Employment Insurance (EI)

A relief provided by the Government of Canada to those who were recently unemployed or are unable to work due to certain circumstances

What is Employment Insurance (EI)?

Employment Insurance (EI) is relief provided by the Government of Canada to those who become unemployed or are unable to work due to certain circumstances such as illness, pregnancy, caring for a family member, etc. It acts as temporary financial support and also includes support for unemployed individuals to look for jobs.


Employment Insurance (EI)


Types of Employment Insurance and Eligibility


Regular Benefits

  • Must be without pay for a week (7 days) minimum
  • Must have worked the required number of hours per week as per the area the individual resides in. The hours typically depend on the unemployment rate of the area.
  • Must have paid into the EI program, which is taken away from an individual’s monthly salary as part of tax cuts


Special Benefits

  • Income reduction by more than 40%
  • Must have worked 600 hours or more in the last 52 weeks/since the last claim was made


Additionally, different types of special benefits have additional requirements that pertain to the special situation.


Maternity Benefits

Must provide documentation surrounding details of the pregnancy, date of delivery, etc.


Parental Benefits

Parental benefits are restricted to those who recently had/adopted a child and must provide details for the same to qualify.


Sickness Benefits

Must have relevant documentation regarding the sickness and provide evidence to show an inability to work due to the sickness


Compassionate Care Benefits

Compassionate care encompasses situations where we need to care for a dying family member. In order to qualify for the benefits, the family member must be at risk of dying within 26 weeks and should be on the list of qualifying family members.


Ineligibility for Employment Insurance

There are also certain stipulations for when someone is ineligible to apply for Employment Insurance. Some of the most important circumstances that would make an individual ineligible are:

  • If an individual has left his/her job by choice, they will not qualify for the insurance. There must be strong evidence suggesting a valid reason.
  • Similarly, if an individual was fired, especially due to misconduct, they will not be able to redeem the insurance during the time they are unemployed.
  • If the individual is unemployed due to participating in a labor dispute, they are automatically disqualified from being considered for the insurance.
  • If the individual did not contribute to the EI program in the past during their employment, they would not be entitled to claim the relief offered by the Government.
  • If the individual has not worked for a period of time, they will not be entitled to receive Employment Insurance. Typically, once a person loses their job, they must apply immediately for the insurance. Delaying their claim by more than four weeks could potentially reduce the amount they can get as part of Employment Insurance.


Special Cases of Employment Insurance

The Atlantic provinces of Canada – namely, New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island – are said to have seasonal employment. Although most of the EIs are given out in Ontario and Western Provinces, the people of Atlantic Provinces of Canada rely on EIs completely in the winter months. It is due to the nature of their jobs (fishing, forestry, tourism), which restricts them from working in the latter half of the year.

An interplay of such a unique situation, along with the eligibility criteria varying by region, makes it difficult to incentivize people to work rather than relying on the generous benefits. It happens because Employment Insurance is heavily reliant on the unemployment rate of the region.

Since Atlantic Provinces rely on seasonal industries, there are special cases that allow fishermen and other workers to work fewer hours but still receive Employment Insurance. Additionally, even the duration of payment is heavily dependent on the unemployment rates of provinces, hence making it easier to receive the insurance benefit for longer periods in the Atlantic.


Advantages of Employment Insurance


1. Income assistance

Employment Insurance provides temporary income assistance replacing income lost from loss of work.


2. Financial assistance

EI offers temporary financial assistance to employees if they are sick, pregnant, have a newborn or critically ill child, or caring for a sick family member with a significant risk of death.


3. Work-share benefits

Employment Insurance also provides work-sharing benefits when businesses and industries are facing a temporary economic slump in order to avoid layoffs. It allows employers to reduce work hours for certain employees until their business recovers financially.


4. Impact on the economy

In terms of impact on the economy, if there were no benefits provided for all of the above reasons, Canadian citizens would have less or no money to spend as per their daily spending. It can accumulate and significantly affect the gross domestic product (GDP) of the country.

Additionally, putting in place a program that everyone participates in by contributing an amount each month speaks to coherence and support within a country, which is a positive sign.


Disadvantages of Employment Insurance


1. Negative economic incentives

The provision of Employment Insurance may unknowingly create negative economic incentives by establishing a dependence on EI, as it exists in the Atlantic regions, where seasonal work and industries are a staple to the provinces.


2. Feeding into unemployment

Another incentive issue could arise by providing less incentive for people to go out and search for work. Moreover, Employment Insurance benefits are said to be higher in areas where unemployment is high. It may be problematic if it is encouraging unemployment in such regions.


More Resources

Thank you for reading CFI’s guide to Employment Insurance. To keep learning and developing your knowledge of financial analysis, we highly recommend the additional resources below:

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