working on your actual business.

Required Records

Hiring an employee comes with certain record and document requirements that you should be aware of. When you hire an employee, you need to handle the following things:

EI premiums
CPP contributions
Income tax withholding from remuneration

You need to calculate and record those amounts before submitting them to the CRA. To fulfill your employer payroll responsibilities, you need to:

Open a payroll account with the CRA, which requires a business number (BN).
Calculate payroll deductions for EI premiums, CPP contributions, and income taxes.
Remit those deductions on behalf of your employees.
Fill out Form T4 to report the income and deductions you make for your employees.

If you have multiple employees, you repeat these steps for each employee, which can take some time to complete. You need to calculate the deductions for each pay period, so your payroll processing may take longer when you keep employees on staff. If you use independent contractors who operate on a self-employed basis, they handle their own deductions for all of the required and optional programs, which means less record-keeping for you.

When you need help in your small business, it’s important to compare the differences between hiring your own employee and entering a business relationship with someone who is self-employed. No matter what relationship you choose, documenting the salary and expenses related to the worker is an important part of keeping your finances under control. 5.6 million customers use QuickBooks. Join them today to help your business thrive for free.

Employment Insurance special benefits for self-employed people

Under the Employment Insurance Act, self-employed Canadians and permanent residents—those who work for themselves—are able to apply for EI special benefits if they are registered for access to the EI program.

This booklet outlines what EI special benefits are available, who can register for them, how they are calculated, and how long they can be paid.

EI special benefits are part of the EI program, which is administered by the Government of Canada.

What are EI special benefits

There are six types of EI special benefits:

Maternity benefits are for mothers who give birth. These benefits cover the period surrounding the child's birth (up to 15 weeks).
Parental benefits are for any parent (mother or father) to care for their newborn or newly adopted child or children. The benefits are available to biological, adoptive, or legally recognized parents. There are two options available for receiving parental benefits: standard or extended.
- Standard parental benefits can be paid for a maximum of 35 weeks and must be claimed within a 52 week period (12 months) after the week the child was born or placed for the purpose of adoption. Standard parental benefits are paid at a weekly benefit rate of 55% of the claimant’s earnings from self-employment, up to a maximum amount.
- Extended parental benefits can be paid for a maximum of 61 weeks and must be claimed within a 78-week period (18 months) after the week the child was born or placed for the purpose of adoption. Extended parental benefits are paid at a weekly benefit rate of 33% of the claimant’s earnings from self-employment, up to a maximum amount.
- Either parent can receive parental benefits, or they can share the benefits between them. If both parents share the benefits, they must receive them under the same option.
Sickness benefits are for people who cannot work due to injury, illness, or the need to be isolated in quarantine because they may be carrying a disease (up to 15 weeks).
Compassionate care benefits are for people who must be away from work temporarily to provide care or support to a family member who is seriously ill with a significant risk of death (up to 26 weeks). The 26 weeks of benefits can be shared between different family members who applied and are eligible to receive them.
Family caregiver benefits for children are for family members who must be away from work to care for or support a critically ill or injured child. Family members can receive benefits or they can share benefits between them (up to 35 weeks).
Family caregiver benefits for adults are for family members who must be away from work to care for or support a critically ill or injured adult. Family members can receive benefits or they can share benefits between them (up to 15 weeks).

Note

If you are a self-employed resident of Quebec, you are already covered for maternity, paternity, and parental benefits under the Quebec Parental Insurance Plan (QPIP). If you choose to register for access to the EI program, you may be eligible for EI sickness, compassionate care and family caregiver benefits only.

Who can register

You can register if you operate your own business, or if you work for a corporation but cannot access EI benefits because you control more than 40% of the corporation's voting shares. You must also be either a Canadian citizen or a permanent resident of Canada.

However, some individuals who work independently and are not hired as employees cannot register for these EI special benefits for self-employed people because they are already eligible to receive benefits through the regular EI program. These individuals include:

barbers, hairdressers, taxi drivers, and drivers of other passenger vehicles who are not hired as employees but whose employment is insurable under the EI Regulations, and
fishers who are included as insured persons under the EI Fishing Regulations

Once I register, how long do I have to wait before I can apply for EI special benefits

You have to wait 12 months from the date of your confirmed registration before applying for EI special benefits. For example, if you entered into an agreement on November 12, 2020, you will be able to apply for EI special benefits as early as November 12, 2021.

What are the conditions I have to meet to qualify for EI special benefits

You must meet the following conditions to qualify for EI special benefits:

your registration for access to the EI Program must still be valid (that is, not terminated), and
you must have reduced the amount of time devoted to your business by more than 40% because of:

the birth of a child
the need to care for your newborn or newly adopted child or children
illness, injury, or quarantine
the need to provide care or support to a gravely ill family member, or
the need to provide care or support to your critically ill or injured family member

you must have earned a minimum specified amount of net self-employed earnings during the calendar year before the year you submit an EI claim. Thus for claims filed in 2021, the minimum amount of 2020 net income is $7,555

Will I have to provide any evidence to validate my claim

Self Employment Program Through Ei Learning

Yes. If you are applying for sickness benefits, you have to provide a medical certificate as proof that you are ill, injured, or in quarantine. If you are applying for compassionate care benefits, you have to provide medical proof showing that a seriously ill family member needs your care or support. If you are applying for family caregiver benefits, you have to provide a medical certificate completed by a medical doctor or nurse practitioner stating that your care or support is required by your critically ill or injured family member as well as an authorization to release medical information.

If you are applying for maternity or parental benefits, you have to provide the expected date of birth of the child and the actual birth date once it has occurred, or the official placement date in the case of adoption.

Parental benefits - options

You will also be required to elect under which option you wish to claim parental benefits: standard or extended. If you are sharing the parental benefits with the other parent, you will be required to choose the same parental benefit option. The option chosen by the first claimant who completes the EI application will be considered as the option chosen by the second claimant. The choice is final once parental benefits have been paid on a claim. This means that you cannot change between standard and extended once parental benefits have been paid.

How much money will I receive

If you are eligible for maternity, standard parental, sickness, compassionate care or family caregiver benefits you can expect to receive 55% of your earnings from self-employment up to a maximum amount. For extended parental benefits you can expect to receive 33% of your earnings from self-employment, up to a maximum amount.

In 2021, you can receive up to $595 per week for maternity, standard parental, sickness, compassionate care or family caregiver benefits, based on the maximum insurable earnings of $56,300 for that year. For extended parental benefits you can receive up to $357 per week. (The amount of $357 can be increased if you are eligible to receive the Family Supplement).

The amount of your benefits may decrease if you continue to work or if your business generates earnings while you are collecting EI special benefits.

Working while receiving benefits

If you work while receiving special benefits for the self-employed and have served your waiting period, you will be able to keep 50 cents of your EI benefits for every dollar you earn, up to 90% of the weekly insurable earnings used to calculate your EI benefit amount. This 90% amount is called the earnings threshold. If you earn any money above this threshold, we will deduct it dollar for dollar from your benefits.

For more information, visit the Working While on Claim page.

How much money will I pay

As with any insurance program, you will need to pay premiums. In 2021, for every $100 you earn, you will need to contribute $1.58 in EI premiums up to a defined maximum—the same amount that employees pay. This means the most you will pay in EI premiums for 2021 is $889.54.

Since Quebec has its own parental insurance program that offers maternity, paternity, and parental benefits, the Government of Canada has adjusted the premiums accordingly for that province. In 2021, self-employed people in Quebec who register for the EI program will pay $1.18 for every $100 of earnings, up to a total of $664.34 for the year.

EI premiums are calculated based on your income tax return. For example, if you sign up for the program in 2021, your premiums will be based on your 2020 tax return.

What if I am both self-employed and an employee

The choice is yours: you can choose to apply for EI special benefits either as a self-employed person or as an employee.

If you choose to apply as a self-employed person, we will take into account your earnings from both self-employment and employment as an employee when we calculate your weekly benefit amount, as long as your earnings from both sources are eligible. A Record of Employment will be required from your employer to show details of your earnings from that employment.

If you choose to apply as an employee, we will use only the earnings from your employment as an employee (including fishing earnings) to calculate your weekly benefit amount. We will not use any of your self-employment earnings. A Record of Employment will be required from your employer to show details of your earnings from that employment.

How do I register

If you choose to register, you must do the following:

Visit the Service Canada page and sign up for My Service Canada Account. This service is accessible online from home, at any Service Canada Centre using one of the many Internet kiosks available, or at a public Internet access site in your community, such as a public library. After you register, we will mail you a personal access code within 10 days.

Once you have your personal access code, use it to log back into My Service Canada Account and register for EI special benefits for self-employed people.

If you have already signed up for My Service Canada Account, simply log in and register for EI special benefits for self-employed people.

Self Employment Program Through Either

What if I change my mind about taking part in this EI program

By taking part in this EI program, you are registering with the Canada Employment Insurance Commission and agreeing to pay premiums on your self-employed income. If you change your mind, you have 60 days to cancel your registration. If you choose to cancel your registration within those first 60 days, you will not have to pay any premiums.

After the 60-day period, you can terminate your registration at any time—as long as you have never claimed any benefits. This termination will be effective at the end of the calendar year, so you will have to pay EI premiums for the entire calendar year.

Once you have claimed EI benefits, your participation in the program lasts indefinitely. You will have to pay premiums for the entire duration of your self-employed career, regardless of any change in the nature of your self-employment.

When can I receive benefits

Once you register, you must wait 12 months to make a claim for EI special benefits. For example, if you registered on June 12, 2021, you could apply for EI special benefits on June 12, 2022.