May 2, 2017
Budget Changes to Parental Leave
The Federal Budget included changes to the Employment Insurance plan with respect to parental leave benefits. Currently parents can collect up to 55% of their earnings while on leave for up to 12 months. The proposal will allow parents the option to extend the leave to 18 months but at a proportionately reduced rate (i.e. 33% for 18 months vs. 55% for 12 months). This will also require an adjustment to provincial Employment Standards Acts that currently provide job protection for 12 months.
Depending on how policies are drafted, an employer top-up plan may end up paying more. For example, if a plan tops the employee up to 95% of earnings, under the current plan they are paying 40% of earnings for 12 months. However under the new plan, an employee taking 18 months with EI paying 33% means that the company could be topping up 62% for 18 months. Perhaps the wording needs to be changed so that the total employer payout is pro-rated over the duration of the leave be it 12 or 18 months, or maybe the top-up is at one level for the first 12 months and something else for the remainder.
Other benefits such as vacation accruals should be reviewed as well. Until the provincial ESAs fall in line with the new leave period, accruals may only be required for 12 months but employers may wish to allow for accrual during the additional 6 months.
These are options and issues that companies need to review to be prepared.
The proposal has faced opposition from parent advocacy groups because they say that more needs to be done in terms of income replacement, child care availability, and financial subsidies for that care. For many, finances become tight during a parental leave and extending the duration of a leave without making changes to the amount of coverage only benefits the wealthy. There is also a concern for those who may not qualify for EI benefits such as those who work part-time (a growing portion of today’s labour force) and the self-employed.
Businesses have also voiced their concerns about the change because it will allow parents to work part-time during the leave. This presents a challenge for employers trying to find replacement coverage.
Whether the government proceeds with the changes as per the budget or make revisions based on this feedback remains to be seen.
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