Digest of Benefit Entitlement Principles - Chapter 5
CHAPTER 5
EARNINGS
5.5.0 SPECIFICALLY EXCLUDED FROM EARNINGS UNDER REGULATION 35- 5.5.1 Relief Grants
5.5.2 Payments Supplemental to Unemployment Insurance Benefits
5.5.2.1 Approved Supplemental Unemployment Benefit Plans
5.5.2.2 Payments by Reason of Pregnancy or for the Care of a Child
5.5.3 Retroactive Increases in Wages or Salary
5.5.4 Employment Income Excluded Pursuant to Subsection 6(16) of the Income
Tax Act
5.5.0 SPECIFICALLY EXCLUDED FROM EARNINGS UNDER REGULATION 35
| EIR 35(7) | Specifically excludes moneys that may otherwise have been determined to be earnings. |
Some moneys, even though they are earned by labour, or resemble moneys earned by labour1 because they are related to or attached to employment, are expressly excluded from being considered earnings2 and do not affect a claimant's entitlement to EI benefits. The following moneys are excluded from earnings under Regulation 35:
- disability pensions;3
- a lump sum or pension made in full or final settlement of a claim made for workers' compensation payments;4
- payments under a sickness or disability wage-loss indemnity plan that is not a group plan;5
- relief grants in cash or in kind;6
- payments received under a supplemental unemployment benefit plan;7
- retroactive increases in wages or salary;8
- pension payments if pension requalifier insured hours are accumulated;9
- payments made by reason of pregnancy or for the care of children referred to in subsection 23(1) if the payments meet specific conditions;10 and
- disability benefits or allowances that are excluded as income under subsection 6(16) of the Income Tax Act11.
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- see 5.2.0, "The Determination of Earnings under Regulation 35" and see 5.3.2 "The Entire Income";
- EIR 35(7);
- EIR 35(7)(a); see 5.13.14, "Disability Pensions";
- EIR 35(7)(a); see 5.11.3, "Workers' Compensation for an Illness or Injury";
- EIR 35(7)(b); see 5.11.2, "Wage-loss Indemnity Plans";
- EIR 35(7)(c); see 5.5.1, "Relief Grants";
- EIR 37; see 5.5.2.1, "Approved Supplemental Unemployment Benefit Plans";
- EIR 35(7)(d); see 5.5.3, "Retroactive Increases in Wages or Salary";
- EIR 35(7)(e); see 5.13.13, "Requalifier Exemption for Pension Earnings";
- EIR 38; see 5.5.2.2, "Payments by Reason of Pregnancy or for the Care of Children";
- EIR 35(7)(f); see 5.5.4, "Employment Income Excluded Pursuant to Subsection 6(16) of the Income Tax Act ."
A relief grant is freely given assistance that is given to alleviate hardship. Hardship includes, but is not confined to, circumstances of personal destitution, emergency or disaster. Hardship may also comprise the broader circumstance of financial or other adversity, not necessarily amounting to destitution, emergency or disaster.1
A relief grant is usually monetary, but sometimes may be non-pecuniary. It can be received from a federal, provincial or municipal authority; a charitable organization; a welfare agency; an employer; or other persons. A relief grant may be a one-time payment made for a special situation, such as where an individual encounters a family emergency or disaster, or it can be an ongoing payment from a welfare agency because the claimant's income is insufficient to meet basic needs. Payments that are in the nature of relief grants are not earnings; this is so whether the payment is non-pecuniary or not and whether or not the claimant is required to perform work as a condition to receive that payment.
Due to the connection with employment, relief grants originating from an employer are not as easily identified. It is important to examine the true nature of the payment,2 that is, whether the purpose of the payment is to assist in a personal situation or a disaster; whether the payment is conditional or not to providing some sort of service to the employer for the assistance; and whether the assistance is freely given by the employer, without any legal obligation. An example of a relief grant is an employer freely giving some monetary assistance to an employee whose house has burnt down and does not expect any additional service by the employee for the assistance.
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5.5.2 Payments Supplemental to Employment Insurance Benefits
Often, a claimant may receive a supplement to their EI benefits during a period of unemployment to make up the difference between the EI benefits and their normal wages while employed. As these payments are moneys arising out of employment, they would be earnings to be deducted from EI benefits.
The Commission has recognized the benefit of such payments which have advantages for all parties. It helps the employee maintain a standard of living during a period of unemployment and it helps the employer maintain a skilled work force during a period of temporary lay-off. As a result, the Commission has made regulations that exempt these types of payments from being considered earnings under certain circumstances.
Two types of payments which are intended to supplement EI benefits have been specifically excluded from consideration as earnings. The first type relates to those supplemental payments that are made by an employer to an employee during a period of unemployment due to a temporary stoppage of work, training, illness, injury or quarantine.1 The second type relates to supplemental payments that are made by an employer or another person, to an employee by reason of pregnancy or for the care of a child or children, or the support of a family member or any combination of those reasons as referred to in subsections 23(1) of the Act, or 23.1(2).2
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- EIR 37; see 5.5.2.1, "Approved Supplemental Unemployment Benefit Plan";
- EIR 38; see 5.5.2.2, "Payments by Reason of Pregnancy or for the Care of a Child."
5.5.2.1 Approved Supplemental Unemployment Benefit Plans
Payments may be made to an employee to supplement EI benefits during periods of unemployment due to a temporary stoppage of work, training, illness, injury or quarantine.1 Payments made by an employer to supplement EI benefits are excluded from consideration as earnings if they are made under a Supplementary Unemployment Benefit (SUB) Plan which meets specific conditions.2
The SUB plans are reviewed at the national level to determine if all required conditions are met and a list of the SUB plans that meet the conditions is maintained. Any payment made under a SUB plan that does not meet all of the conditions is treated as earnings and is allocated to the period for which it is payable, depending on whether it is paid for a period of incapacity3 or for one of the other reasons4.
The combined weekly amount of the SUB payment plus the EI benefit rate from that employment cannot exceed 95% of the claimant’s normal weekly earnings. When there is dual employment, only that portion of the benefit rate and the normal weekly earnings from the employer that pays the SUB are to be considered.
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- if the payment is made by reason of pregnancy or for the care of a child, see 5.5.2.2;
- EIR 37;
- EIR 36(12)(a); see 5.11.7, "Supplemental Unemployment Benefit Plans for Incapacity–Criteria Not Met";
- EIR 36(5); see 5.7.2.4, "Supplemental Unemployment Benefits Plan–Criteria Not Met."
5.5.2.2 Payments by Reason of Pregnancy or for the Care of a Child or for the Care or support of a family member
Payments may be made by an employer or another person during a period of leave for maternity or child care or for the care or support of a family member. In order for these payments to be excluded from consideration as earnings, they must meet the following conditions:
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the payments must be made by reason of pregnancy, or for the care of a child or children referred to in subsection 23(1) of the Act, or the care or support of a family member as per subsection 23.1(2) of the Act or any combination of these reasons;
-
when combined with the claimant's weekly rate of employment insurance benefits, the payment does not exceed the claimant's normal weekly earnings from his or her employment; and
-
the payment does not reduce the claimant's accumulated sick leave, vacation leave, severance pay or any other accumulated credits from his or her employment.1
Any payment made under a plan that does not meet these conditions is treated as earnings and is allocated to the weeks in respect of which the payments are paid or payable.2
However, with respect to the second condition (the total of supplement payments and EI benefits does not exceed the claimant’s normal weekly earnings) it must be emphasized that:
When the total of supplemental payments and EI benefits exceed the claimant’s normal weekly earnings from employment, only the part that exceeds that total constitutes earnings.3
When there is dual employment, only that portion of the benefit rate and the normal weekly earnings from the employer that pays the top up are to be considered.
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5.5.3 Retroactive Increases in Wages or Salary
An increase in wages or salary means that the wage or salary amount is augmented, enlarged, or expanded. This implies that an amount was added to the wages or salary, therefore, constituting a newly agreed rate of pay for the work performed. Often an increase of salary is given retroactively. This occurs during contract renewal where workers continue to perform their duties at their former rate of pay while the contract is being negotiated. When the contract is finally signed and there is a new agreement as to an increased salary level, that new salary is often effective at an earlier date. In this case, payment must be made retroactively to compensate for the difference under the old contract and the increased salary level under the new contract. In other cases, an employer may unilaterally give an increase in salary that may also be retroactive. These retroactive increases in wages or salary are specifically excluded from consideration as earnings.1
A retroactive increase in wages or salary must be differentiated from a retroactive adjustment of wages or salary, which is considered to be earnings. A retroactive adjustment is a payment that is made to adjust the wages or salary so it reflects a salary that was already in place at the time that the work was performed. It is made to bring the employee's salary to the pay level which was in existence at the time the work was performed but for some reason was not paid. This late payment may be due to a mistake or a delay by the employer; a disagreement between the employer and the employee as to the applicable rate of pay for the duties performed; or it could be due to an agreed condition that must be met before a higher rate of pay becomes applicable. For instance, substitute teachers may have their salary retroactively adjusted to the first day worked after having worked more than twenty days. Other situations may involve an employee who wins a grievance regarding the applicable salary for the work that was performed. In all of these situations, the adjustment of salary is not the result of a new agreement between the employer and the employee as to the work that must be performed and the rate of pay that must be paid for that work. In the case of the grievance, the settlement does not constitute a new work agreement but rather a clarification of the original one.
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- EIR 35(7)(d).
5.5.4 Employment Income Excluded Pursuant to Subsection 6(16) of the Income Tax Act
Subsection 6(16) of the Income Tax Act excludes from taxable income certain employer-provided benefits or allowances. These benefits or allowances are provided by the employer only to employees with severe or prolonged disabilities. These payments can include moneys for transportation to and from work, parking near the work location, or other items that reduce barriers to labour force participation by disabled workers.
Any payments made by an employer which are excluded from taxable income under subsection 6(16) of the Income Tax Act are excluded from consideration as earnings.1
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- EIR 35(7)(f).
