The optional Special Employment Insurance (EI) Program for self-employed individuals in Canada is designed to provide support during specific circumstances, such as sickness, maternity/paternity leave, and caregiving responsibilities. Pharmacy owners and self-employed pharmacists may wonder if these special benefits are worth investing in.
It is important to understand that this program does not cover general unemployment or job loss, which is a critical point to consider when evaluating its value for self-employed individuals. There are other considerations, too, that should be taken into account before making a decision.
Eligibility and Premiums
As a self-employed pharmacist, if you are drawing a salary, you are eligible to enroll into the program. Enrolling is voluntary, so you can decide if you want to join or not. That being said, if you are paying yourself in dividends, this program does not apply to you.
To be eligible for this program, self-employed individuals must register and pay premiums for a minimum of 12 months before benefits can be accessed. Individuals must plan ahead and register before EI benefits are likely to be needed.
Premiums are calculated based on net self-employment earnings and are set annually. These premiums are tax-deductible, but it’s still essential to assess whether the benefits outweigh the financial commitment.
Optional Special EI Benefits for Self Employed People
The program offers several types of special EI benefits for periods of time that a self employed individual may be unable to work. Benefit coverage does not include loss of employment.
Each benefit type has its own maximum weekly rates and a maximum number of weeks for which you can collect the benefit. Understanding these maximums is essential when considering whether to enroll in the program.
Maternity Benefits
These benefits offer income replacement for individuals away from work due to pregnancy or childbirth.
Parental Benefits
These help parents taking time off work to care for a newborn or adopted child.
EI Sickness Benefits
This coverage is designed for those unable to work due to medical reasons; a medical certificate is required.
Family Caregiver Benefits for Children or Adults
Family caregiver benefits are available to a self-employed person who is a caregiver of critically ill or injured children under 18 or a caregiver supporting critically ill or injured individuals aged 18 or over.
Compassionate Care Benefits
This provides coverage for up to 26 weeks to those providing end-of-life care and support, including family members with a significant risk of dying.
Application Process and Opting In
To apply for benefits under the optional special EI benefits program, self-employed individuals must meet specific eligibility criteria and complete the application process, including providing any necessary documentation including medical certificates.
Opting into the program requires pre-registration for the Self-Employed EI Benefit Program through your My Service Canada Account. Self-employed individuals who opt in must pay the EI premium rates as calculated based on your income.
Is Signing Up for the Optional Special EI Benefits Worth It?
There are several reasons why choosing to participate in this program is not an advantage for many pharmacy owners or pharmacists in a self employment situation.
Opting Out Restrictions
It’s crucial to understand that once you enroll in the program, you are bound to pay EI premiums as long as you are self-employed. Opting out is only possible at the end of a tax year if you have never claimed benefits. This means that if you have claimed benefits, you must continue paying into the program.
Note that if you’ve been an employee elsewhere and used EI in the past, that is allowed. You are still able to opt out of the self-employment EI program. However, once you enroll in the self-employment special EI program, you must contribute for at least 12 months to be eligible for benefits. And once you start receiving benefits, you are required to continue making contributions for the rest of your life.
This makes choosing to participate in the program a significant commitment that may not benefit you in the long run.
Restricted Maximum Benefits
The amount of money you can receive if you do make a claim is capped, which may make the benefits not worth the amount you pay into the program.
The maximum benefit amount as of 2023 is $650 per week for 52 weeks, for a total of $33,800, and is fully taxable. However, premiums for self-employed individuals can add up significantly over the years.
For example, if premiums are around $2,405 per year, for the employee and employer portions:
- 20 years x $2,405 per year = $48,100
- 25 years x $2,405 per year = $60,125
- 30 years x $2,405 per year = $72,150
Considering the maximum benefit you could receive, if you were to enroll for the maternity or parental benefits, you would need to have at least two to three children to come out ahead. Most self-employed individuals already have children by the time they consider enrolling, making this program financially unattractive for many.
Additionally, there is a 12-month waiting period before you can make a claim, further limiting the program’s usefulness for individuals seeking immediate assistance.
The money that would be spent on premiums could be more effectively invested and saved.
Restricted Coverage and Other Limitations
While the optional special EI program offers coverage for specific situations, it does not address the primary concern of most self-employed individuals: job and income loss security. Since you cannot fire yourself, this program doesn’t provide assistance if you lose your work through no fault of your own.
Furthermore, even after paying premiums for a full 12 months, if your business fails, you become ineligible for benefits. This creates a significant gap in coverage for self-employed individuals during times of economic uncertainty.
Many pharmacy owners and pharmacists, for example, have critical roles within their businesses, and an extended absence due to illness or caregiving responsibilities can have a detrimental impact on the business’s operations. This means a temporary income loss is only one critical concern to address.
Consult With an Expert
Opting into the optional special EI benefits program for self-employed individuals isn’t recommended for most self-employed pharmacists and pharmacy owners.
The limited coverage it offers, coupled with the significant financial commitment and restrictions on opting out, means it doesn’t meet the needs of self-employed individuals seeking job and income loss security in a cost-effective way.
It’s recommended that you carefully evaluate your specific circumstances and financial goals before deciding to enroll in this program, and be aware that for most, it’s not a financially wise decision. Consider alternative ways to secure your financial future and protect against income loss, such as investing or obtaining private insurance, as they may offer you more flexibility and value.
At PharmaTax, we guide pharmacy owners and pharmacists on financial decisions like these, to help them maximize their income and save more money.
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