SUBP (Supplemental Unemployment Benefits Plans): A Layoff Option

A Supplementary Unemployment Benefits (“SUB”) Plan is a plan, approved by Service Canada, which allows an employer to top up an employee’s EI benefits during periods of unemployment due to one of or a combination of the following three legislatively permitted types of unemployment:

• Temporary stoppage of work,
• Training, and/or
• Illness, injury or quarantine.

The following is an exploration of SUBP plans.  As this article is not client-specific, this document is merely information and not legal advice. Before taking any steps, we urge you to seek legal advice to confirm that those steps are appropriate at the current time and in light of your specific circumstances. Our main office contacts for Employment Law are at the bottom of this document.

A registered SUB Plan is an option for employers that benefits employers (by permitting an employer to continue to support employees without impacting the employee’s eligibility to any EI payments) and employees (by providing an employee with additional weekly income beyond EI payments). Payments from properly registered SUB Plans are not considered insurable earnings and, accordingly, are not deducted from the employee’s EI benefits[1].

In order to comply with the Employment Insurance Regulations, the following requirements should be met:

1. Employees must be in receipt of EI benefits related to one of or a combination of the permitted types of unemployment[2];
2. The weekly payment under a SUB Plan, when added to the applicable weekly EI benefit rate, cannot exceed 95% of the employee’s normal weekly earnings[3]; and
3. SUB Plans must be approved and registered with Service Canada before the implementation date of the Plan. If they are not, top-up payments will be considered insurable earnings and will be deducted from an employee’s EI benefits/premiums.

TO SET UP A SUB PLAN:

1. Create a plan

The SUB plan must contain a complete description of the benefits, inclusive of the following information:

• The group/groups of employees covered by the plan must be clearly identified (e.g. all employees, employees with 1 year of service, employees with 5 years of service, unionized employees, employees holding a specified position within the company, etc.);
• A statement indicating that it covers unemployment caused by one of or a combination of the specified types of unemployment;
• A statement noting that employees must apply for and be in receipt of EI benefits (and, where relevant, identifying which of the specified exceptions, outlined in Footnote 2, apply);
• The value of the SUB Plan and SUB payments, either a percentage of normal weekly earnings or as a fixed amount[4]. These amounts must be paid periodically (cannot be paid as a lump sum);
• Benefit duration: the SUB Plan must indicate the maximum number of weeks the SUB payments are payable (this is left to the discretion of the employer as there is no statutory minimum or maximum requirement);
• Plan Details: The Plan must indicate:
  • A start and end date;
  • Must be at least one year in length and can continue for up to five years[5] (note: Service Canada- SUB Program sends a renewal request before the end date of a Plan, so employers can chose to continue the Plan beyond the designated end date)
  • Must include a statement that any changes in the SUB Plan or pursuant to a major reorganization of the company will be conveyed in writing to Service Canada-SUB Program within thirty (30) days of the effective date of change
  • A statement indicating which of the three prescribed methods are being used to finance the SUB payment:
    • By making payments from the general revenue of the company;
    • By making deposits into a trust fund established for SUB payments; or
    • By paying 100% of the insurance premiums required to finance the SUB payments.
  • A statement indicating that separate records will be kept of all SUB payments
  • Where the Plan is financed by a trust account, a statement indicating that, upon termination of the SUB Plain, all remaining assets will either revert to the employer, be used for ongoing payments under the Plan, and/or be used to pay for administrative costs of the Plan;
• A statement noting that payment received under the SUB plans will not be used to reduce or increase any other forms of remuneration (including deferred remuneration and severance pay, and benefit entitlements thereunder such as sick leave, vacation pay or bonuses); and
• A statement that the employee has no vested right to SUB payments, except during periods of unemployment due to one of or a combination of the specified types of unemployment.

The SUB Plan may include any other requirements required by the employer (e.g. minimum periods of employment before an employee is entitled to payment or that the employee must return to work for the employer for a certain time period after SUB payments are made). It should also be noted that, where there are different groups within a SUB Plan, the employer can implement different benefits for each group (e.g. benefit duration or amount of SUB payment).

To see a “Sample Plan”, click here.

2. Submit a copy of the SUB Plan, SUB Plan Registration Form, and, if applicable, any additional documentation to Service Canada

To access the SUB Plan Registration Form, click here.

Additional documents would include current collective agreements if the SUB Plan covers unionized employees; relevant sections of insurance policies used to administer the SUB Plan; Trust Agreement; and any policies or guidelines setting out information about the plan and any declarations or documents that employees are required to sign to receive the SUB payment.

Documents submitted to Service Canada are to be sent to:

Service Canada – Supplemental Unemployment Benefit (SUB) Program
120 Harbourview Boulevard
PO Box 11,000
Bathurst, New Brunswick
E2A 4T5

The “Registration Date” of a SUB Plan is the date that it is submitted to Service Canada-SUB Program (so long as all the requirements are met and all documents are provided). The Plan is registered under the employer’s business number for payroll deductions and a notification is sent to the employer.

3. Obtain approval from Service Canada

Approval must be received before the implementation date of the plan. If employers pay employees any top up amounts before a plan is registered, these amounts will be treated as insurable earnings and may be deducted from the employee’s EI benefits.

CLAIMING ENTITLEMENT UNDER A SUB PLAN:

1. 1. The employer must complete a Record of Employment (‘ROE”) when the employee is deemed temporarily unemployment because of one of or a combination of the prescribed types of unemployment, as identified in the SUB Plan. The ROE must indicate that the employee is entitled to SUB payments by entering “SUB plan benefit” into the “other monies” section of the form. The employer’s business number for payroll deductions, indicated on the ROE, will be used by the EI program to confirm that the employer has an approved and registered SUB Plan.For information on completing an ROE, click here.
   2. Before SUB payments are made, the employer/party responsible for making SUB payments must verify:
      1. That the employee is in receipt of EI benefits (or, if not, then falls under one of the exception, as detailed by the employer in the SUB Plan); and
      2. The value of the employee’s weekly EI benefit rate, to ensure that the additional SUB payments will not exceed 95% of the employee’s normal weekly earnings.EI information can be obtained either through the employee, directly, or through a report provided by Service Canada at the employer’s request.

SUB Plans are part of the Government of Canada’s supplementary programs available through the scheme of temporary layoffs and Employment Insurance (EI).  Because Service Canada may change these plans from time to time and we cannot determine eligibility without knowledge of the particular circumstances, we recommend that you access the government’s information on SUB Plans here.

For more information on these topics or any other matters please contact one of the below lawyers from Bryan & Company LLP or access our Employment Law group here and it would be our pleasure to assist.

This article was prepared with the assistance of:

[1] SUB payments are generally subject to CPP and income tax

[2] Where an employee is not in receipt of EI benefits, payment under a SUB Plan may be provided where the employee (i) is serving the one-week* EI waiting period, (ii) has insufficient hours of insurable employment to qualify for EI, or (iii) has exhausted his/her EI entitlement.

*Since January 1, 2017, the EI waiting period has been reduced from 2-weeks to 1-week. Plans registered prior to this date must ensure that they are not continuing payments for the two-weeks (which would exceed the allowable limit of 95% of the employee’s normal weekly earnings)

[3] Unless the SUB Plan was in place before the date when s.208 of the Budget Implementation Act, 2016, No. 1 came into force

[4] When including a fixed amount, the employer should be aware of the 95% allowable weekly limit and recognize that, as EI payments are altered, the maximum amount permitted under a SUB Plan will change accordingly. Employers can provide, within the SUB Plan, for an automatic adjustment of the SUB payments when the EI rate changes. The employer may also want to consider whether the employee has any other earnings (which will influence his/her entitlement under the SUB Plan)

[5] If it is for a collective agreement, can last until the expiry of the collective agreement