When an employee gets paid, deductions are taken at the source and remitted to the government. This includes CPP contributions that entitle them to the Canada Pension Plan in their senior years, income tax, and Employment Insurance (EI).
But self-employed workers don’t automatically pay into Employment Insurance the way that employees do. This means that self-employed individuals can’t take advantage of EI benefits. Not unless they opt in to the program so that they can access EI’s special benefits for self-employed people, targeted at workers who take time off for:
- Maternity leaves up to 15 weeks for birth mothers.
- Parental leave up to 61 weeks for biological or adoptive parents.
- Sick leave for up to 15 weeks when ill, injured, or quarantined.
- Compassionate care leaves for up to 26 weeks to care for someone who is at significant risk of death.
- Caregiver leaves for up to 35 weeks to care for a critically ill.
If you operate your own business and want to have access to these benefits, you can choose to make EI contributions. To do this, you will have to contribute the employee portion of EI premiums. You don’t, however, have to pay the employer’s portion (1.4 times the employee contribution) since you are self-employed.
Currently, employees pay EI premiums of 1.58% on insurable earnings up to $56,300 annually. This equals a maximum annual premium of $889.54. But remember, your premiums will not be deducted at the source like it is for your employees. Instead, you’ll have to remit payment by April 30.
If this is something that interests you as a self-employed person, all you have to do is register online with the Canada Employment Insurance Commission through your My Service Canada Account. If you register between January 1 and April 30 in any given year, your premiums will be based on your previous year’s earnings.
If, however, you apply after April 30, your premiums will be based on your current year earnings and become payable the following April 30. And no matter when you register, you will have to wait a full 12 months before you can access the special benefits.
If you choose to cancel your registration, you can do so within 60 days of registering without paying premiums. You can also cancel your registration after 60 days if you haven’t received any special benefits. But the moment you receive benefits, you are obligated to pay premiums for the remainder of your self-employment.
How do I apply for EI Special Benefits?
As a self-employed individual, you have to register online with the Canada Employment Insurance Commission to participate in the EI program, through your My Service Canada Account. Once you receive confirmation that your registration was successful and completed by April 30th the premiums will be based on the previous year’s income tax return, but if completed afterward your EI premiums will be calculated based on your income tax return for that year. You have to wait 12 months from the date of your confirmed registration before applying for EI special benefits.
If you want to know more about this program and find out whether it’s the right choice for you, contact the Filing Taxes team of professional accountants today at 416-479-8532. Schedule an NTR engagement appointment with us and take the first step towards proper management of your finances.
Disclaimer
The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page.