Don’t be fooled by new EI rules

Ladies take heed. The new EI benefits for the self-employed are not what they’re cracked up to be. And, boys, I don’t mean to insinuate you won’t be taking the government up on its new offer to collect EI. You may be just as likely as the ladies to collect the sickness benefit; however, the other available benefits are for maternity, parental and compassionate care leave. While you could collect the latter two, on average you are far less likely to do so than your female counterparts.

Taking a step back for a moment, I am mortified by this so-called “helping hand’ to the self-employed. Since it’s much more likely to affect females, I thought I would address the issue before too many leap before they look. Notice the government was quite quick to accept premiums. I remember reading I could contribute before I could even view the rules to see if I’d ever qualify.

If you are an advisor who does even moderately well, would the fairly minimal amount of EI that you may possibly receive really mean anything at all? Trust me, it makes a difference if you really think about it. I’ll use myself as an example. I am the primary breadwinner in my home. I earn a very good living with upper-median production compared to my local male counterparts and in the top 10% earning power of local female advisors. I’m not telling you this to brag but to really acknowledge that any additional economic support after the birth of a child is valuable, even if you made great money beforehand.

In 2007, I had my first and currently only child after spending the last 7 weeks of my pregnancy on bed rest. After having an emergency cesarean section, I had a very healthy baby boy.

When I first found out I was pregnant I worked very hard to save a significant nest egg. As a result, I had earned about 70% of what I normally do in a year before mid April of 2007 and I wasn’t due until August. I was so proud of myself and I was prepared, or at least I thought I was. My husband agreed to take paternity leave of 35 weeks and I would stay home with our little bundle only for a month.

My month never came to pass. My assistant became very ill and needed surgery herself, so I was pretty much called back in the swing of things right away.

In households like mine where the person who bears the child is also the self-employed individual, those first 15 weeks of maternity leave which are available to all other families, are not accessible. This forfeited amount is about $6,855 in total if you consider the maxed-out benefit. Now, I don’t know about you, but that amount of money would take me quite a few hours to earn from fee-based clients, or would be the result of a few reasonable insurance sales or a good size investment account. Any way you look at it, the amount is not insignificant and we really could have used it.

Even though I had squirreled away a very healthy five-figure sum from which to pay myself, I was still economically rocked by being self-employed and the one who had the baby.

To my surprise, I was actually contacted last fall to give feedback on this new part of the EI program. My recommendation for many self-employed women – who, again, are the primary group affected, simply allowing the 50 weeks of benefits to extended to their spouse, rather than splitting the 15 week maternity leave and 35 week paternity leave, would not only be easy to do but would solve the issue for at least that most dominant group of potential claimants.

To my fellow self-employed female advisors who may still be in the process of growing or starting a family, or for you ladies who are more likely to take the compassionate care leave, be careful. If you read the details for those who receive commission sales, even a small amount of trailer fees paid to you per month would reduce your potential benefit dollar for dollar. Although they reduce the dollars used in the calculation of your income by some expenses, this math must be done weekly which, depending on when you receive trailers or even the proceeds of a sale you actually placed before you went on leave, can really make any possible economic stability to be gained by this benefit totally unreliable. So beware. If your trailers aren’t eaten by your expenses, if you have funds transfer in or other delayed pay is triggered, you could relinquish the money you thought you would see from EI.

And gentlemen, you too should pay very close attention to these rules when advising any of your self-employed clients, particularly the women, on contributing to this special offering. Exercise caution. It’s not just advisors or other commission salespeople you need to worry about. For example, what about a retail shop owner who is a sole proprietor? Are they going to shut the store down to have a child or take care of sick relative? And as sole proprietor they’ll show profits in a given week even if they aren’t there. Does this mean that a business owner doesn’t suffer financially for having taken that time off? If that were the case, couldn’t they sit home and eat bonbons since their business isn’t impacted by their absence?

Do the math thoroughly. Not only could you or your client never qualify to receive much or any benefit no matter how much in premiums are paid, the self-employed individual is required to have been paying into EI for a full 12 months rather than the standard 600 hours worked that applies to employees. That is, unless you sign up by April 1st 2010, and then you’ll be able to draw a benefit as soon as Jan 1st 2011.

To top it all off, if a claim is filed, the contributions must be maintained indefinitely until your career ends regardless of any changes in the nature of your employment. In my opinion, this supposed opportunity to access EI for the self-employed should be approached with an abundance of caution. I worry this is just a cash grab to fill the EI bucket back up, as opposed to a true gift to those of us who create our own incomes.