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I'm not convinced EI is the way to go on this. Mandatory RRSP savings and some machinery to allow self-employed people to dip into their RRSP without taking a huge tax hit might be better. The gov't could provide subsidies as appropriate. Sorta like the way Singapore does things.

I was thinking along similar lines: it's impossible, so better to try and set up a system where people can self-insure more easily.

I believe self-insurance is a seperate idea from forced savings.

Forced savings is a good idea, but it doesn't collectivize the costs the way EI does. If I save $40K and don't get fired, where does that $40K go? If I get it back, people who are fired still bear a much larger costs than those who get fired on EI, despite the self-employed having a larger safety cushion. As well, the RRSP issue can be fairly disadvantageous since there are high costs associated with premature withdrawal, accompanied by the fact that withdrawals are likely to occur in a 'down market' like we are in now.

Self-insurance does collectivize the costs, but replaces the employer with an insurance adjuster who assesses the merits of each layoff. This would add quite a layer of bureaucracy, but would probably get the job done.

I'm really not sure what the solution is, such a conundrum.

If we are talking about insurance for the self-employed, we are getting to the point of having everyone covered by some form of social insurance. What about a minimum income? At least a component of employment insurance and welfare would be taken care of by a guaranteed minimum income.

Insurance above the minimum income could be taken care of by employment insurance, as it stands.

This wouldn't do anything explicitly to help the self-employed. But it would provide at least some security for them.

Oh, I'm with you there. In fact, the insurance argument is one of the reasons why the basic income proposal is such a good idea.

"about one-third of those who are self-employed did not originally choose to work for themselves; they would have preferred to have continued working for their previous employer. It would seem that this group would deserve the same protection as people who were not forced out of their jobs by a corporate reorganisation"

This is an interesting issue. In theory CRA uses a principles based assessment process to determine if someone is self-employed or not, but it practice firms have figured out how to get around it and the basic protections of the labour laws:


Software engineering is the industry I know best, but I suspect it happens in many professions that require technical skills and where the work is typically project based. Anyway, The trend towards hiring people as 'contractors' rather than full time regular employees is really a game of regulatory arbitrage. As a contractor, you get no vacation, no limits on the hours of work, no overtime, and they can lay you off you at any time without notice or pay in-lieu of notice. Here's how it works:

Imagine a purely fictitious multi-national called General Engineering (GE for short). A company like GE goes to one of the IT 'recruiting' firms (as you'll see they aren't actually recruiting firms) and tells them they need a software developer (or other technical staff) with certain qualifications. The recruiting firm finds candidates and the GE interviews and chooses the one they want. The new hire then becomes an employee of the recruiting firm, not GE - the recruiter does payroll etc... The employee is then contracted out by the recruiting firm and GE pays the recruiting firm a fee that covers the hours worked plus something extra. The employee does work for GE, sits in a cube provided by GE, takes orders from a GE manager, but they aren't a GE employee.

Then the fun starts. GE and the recruiting firm want to be really sure that they never have to offer benefits of any kind, nor do they want to be subject to the basic legal requirements for termination notice/pay in-lieu of notice, vacation, etc (which are pretty minimal BTW). The basic 'thou shalt' requirements usually only kick-in after a year of employment, so to be really sure that they aren't on the hook none of the contractors goes more than 8 to 12 months without being 'laid-off' for a while and then miraculously called back. This cycle can repeat itself indefinitely.

To really seal the deal, what the recruiters like to do is have the employee create a corporation (a simple provincial numbered company will do), and the recruiting firm deals with the numbered company, not the employee. The recruiting company will even do most of the work to get the company setup for the employee, help you find a cheap accountant (filling a T2 is a nightmare), etc ... Why? Because then it's much easier for them to argue that the 'employee' clearly intended to be self-employed; after all they went to all the trouble and expense of setting-up a corporation for that purpose.

At one point CRA started to crack down on these shenanigans. I don't know how far they got.

I'm not sure how insuring self-employed workers would work. If workers who quit don't get EI, but workers who are laid off get EI, how does government determine whether a self-employed worker quit or was laid off, when they're both the employer doing the laying off and the worker calling it quits?

Also, along the lines of points 4 and 6, such an EI plan could have the effect of incentivizing people to create crappy businesses. If I want to get eligibility for EI but can't find an employer to take me on, I could open up a highly unprofitable lemonade stand and run it until I'm eligible for EI, then lay myself off. Not only would this be unfair to the taxpayer, but it's also inefficient because it means a smaller labour supply for "real" jobs since I'm out running my lemonade stand instead of working a real job.

I find Stephen's arguments convincing. But it leads my mind in a different direction: What are the key conceptual differences between: EI; basic income; a forced savings plan for unemployment; a voluntary RSP where you can temporarily withdraw money when you are unemployed, and replace it later?

In particular, how would they function as automatic stabilisers?

Patrick is exactly right. There are different sorts of self-employed people. I am a case in point. I work at a large bank in Toronto. Over half the full-time people in HQ are on contract, like me. To avoid law suits, the banks make us work through agencies: we submit time sheets to the bank, but the bank pays the agency who pays us. Unless we are incorporated, the agancies take off EI from our pay. However, we are not eligible for EI because we are self-employed. Those of us who want to stay on contract incorporate, but many of us are actually looking for regular employment.

I have never heard of anyone being laid off once a year, as Patrick notes. There are people in my department who have been working on contract here for many years without a break.

Increasingly, organizations refuse to hire regular employees and instead have a large proportion of their work done by contractors. This is true in universities and many industries. These people need to be considered in the social safety net along with regular employees. There are many other cases where Canadian workers fall through the cracks of EI.

btw, I don't know if the CRA can stop this practice, but we should really regulate the agencies. Some take egregious percentages from contractors. Often there is no choice in which agency you get. Sometimes a person goes to an interview at a bank and is offered the job on the condition they go through a certain agency.

As a self-employed person I would much rather see a change to the RRSP contributions so that I can contribute more since aside from CPP and other non-registered savings, RRSPs WILL be may retirement plan.

A good chunk of "self-employed" people really just do contract work for their former employers. Realistically, CRA should just be more diligent about deeming such workers contract employees, instead of spending a whole bunch of time figuring out how to extend EI to the self-employed.

For true entrepreneurs, there's not really a way for the government to evenly and fairly distribute EI. They should provide any support they can so that the maximum number of businesses succeed, but entrepreneurs are not employees, don't have employment income, so shouldn't be covered by EI.

A good chunk of "self-employed" people really just do contract work for their former employers. Realistically, CRA should just be more diligent about deeming such workers contract employees, instead of spending a whole bunch of time figuring out how to extend EI to the self-employed.

This does seem to be a good place to start. Much of the motivation for worrying about the problem is precisely the plight of people who should be considered regular employees but are still classified as 'self-employed'.

I agree with many of the comments about 'self-employed' who are really just contracted out from their previous employer or are contract employees for an organization. CRA needs to get this under control - the guidelines are in place around what constitutes an employee vs an individual in a business relationship (the real self-employed), they just need to be enforced and it would only take one or two high-profile cases for the practice to stop.

I would like to make mention of the fact that the rise in contract employment came when equal work legislation was being challenged by the government. The government is a huge employer of contract workers. Attending this shift from full-time employment to contract employment was the rise of part-time jobs to replace full-time jobs. Again, the government initiated this shift and corporations followed suit. Today we have a very different situation from 20 years ago where even professions like nursing see a period of contract or part-time work before full-time work is offered. Obviously the benefit for the government in making the move to hire contract and part-time employment was in part, to cut down on the EI premium cost, and to encourage corporations to do the same to cut down the amount government would have to pay out in premiums. Now the workplace is so changed that the EI plan has to change dramatically to reflect the new realities of how people live and work. I think that it makes absolutely no sense to try to cling to the old model. A completely new model, such as I suggested in a previous post here on this topic, is called for. In planning this new model, the considerations of wage equity and participation of women in the workforce should be topmost. The true demand/supply is not currently known due to the changed nature of the workforce, so EI should be given to all who are unemployed for a period, whether contract/part-time/full-time/seasonal/self-employed and to minimize the costs while true supply/demand becomes known the payout period should be shortened to 3 months of support for all. This can be temporary while the government sorts out what is fair. The fact that contract workers and self-employed workers cannot be held to 'task' by qualifying rules such as whether they quit or are fired, says to me: it's too hard to administer this reform tactic across the system so SCRAP IT. As I pointed out before, those who quit or are fired need income support as much as anyone else in order to maintain their attachment to the workforce, and this is the PRIMARY point of EI. It's the safety net to keep people off of welfare.

The BC premier's idea to divide the plan by rural and urban boundaries is ridiculous. The bulk of new immigrants and women entering or re-entering the workforce are in urban centres and their barriers are the same as what rural workers face, thus the Campbell's idea just penalizes urbanites who suffer the most from inability to qualify for EI.

I would just like to offer up one more reason to abandon the exclusion of those who quit or are fired from income support during their initial period of unemployment following departure from their job. Not only has the workplace changed significantly in the ways I detailed above, but employers have changed significantly. Many employers now do not offer fair wages for work and don't know how to retain and develop employees. I've heard so many stories (really, sooo many stories) of men hired for 10 dollars an hour and then after a period of probation, being offered salary increases of 10 cents or 25 cents. Attending that, you have employers hiring at such low starting rates: 20-30K. This is employee abuse. EI should be there to help workers to fight this dynamic. The government can begin to punish employers who don't offer fair wages, who have too many people who quit, by upping their premiums. Let's please recall recent news stories that point to increasing class divisions over low wages: Dhallagate, Ehealth where an employee reported one the contractors who got 30K for 78 works, and the Criminal Lawyers who are boycotting legal aid in opposition to the unfair compensation they get next to highly paid crown attorneys. There is alot of employee abuse out there right now, that is reality, so this little caveat in the EI that an employer has control over the payment of EI benefits doesn't sit well in that reality. Individuals must have entitlement to income support with few strings attached at this time to help maintain confidence in the government -- both as an employer, and as the leader for setting equitable standards in work environments.

CRA could certainly detect many of the self-employed who are really employees simply by looking at the tax returns. For example, an entrepreneur is going to have sales and marketing expense on the income statement they file with their T2 whereas a 'contract' worker won't.

The problem with CRA deciding to snuff out the practice is that CRA will come after EI premiums from both the employer and the employee. They don't really care (because it isn't their mandate) about the employee being treated shabbily.

In the first place, paying into EI doesn't guarantee that one will be covered if one loses one's job, that is until your employer has paid up all his/her share of the withholding taxes and pays the EI that he/she has deducted from your paycheck each pay period so it doesn't do one any good to be contributing to EI which was intended to enable people to have a cushion in the event that they needed to find another job. In 1998 we (the whole community) found out that the company that had been employing the whole area was not only bankrupt, but that they had not been paying their income taxes, GST, and withholding taxes and although all of their laid off employees were promised by CRA that they would be receiving their EI benefits immediately, they did not receive them for over one year's time. Since the whole area was economically affected by this one company, laid off employees were forced to look for work in a different area of the province and in some cases even a different province. They did not receive any of their EI for a whole year or more, and their families were forced to apply for social assistance for the first time in their lives, which is a very humiliating experience for anyone, let alone women and children who through no fault of their own, suddenly find that despite the FACT that they and their husbands had been contributing to EI for twenty and more years, they were not only broke but losing their homes, not being able to feed their families and not even being able to search for work, which for all of those who have never been in this situation, costs money!

My advice: Avoid paying into any Government based funding for security of employment replacement. After years of paying these thousands of employees found themselves starving, losing their homes, and unable to look for work due to the fact that EI did not kick in for over a year. In addition, shortly around this time, EI changed to include the fact that no matter how many decades one had contributed to EI only the few months prior to when one needs to rely on EI benefits count towards being able to claim EI so all those decades of paying into EI resulting in nothing of any benefit to anyone!

In April I took my income tax returns to an accredited tax preparer and when I went back to collect my copy and pay the bill, I was told that I had to pay $40.02 extra because I owed Revenue Canada for EI payments because I was self employed, (paid on commission by my employer so that he does not have to contribute to my EI) therefore, reducing his cost of having employees, which is in addition to the fact that while working for this employer, he did not top up my commission if my commission fell below minimum wage which I understand that he is supposed to do. The tax preparer told me loudly that in British Columbia she has been working as an accountant since 1988 and it has always been a requirement that self employed people had to contribute to EI and if they did not do so and had not done so, then CRA could and would come after you and charge you interest (usury) and penalties for as long as you had neglected to contribute to EI.

So, my question has to be, where did my $40.oo go? Is this tax preparer fleecing hard working self employed people? Are they committing fraud? What is going on and how can I find out what to do about this problem so that I and others don't get fleeced by this outfit in the future? When I questioned her assertion, she told me that she had been preparing other people's income taxes for decades and that this had always been a requirement and if I had not been paying EI on my self employment income, Revenue Canada would be coming after me! She even told me that she knew of a local woman who had been preparing her self employed Electrian son's taxes for years and had not contributed to EI for him each year and CRA had recently come knocking on his door and as a result, he had to pay CRA for years of self employed EI contributions that he had not made because they were under the mistaken impression that the son did not need to make these contributions to CRA at the end of the year. What is going on? Is CRA fleecing the Canadian taxpayers in BC or is this just another method that CRA employs to force the Government to change the laws that govern EI for them, or is CRA fleecing the taxpayers of BC or is the tax preparer fleecing people?

What a timely discussion for the Government to have after being told this by this tax preparer! Now, what to do about it. Is this a matter for the R.C.M.P.? Do I go to my MLA? What do I do?

I have something to say about this issue but I can't think of a way of helping the Canadian economy or indeed the world economy that doesn't bolster our GOP. Harper is doing a masterful job of using WCI's flawed "stimulus must be temporary" argument to deny transit funding to Toronto while ramming through the largest subsidy in Canadian history. Everything Coservative do seems to be about making rich people richer and maximizing as large as is politically possible the amount of human extinction unleashing pollution.
The reason your argument is flawed is because it is politically easiest in a recession to improve fiscal and other government policy (taxpayer don't mind federal debt when their jobs threatened), and hardest during bubble (cut GST and Flhaerty 3rd world tax rates don't phase voters). But WCI has also argued against protecting and taking responsibility for political hijacking of economics (ie. economists only should study econmoics is a recent thread); defines economics narrowly enough to be worse than useless.
Conservatives are selfish; I'm not going to help fight a battle that loses the war...

...in general "stimulus must be temporary" is an argument not to make fiscal or Crown policies more efficient in recessions. Under this definition a $10B Chrysler bailout only works if it is to be done in perpetuity every few years, but would be bad if one time. Transit in Toronto is being denied funding because it can't be utilized in a compressed 2 year timescale. This permanently prevents Keynesian projects that take longer than two years to complete; permanently cuts off all such infrastructures or makes them be constructed in bubble in a way that causes 2007 AB/China style wage and price inflation. Meanwhile no one even remember the only reason all this funding wasn't done in the Fall and the only reason we've had 3 months of Parliament the last 13 months is Conservatives are very late to address non-bubble economics.

May Mickelow: If you don't mind, could you say what town and company?

I am self-employed and the tax preparer's story certainly sounds fishy to me. Don't worry about what your employer may or may not be doing. That is his/her problem. Worry about getting yourself square with CRA.

In principle self-employed people do not pay EI premiums because they do not qualify for EI benefits. However it is CRA, not your employer, who makes the determination about your status as 'self-employed'. If there is any doubt about your status, you can ask CRA for a ruling. More info here:


It may be worth seeking advice from a professional accountant before you do anything. In BC, you might try contacting the CGA professional organization to improve your chances of finding a competent accountant:


I've always found CRA to be reasonable so long as you keep in mind that their mission is to collect the taxes. They don't care about anyone's sob stories or problems. They just want you (and everyone else) to pay what they owe. It's up to you, your accountant, and your lawyer to look after your interests.

Good luck sorting it out.

May Mickelow : One more thing - obviously professional service (like an accountant) are not free. When you contact an accountant, be sure to describe your situation, what you want them to do, and ask how much. That way there will be no surprises. Good luck.

"Under this definition a $10B Chrysler bailout only works if it is to be done in perpetuity every few years, but would be bad if one time"

Confusing sentence but I'll flood the blog eplaining it because our industrial policy has been set without so much as a peep at what the alternatives could've been (hiring $10B nurses and building hospitals maybe most efficient IDK). Keynes defined stimulus as flooding banks with liquidity that would induce loans and reverse a downward demand spiral. We don't really know of many alternative potentially superior ways to spend that money (turning on the taps looks like it plateaued the downward spiral at least) because WWII forced war economy, and USA forced post-WWII free trade as Cold War strategy, and demographics forced subsequent demand rise. Maybe cars (Zenn?) are superior to giving to banks if banking industry derivatives are the cause of recessions, at least Magna isn't competing against superior competitors....
Conservatives look for any way to subsidize fossil fuel consumption, is their political base. Defining stimulus as temporary will allow them to subsidize fossil fuels every recession ($10B every decade under derivatives business cycle?), when the public good of government is served by just the opposite, long-term productivity gains like Obama's relatively weak healthcare plans. Keynes didn't specify what industrial policies are stimulus and he didn't mean to suggest a temporary $$ liquidity stimulus as a solution when banking derivative are the problem (*after* rule changes then TRAP). There is a flu vaccine manufacturer in Australia going bankrupt; no one should buy the company in a recession because we plan for pandemics beyond 2010? Absurd.
If industrial policy is stimulus, we need a frank discussion of why GOP industrial policy is a failed model (and recognized failed by our trading partners). Obama subsidizes Chrysler to try to win Midwest weak Blue State influence on other issues. Why are we following? Our media is leading us off a fossil fuel cliff...the blogosphere is following?

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