COVID-19 has had a devastating effect on employment for the past year. Large numbers of employees have been laid off as the rolling lockdowns continue. Employees who have recently been terminated traditionally have a number of challenges to navigate, which have become more complicated due to the pandemic. One of the questions we are asked most often is whether receiving severance pay will affect Employment Insurance (EI) benefits. The answer to this question has an added layer now that we are dealing with the impact of COVID-19.
EI benefits are allocated to specific pay periods where individuals must report their income for the period to determine how much EI benefits will be paid out for that specific period. If an individual receives severance pay or has other employment income, they are obligated to report said income. If the severance pay is a lump sum payment, an individual may be obligated to allocate the payment into different periods.
EI benefits are designed to compensate an individual’s loss of employment income. If there are other sources of income that are equal or greater than the designated amount for EI benefits, then EI benefits will not be paid. In certain situations, if the EI benefits amount is assessed and paid before severance pay has been assigned, then the individual will be responsible for the repayment of the amount that has been overcompensated.
To combat the impact of COVID-19 on employment issues, the federal government issued a temporary order amending the Employment Insurance Act in order to make it easier for individuals to access EI benefits. Effective from September 27, 2020 until September 2021, individuals may see the waiting period waived, a longer benefits period, and a one-time hours credit towards qualifying (reducing the number of hours required to receive benefits), among other things. Most importantly, where severance pay is concerned, it will not affect EI benefits payments as long as the claim was established on or after September 27, 2020. Here is a simple chart.
| Pre COVID-19 Program | COVID-19 Program | After COVID-19 Program |
| EI Before Sept 27 2020 | Between Sept 27 2020 and September, 2021 | After September 2021 |
| EI Payments MUST be paid back |
EI Payments NOT paid back |
EI Payments MUST be paid back |
If you need guidance from an experienced employment lawyer, call HUM Law today at (416)214-2329 or email info@thehumlawfirm.ca.
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