Special VTN Report from Hugh Neilson -
On August 20, 2020 Deputy Prime Minister and Minister of Finance Chrystia Freeland, and Minister of Employment, Workforce Development and Disability Inclusion Carla Qualtrough, announced new measures to support Canadian workers through the next phase of the recovery.
CRA and ESDC hosted an embargoed media technical briefing leading up to the press conference, which Editorial Board Member Hugh Neilson attended. These comments are derived largely from that session, and could not be released prior to 2:45 Pm Eastern Standard Time in accordance with the embargo terms.
First Step – CERB Extension
The CERB was originally limited to four periods of four weeks each, then extended to six such periods. In order to bridge the gap until the new benefits announced today, CERB will be available for seven periods. This will allow Canadians who have been receiving CERB since it commenced in March, 2020 to retain access until the end of CERB on September 26.
Second Step – Simplify the EI Program
Commencing September 27, 2020, the EI rules will be revised for a period of one year to facilitate access, and enhance benefits, under the EI program. These revisions will apply uniformly across Canada. These changes will effectively:
Reduce required insurable hours to 120 hours in the 52 weeks prior to EI application. For example, assume an individual lost their job in early March, 2020 due to COVID-19. They then collected CERB for all seven periods, to September 26, 2020. They would look back to September 29, 2019 for insurable hours to determine whether they are eligible for EI when CERB ends on September 26, and would require 120 insurable hours (3 weeks at 40 hours per week, less than four weeks at 35 hours a week, or 10 hours a week for 12 weeks). Under the normal rules, the minimum hours required range from 420 to 700. Special rules will also facilitate EI eligibility for individuals transitioning from CERB to EI special benefits (maternity, parental, compassionate care, family caregiver and sickness).
Increase minimum weekly benefits to $400. Normally, the weekly benefit is 55% of average weekly earnings for a period between 14 and 22 weeks, to a maximum weekly benefit of $573. If the normal rules would result in a higher benefit, that higher benefit will be paid. Due to the minimum unemployment rate being set at 13.1% across Canada, as announced on August 10, 2020, the best 14 weeks will apply to all claims under the normal rules. Individuals receiving extended parental benefits will receive a minimum of $240 per week, as these benefits are 60% of normal benefits to offset the additional weeks for which benefits are received.
Increase minimum weeks eligible for EI to 26 weeks (that is, about six months). Under the normal rules, EI is available for 14 to 45 weeks. If the normal rules would result in access to more weeks of benefits, benefits will be available over that longer period.
The usual rules for working while on claim will apply, meaning that the worker can earn income while receiving benefits, with their EI benefits reduced by 50 cents for every dollar of other earnings, up to 90% of their prior earnings.
Third Step – New Benefit Programs
For the same one-year period commencing September 27, 2020, three new benefits will be implemented to extend benefits to individuals who would otherwise be ineligible for EI under the normal rules, as follows:
The Canada Recovery Benefit will be available to self-employed individuals and other workers who are not eligible for EI but still require support due to an inability to return to work. This will be a benefit of $400 per week for up to 26 weeks. Eligibility criteria will be similar to CERB – the individual ceased working, or has had their income reduced, due to COVID-19. However, they must be available and looking for work. They may continue to earn income while receiving benefits. However, they will be subject to a clawback of 50% of net income, up to the total benefit received in the calendar year. The Canada Recovery Benefit will be excluded from net income for this purpose, but all other forms of income will count, including CERB, CESB and investment income.
The Canada Recovery Sickness Benefit will be paid to workers who are ill or must self-isolate for reasons related to COVID-19. This was noted as meeting the government’s Safe Restart Agreement commitment to make every Canadian worker eligible for at least ten days of paid sick leave. It will provide $500 per week for up to two weeks for individuals who cannot work due to illness or self-isolation related to COVID-19. It is not available in combination with other paid sick leave or benefits. Eligibility conditions will be similar to CERB, including the requirement for $5,000 of earned income in 2019, or the twelve months prior to claim.
The Canada Recovery Caregiving Benefit will be paid to workers who are unable to work because they must care for a child under the age of 12, dependant or family member because schools, daycares or care facilities are closed due to COVID-19. It will provide $500 per week for up to 26 weeks per household. It can be shared, but only one member of the household may receive it at any one time. The benefit will not be available where the schools or care facilities have reopened. In the media briefing, government officials responded to a question and confirmed that, if medical advice indicates the person would be at risk (for example, they are immunocompromised) by returning to school or daycare, the benefit would remain available.
All three benefits will be available for one year, commencing September 27, 2020, and will be administered by CRA. Applications will be required, and will be based on the applicant’s attestation that they qualify, subject to possible verification at a later date. The benefits will be paid in arrears, so the first relevant two week period will end on October 10, 2020. A web page will be established by mid-September. These benefits will be taxable, with source deductions withheld. Potential applicants were recommended to sign up to My Account, if they have not already done so.
Application Details – Transition from CERB
Most individuals who received CERB through Service Canada, and whose regular reports indicate a continued need for financial assistance, will automatically transition to EI once they have received their full CERB entitlements. However, some will have to apply for EI benefits. Details of these situations were not provided.
However, individuals who received CERB through CRA will be required to apply for EI through the usual EI online application process.
All EI recipients must submit bi-weekly reports showing their continued eligibility, including their availability to work.
EI benefits are taxable, as normal, and taxes will be withheld from the payments.
EI Premium Rates
With more Canadians claiming EI benefits, the EI premium rate would normally be expected to increase in 2021. However, these proposals include a commitment to freeze the EI premium rate for two years, so there will be no increases for 2021 or 2022.