Topping up employee pay during temporary layoffs using a Supplementary Unemployment Benefit Plan (SUB Plan) (Canada)

March 25, 2020 Occasional Contributors Employment/Labour Standards, Human Resources, Payroll, Pensions and Benefits, Wages and Compensation, 3

In the face of the global COVID-19 pandemic and recent declared states of emergency in several Canadian provinces, employers are faced with the difficult decision of having to temporarily lay-off their employees.

In Ontario, the Employment Standards Act, 2000 provides for temporary lay-off of up to 13 weeks in any 20 week period, and up to 35 weeks in any 52 week period if:

the employee continues to receive substantial payments form the employer;
the employer continues to make payments for the benefit of the employee under a legitimate retirement or pension plan or a legitimate group or employee insurance plan; or
the employee receives supplementary unemployment benefits.

Recently, more employers have begun to consider using Supplementary Unemployment Benefit Plans (SUB Plans) to provide financial assistance to their employees during a period of layoff due to temporary stoppage of work, training, or illness, injury or quarantine.

A SUB Plan can be established by an employer or group of participating employers. Once the SUB Plan is registered with Service Canada, the SUB Plan allows the employer to top up an employees’ employment insurance (EI) benefits during a period of unemployment due to a temporary or indefinite layoff. The amount of the top up can be up to 95% of the employee’s weekly wages/salary, less the amount of the employee’s corresponding EI benefits.

The benefit of using a SUB Plan (as opposed to continuing to make substantial payments to the employee in the ordinary course) is that the payments from a registered SUB Plan are not deducted from the employee’s EI benefits. Further, payments under a registered SUB plan are not considered as insurable earnings; therefore, EI premiums are not deducted. There is no minimum or maximum duration for which payments under a SUB Plan can be made.

More information about SUB Plans is available from the Government of Canada.

When considering whether to lay-off an employee or implement a SUB Plan, employers should first consult with legal counsel.

By Ryan Campbell, DLA Piper

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Occasional Contributors

In addition to our regular guest bloggers, First Reference Talks blog published by First Reference, provides occasional guest post opportunities from various subject matter experts on the topics of payroll, employment and labour law, payroll, HR analytics, corporate immigration, accessibility related issues in Canada. If you are a subject matter expert and would like to become an occasional blogger, please contact Yosie Saint-Cyr at editor@firstreference.com. If you liked this post, subscribe to First Reference Talks blog to get regular updates.

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3 thoughts on “Topping up employee pay during temporary layoffs using a Supplementary Unemployment Benefit Plan (SUB Plan) (Canada)”

RK Padiyath says:

March 25, 2020 at 5:13 pm

We are splitting the total number of employees into two groups – on a weekly rotation basis. One group is coming one week and another group in the other week. The proposal was to pay those who are not working in one week to be compensated using their SUB pay accrual. Is this OK? If so, do we have to limit the compensation to 95% or can we go to 100%.
Yosie Saint-Cyr, LL.B. Managing Editor says:

March 25, 2020 at 11:49 am

EI benefits paid for temporary lay-off are regular benefits and are paid to claimants who are available for, able to and looking for work. Claimants must continue to meet all EI requirements even though they are on temporary stoppage of work. Under Working While on Claim, a claimant is allowed to retain up to 50% of their earnings. Once the claimant has earned 90% of the average weekly earnings amount used to calculate their benefit rate, then the earnings are deducted dollar for dollar. The claimant must report all earnings. The employer may wish to consider these other earnings and the EI benefit amount when calculating the SUB payment.

This is the example Service Canada offers:

Example 2: SUB payable when the employee is receiving regular, training or sickness benefits and also has other earnings.

Employee’s normal weekly earnings $1,000
Employee’s other earnings $225
Maximum EI payment $573 Footnote1
50% of the earnings ($225 x 50%) $113
EI benefit [C – D = E] [$573 -$113] $460
Scenario A: SUB payable without consideration of other earnings

(Sample Plan – Part II – item 5 option A or B)

95% of normal weekly earnings $950
Maximum EI payment $573 Footnote1
SUB (A – B = C) $377
Scenario B: SUB payable if the employer includes other earnings and EI benefit

(Sample Plan – Part II – item 5 option C)

95% of normal weekly earnings $950
EI Benefit (as per E above) $460 Footnote1
Other earnings $225
SUB (A – B – C = D) $265

Note: SUB plans are intended for periods of unemployment caused by a temporary stoppage of work. Termination of employment caused by a re-organization or a shutdown of a plant or operation is not considered temporary unemployment. SUB payments may not form part of a separation package, be used to bridge to retirement, nor form any part of a work-sharing agreement or short-week benefits.

I hope this helps!
Serge Lafontaine says:

March 25, 2020 at 11:13 am

If an employer opts for a SUB plan, can the employees still work part time? (i.e. working 40% of the week, while being paid 95%?)