Employment Insurance

You may know adults who have lost their jobs. Overnight, these people lost the only income that allowed them to meet their basic needs, including housing, food and clothing. Fortunately, Canada has an employment insurance program. This program gives individuals a supplemental income for a certain period of time to meet their basic needs while actively seeking work. 

All employed individuals contribute to this program through payroll deductions for the Employment Insurance program. You may have started contributing to the program if you have a job. Let’s take a look at the reality of unemployment, the program offered by the Canadian government, the eligibility criteria and some practical examples of people facing this situation.

According to Statistics Canada, 262 600 people were unemployed in Quebec in July 2017. With this statistic, how is unemployment defined? What are the different types? How is the unemployment rate calculated?

There are different types of unemployment: frictional, seasonal, cyclical, structural and technological. 

Frictional unemployment results from the voluntary departure of a person to seek another job for better pay, to be closer to home, etc. In this situation, the person is ineligible for regular employment insurance benefits.

Seasonal unemployment is related to economic sectors that depend on the seasons. For example, the tourism sector can have a decline in jobs in the fall only to pick up again in the spring. The same is true for the fishing industry.

Cyclical unemployment is directly related to the economy. When companies experience economic difficulties, some cut back on jobs. This could be the result of sales dropping significantly, forcing companies to temporarily lay off some of their staff.

Structural unemployment occurs when a type of job is no longer in demand. People affected by this type of unemployment often have to change their career path and work in another field. Sometimes, it can be an opportunity to seek new training in a more dynamic sector. This type of unemployment would apply to a factory worker whose company has shut down all its operations in the country. Other companies may also have left the region, making it hard to find a similar job. This person could take the opportunity to change career paths.

Technological unemployment occurs when a person’s job is replaced by technology. For example, the introduction of automated teller machines has greatly reduced the number of tellers in banks. The purchase of a new machine in a factory could eliminate a job that was done by an employee. This type of unemployment is considered a subtype of structural unemployment.

All of these types of unemployment are taken into account in the calculation of the unemployment rate. The unemployment rate varies by region, economic sector and age of the unemployed, among others, and is calculated as follows:

Regular employment insurance (EI) benefits are given to people who have lost their jobs through no fault of their own and are looking for work. Frictional unemployment does not qualify for these benefits. Regular EI benefits are different from those given to people who receive sickness and compassionate care benefits. EI sickness benefits provide income to sick workers while compassionate care benefits can be received by someone whose loved one is at risk of dying.

You may be entitled to these regular benefits if you: 

• have been employed in an insurable job recognized by the Canada Revenue Agency;

• lost your job through no fault of your own;

• have not worked or received wages for at least seven consecutive days in the last 52 weeks;

• are ready, willing and able to work at any time;

• are actively looking for work and have a record of doing so.

To access regular employment insurance benefits, you must also have worked between 420 and 700 hours. These hours must have been completed during the 52 weeks before starting to claim benefits or since the last benefit period. This is called the qualifying period, with the number of insurable hours varying according to the unemployment rate in the region where the person lives. The higher the unemployment rate, the lower the number of hours required. The lower the unemployment rate, the higher the number of hours required to qualify for the program.

A person who works in a region with a 15% unemployment rate will need to have worked 420 hours to qualify for the program, while a person who resides in a region with a 4% unemployment rate will need to have worked 700 hours. 

You may be excluded from the program for:

• having voluntarily left your job without justification;

• having been dismissed for misconduct;

• being unemployed due to participation in a labour dispute;

• being on a leave of absence to compensate for a period during which the individual worked more than usual. For example, a person may agree with their employer to work 40 hours per week, instead of 35, accumulating excess hours. When they take time off to recoup these hours, employment insurance benefits cannot be claimed.

When a person is eligible for the program, there are factors that determine the amount paid and the length of time they will receive benefits. 

The amount that a person can receive is 55% of the basic weekly earnings that they would normally receive as an employee. A person cannot receive more than $573 per week in benefits (2020). 

For example, if a person who usually earns $800 a week loses their job and qualifies for regular employment insurance benefits, they would be entitled to 800 × 0.55 = $440. However, a person who usually earns $1,500 per week would not be entitled to 55% of their income because this would exceed the maximum benefit of $573, given that $1,500 × 0.55 = $825.

The maximum number of weeks for which benefits can be received is based on the number of hours worked and the unemployment rate in the region. The greater the number of hours worked, the greater the number of weeks of unemployment allowed. Also, the higher the unemployment rate in a region, the greater the time allowed to find a new job. For more details on how this works, see the following webpage: Regular EI Benefits - How much you could receive

Let’s look at two practical examples and figure out the benefit amount and the maximum length of the unemployment period.