Employment insurance (EI) in Canada offers temporary financial support to Canadians who lose their job through no fault of their own, such as a shortage of work, or seasonal layoffs. Benefits are also available to those who cannot work because of illness or injury, and people who take time off work to have or parent a child, or to care for family members.
It was introduced when the Unemployment Insurance Commission was established in 1940 (the precursor to the current Canada Employment Insurance Commission). Working Canadians started paying into the new federal unemployment insurance program in 1941 and the first payouts were made in 1942. In 1996, the government changed the name to employment insurance.
The key requirements to qualify for regular EI benefits are:
- Must satisfy the requirements for minimum length and duration of acceptable work in the last 52 weeks;
- Must have lost their job through no fault of their own (fired employees or those who leave voluntarily are not eligible);
- Have gone seven consecutive days without work or pay from any employer.
The amount of employment insurance benefits varies based on the beneficiary’s circumstances, including the type of EI benefits, how much they earned at their last job, and where they reside.
For most people, the basic rate is 55 per cent of their pay, up to a maximum amount that is periodically reset by the federal government. The duration of benefits also varies, based on the local unemployment rate and how many program-insured hours were worked during the relevant claim period. The maximum payout period is 45 weeks.
Recipients of EI benefits must complete bi-weekly reports to confirm continued eligibility and prove they’re actively seeking new work.
The program operates without government funding (since 1990), and is supported through payroll deductions. Most jobs in Canada are considered “insurable employment,” which triggers deductions used to fund the EI program. Employees and employers are required to pay EI premiums, up to a specified annual maximum.
Employment insurance supports businesses and industries facing a temporary slump, in order to prevent mass layoffs. Employers can reduce working hours for a subset of their employees, until the business picks up or is able to recover financially.
Employment insurance has important consequences for economic activity since the absence of benefits would mean some Canadians have less or no money to spend, which could significantly affect Canada’s gross domestic product (GDP).