Government Benefits for Self-Employed Canadians

When you leave the 9-5 world, you leave behind a lot of securities that come with it. One of those securities for self-employed Canadians is Government Benefits. I’m talking about Canada Pension Plan (CPP), WorkSafe BC (WCB), and Employment Insurance (EI). There are several important things to know about what you qualify for if you’re hurt as a small business owner in Canada and we’re going to cover them today.

Being a tricky subject to understand, we broke this blog post down. You can read the "I'm totally new to this" or scroll down for the "I'm looking for specifics".

The "I'm totally new to this" version

This information is current as of December 2019. All policies and Government programs are subject to change, so please click on the links provided to ensure the information you’re receiving is up to date.

When you leave the 9-5 world, you leave behind a lot of securities that come with it. One of those securities is Government Benefits. I’m talking about Canada Pension Plan (CPP), WorkSafe BC (WCB), and Employment Insurance (EI). There are several important things to know about Government Benefits as a self-employed Canadian and we’re going to cover them today.

Assuming that, at some point in your life you’ve worked for a legitimate company in Canada for a length of time, you probably qualify for Canada Pension Plan (CPP) Disability.

You don’t want to qualify for this benefit. Those who qualify are permanently disabled and likely to die from their condition. Plus, the benefit is pretty well equal to half the rent of a 1 bedroom apartment in Vancouver… it’s not enough to live off of.

If you pass away and qualify for CPP, your family can get up to $2,500 for it. These benefits aren’t designed to be enough to help a family get by. They’re meant to take the edge off, but not to solve the problem. Making a proper plan is up to you.

You’re also responsible for paying your full CCP bill yourself. When you’re an employee, your boss would’ve paid for half the bill and taken it off your paycheque. As a self-employed person, you must pay the full amount yourself, up to a max of $5,497.80 a year. For more information on this, please contact your accountant or visit the CPP info page. 

WorkSafe BC (WCB) isn’t automatic when you’re self-employed.

It’s optional for self-employed people but mandatory once you have an employee.

If you qualify, WorkSafe BC would cover 90% of your wages up to a maximum of $1,151.50 per week that you’re on the claim ($1,122.48/week updated Feb 25, 2020).

For the first 10 weeks you’re getting a benefit, the benefit amount will be based on your average income from the last 3 months. If you’ve just had a slow season, it could be a small benefit.

If you’re still on the claim after the 10 weeks, your benefit will change to 90% of what your income was last year. That’ll be based on your last tax return.

The 3rd Government benefit that automatically goes away when you’re a self-employed Canadian is Employee Insurance (EI).

This one is a little bit tricky because you have the option to pay into it but, once you start, you can’t stop. You must pay into it as long as you’re self-employed, even if you make a change to the nature of your self-employment. If you’ve never received a benefit from E.I., you might be able to cancel but under very specific criteria. For self-employed women who are expecting to take maternity leave more than once, this may be a good option.

The benefit is about 55% of your income with a $573 per week maximum benefit ($547 Updated Feb 25, 2020).  If you’re disabled, they will pay you for a maximum of 15 weeks but then you’re on your own.

These benefits will depend on how you’ve structured your company.

If you’ve set it up so that you’re an employee of your company, you’d have the same access to WCB, EI and other employment benefits that your employees have.

Look at what your benefit would be and talk to a professional to see if that’d be enough for you.

.

 

At this point, you might be thinking, “With CPP, I’ll only get a benefit if things are really bad. WCB will only cover me if I’m hurt at work. And E.I. pays half my income and only for a short amount of time. What am I supposed to do?”

The answer is self-financing or get disability insurance.

Self-financing is what it sounds. If you have enough income and don’t plan to become disabled for a long period of time, you can save like a squirrel and use that money if something happens.

Disability Insurance is another great option. It’ll cover you whether you’re at work or not and you can customize it as specific as you’d like. You might be surprised by how affordable it is. For more information on that, book a quick call with us.

The bottom line, self-employed people have a lot of flexibility in what kind of coverage they get if they become disabled, but they’re responsible for setting it up themselves.

Remember, plans like this need to be set up BEFORE you become disabled.

Government benefits are not automatic as a self-employed Canadian, so be sure to do your research and talk to a professional.

Remember, you’re in control of your financial future.

It takes time and effort to put in plans like this but it’s worth it to know that your family will be taken care of.

The "I'm looking for specifics" version

This information is current as of December 2019. All policies and Government programs are subject to change, so please click on the links provided to ensure the information you’re receiving is up to date.

When you leave the 9-5 world, you leave behind a lot of securities that come with it. One of those securities is Government Benefits. I’m talking about Canada Pension Plan (CPP), WorkSafe BC (WCB), and Employment Insurance (EI). There are several important things to know about Government Benefits as a self-employed Canadian and we’re going to cover them today.

Assuming that, at some point in your life you’ve worked for a legitimate company in Canada for a length of time, you probably qualify for Canada Pension Plan (CPP) Disability.

You don’t want to qualify for this benefit. Those who qualify are permanently disabled and likely to die from their condition. Plus, the benefit is pretty well equal to half the rent of a 1 bedroom apartment in Vancouver… it’s not enough to live off.

If you pass away and qualify for CPP, your family can receive a maximum $2,500 death benefit. Your partner and children might also get survivor benefits and special education grants as well. These benefits aren’t designed to be enough for a family to get by. They’re meant to help, but not to solve the problem. Making a proper plan is up to you.

You’re also responsible for paying your full CPP bill yourself. At tax season, CPP will bill you for what, in an employee position, your boss would’ve taken off each paycheque. If you make more than $3,500, you must pay into CPP. That bill is 10.2% of your NET income. As an employee, your boss paid for half and you paid for the other half. As a self-employed person, you must pay the full 10.2% on your own, up to a max of $5,497.80. For more information on this, please contact your accountant or visit the CPP Information Page. 

WorkSafe BC (WCB) isn’t automatic when you’re self-employed.

It’s optional for self-employed people but mandatory once you have an employee. Depending on how big you anticipate your company growing and the way you’ve structured your own employment – whether you’re an employee of your company, sole-proprietor, etc. – it might make more sense to get disability insurance for yourself.

If you qualify, WBC would cover 90% of your wages up to a GROSS income of $87,417.00 ($84,800 updated Feb 25. 2020). It works out to a maximum of $1,150.50 per week benefit that you could receive while on the claim ($1,122.48/week updated Feb 25, 2020)

For the first 10 weeks, your benefit amount will depend on the average income you made in the last 3 months. If you’ve just had a slow season, it’ll be reflected in your benefit. If you’re still on the claim after the 10 weeks, the amount will change to 90% of your NET annual income. They’ll base that number off of what income you claimed during tax season last year and you must be able to prove it.

The 3rd Government benefit that automatically goes away when you’re a self-employed Canadian is Employee Insurance (EI).

This one is a little bit tricky because you have the option to pay into it but, once you set it up, you can’t stop. You must keep paying your E.I. premium as long as you’re self-employed, regardless of if you make a change to the nature of your self-employment. If you’ve never received a benefit from it while being self-employed, you might be able to cancel but under very specific criteria. For self-employed women who are expecting to take maternity leave more than once, this may be a good option.

The benefit is 55% of your income to a maximum of $54,200 annual income ($51,700 updated Feb 25, 2020). That works out to be $573 per week maximum benefit ($547 updated Feb 25, 2020). With disability or unemployment claims, they’ll pay you for a maximum of 15 weeks. After that, you will stop receiving a benefit.

Again, these benefits will depend on how you’ve structured your company.

If you set it up so that you’re an employee of your company, you’d have the same access to WCB, EI and other employment benefits that your employees have.

Talk to a professional to see what your maximum benefit would be with each of these programs to determine whether it’d be enough for you.

.

Here’s what you might be thinking at this point, “With CPP, I’ll only get a benefit if things are really bad. WCB will only cover me if I’m hurt at work. And E.I. is a short-term solution. What am I supposed to do?”

The answer is self-financing or getting disability insurance.

Self-financing is what it sounds. If you have enough income and don’t plan to become disabled for a long period of time, you can save like a squirrel and use that money if something happens.

Disability Insurance is another great option. It’ll cover you whether you’re at work or not and you can customize it as specific as you’d like. You might be surprised by how affordable it is. For more information on that, book a quick call with us.

The bottom line, self-employed people have a lot of flexibility in what kind of coverage they can get if they become disabled, but they’re responsible for setting it up themselves.

Remember, plans like this need to be set up BEFORE you become disabled.

Government benefits are not automatic as a self-employed Canadian, so be sure to do your research and talk to a professional.

Remember, you’re in control of your financial future.

It takes time and effort to put in plans like this but it’s worth it to know that your family will be taken care of.

One Reply to “Government Benefits for Self-Employed Canadians”

  1. Wonderful information, It is truly a nice and helpful piece of information. I am glad that you simply shared this helpful info with us. And also thank you for your detailed explain.

Comments are closed.