2012 Federal Budget Changes for EI and Federally Regulated Employment

October 18, the Harper government tabled legislation to implement the remaining parts of this year’s federal budget, plus other measures not previously announced. Apart from income tax measures related to the new pooled pension plans, this omnibus legislation contains measures dealing with Employment Insurance and employment standards for federally regulated employers.

The EI measures deal with premiums, both the employer credit for increases in employer EI premiums and returning control over EI premiums to the federal cabinet. Since 1997, small employers have been given a break on year-over-year increases in the employer portion of EI premiums. The legislation introduced this week extends this credit for 2012, for employers whose employer EI premiums would otherwise be no more than $10,000. This credit is capped at $1,000 per employer.

After the EI reforms of 1996/1997, the EI fund grew a surplus of roughly $55 billion. These funds, despite being accounted for separately, were used in part to fund the surpluses recorded in the following years. In 2008, the Harper government formally recognized the use of these monies for other than EI, by writing off this debt to the EI fund. As part of this transaction, the government put in place in independent board to set future EI premium rates, based on actuarial principles. However, the 2008 recession quickly disrupted these plans, and the Harper government quickly reverted to the previous practice of directly setting EI premium rates for each coming year. This week’s legislation formalizes this return, by abolishing what was previously known as the Canada Employment Insurance Financing Board.

However, the most extensive changes for payroll in this legislation related to provisions of the Canada Labour Code. These changes relate to the due date for the payment of vacation pay on termination, how statutory holiday pay is calculated and new limits on employee complaints regarding unpaid wages.

Currently, on termination, any outstanding vacation pay becomes, on termination, immediately due and payable. This week’s legislation would give employers up to 30 days, after the end of employment, in which to pay any outstanding vacation pay.

There are two substantial changes being made to the calculation of statutory holiday pay. Currently, the Canada Labour Code requires eligible employees be paid for each stat holiday essentially what they would otherwise have earned for that day. This is being replaced with a formula, not unlike Ontario’s, under which statutory holiday pay will be calculated as employee wages in the prior 4 workweeks, divided by 20. For this purpose, wages means all earnings for work performed, except overtime, tips and gratuities. For employees paid partly or wholly by commission, this calculation is the earnings in the 12 prior workweeks divided by 60. The extension to 12 weeks only applies for employees who have completed at least 12 weeks of employment. For example, a commissioned employee with only 8 weeks of service is subject to the normal rule of the earnings in the 4 prior workweeks divided by 20.

The requirement that employees work at least 15 days in the 30 days prior is being eliminated. This together with the change in how statutory holiday pay will be calculated means some statutory holiday pay will be owing to any employees with at least 30 days service.

The requirement for at least 30 days employment, prior to a statutory holiday is being retained. This also means that, except for those in continuous operations, the requirement to pay time-and-a-half for any work on a holiday, to employees without these 30 days, is also being retained. However, the definition of service is being extended to include situations where part or all of an employer’s business or assets are transferred to another employer. Previously employees covered by such a transfer would have to qualify all over again under this 30 day rule.

New limits are being imposed on the recovery of unpaid wages. The limitation for filing of employee complaints is 6 months after the last due date for the wages concerned. However, this new limit doesn’t seem to affect the power of an inspector to find that wages are owing, even if it’s too late for employees to file a complaint. There are also new limits being placed on an inspector’s ability to order employers to pay wages owing. This new limit is 12 months prior to the filing of an employee complaint or prior to the inspection out of which the payment order arose. For vacation pay, these12 month limits are extended to 24 months. For example, if an employer failed to pay overtime in March 2013, once these new measures in are in effect, no employee complaint related to this overtime would be accepted later than September 2013 and no order could be written for this overtime later than March 2014.

The effective date for all changes described above is not yet known.

Alan McEwen is a payroll consultant and freelance writer with over 20 years’ experience in all aspects of the industry. He can be reached at armcewen@cogeco.ca,(905) 401-4052 or visit www.alanrmcewen.com for more information. This article first appeared on the Canadian HR Reporter web site on October 21, 2012.

About Alan R. McEwen

HRIS/Payroll consultant and freelance writer
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