With the decrease in economic activity in the wake of COVID-19, some businesses are resorting to layoffs to reduce operating expenses. But there is an alternative to layoffs that many businesses are not aware of – and one which may reduce some of the traditional risks of layoffs: the Work-Sharing program.
Work-sharing is a three-party agreement between an employer, a group of employees, and the Employment Insurance Commission. If all three parties agree, the program provides income support to employees who would be eligible for EI benefits and who work a temporarily reduced work schedule during a specified period of reduced business. The goal of the program, per the Commission, is “to avoid layoffs when there is a temporary reduction in the normal level of business activity that is beyond the control of the employer”.
The benefit rate for each employee in the work-sharing group will be an amount using such employee’s regular EI benefits rate (i.e. up to $573/week), multiplied by the percentage decrease in his workweek. So, if an employee’s EI regular benefits rate would be $573/week and the employee is working 20% or 1 day less per week under the work-sharing arrangements, then the employee will receive EI benefits equal to $114.60/week (i.e. 20% x $573).
To be eligible under the temporary special measures introduced by the federal government, an employer must (among other things) have been in year-round business for at least one year; be a private business or publicly held company; and have at least 2 employees in the proposed work sharing unit.
Eligible employees can only include year-round permanent employees that are eligible to receive EI benefits, and who agree to a reduction of their normal working hours to share available work.
The work-sharing application will define a “work-sharing unit” of employees who have agreed to participate in the program. The unit will typically include all employees of a specific job description, or who do similar work. The work-sharing agreement must last a minimum of six weeks and due to COVID-19, the maximum period has been extended from 38 weeks to 76 weeks. The work-sharing application must also be submitted at least 10 daysbefore its effective date, but we understand that the Commission is prioritizing these applications and attempting to process them quickly.
Work-sharing won’t always be appropriate. For example, it doesn’t work as well for groups of employees with high incomes because of a potential 30% benefits repayment obligation for employees who earn net income over a certain threshold. For tax year 2019, this threshold was $66,375.00. Nonetheless, employers considering layoffs should consider whether the work-sharing program might be a viable alternative. Interested employers can review the Applicant’s Guide for further information (though it does not reflect the temporary special measures described above), or contact any members of Siskinds’ Labour and Employment Group.