Family Business and Employment InsuranceGrant M. Driedger
If you are a part of a family run business, there are two things you should know about the Employment Insurance premiums you've been paying for years: 1) If a family member is laid off EI may not honour their application for benefits; and 2) you might be able to claim back thousands of dollars in premiums that have been paid.
Many people are unaware that EI benefits are frequently refused to applicants who were part of a family business. Never mind that you paid premiums into the program for years and years, if your employer was a close relative the EI administrators will reject the claim if they believe you were treated differently from an "arms length" employee, no matter what the reason may have been for the lay off.
While that can be unfair, the flip side of the coin is that the business can apply for a refund of the premiums that have been paid. If the application is successful, you could get back three years of past premiums paid in, and save the cost of paying premiums going forward.
Generally speaking, if you ask Canada Revenue Agency (or many accountants) they will advise that premiums should simply be paid. Following that advice may avoid some hassle, but it will also cost you a great deal of money over time. If the application is done properly, there should be no future difficulties.
If you have been paying, you should not stop. Rather, an application should be made to be taken out of the EI scheme.
The retroactive claim can frequently amount to $6,000 - $7,000 per family employee. Furthermore, going forward the business can save close to $2,000.00 per employee per year. The costs can be extraordinary over a long period of time, and all for a benefit that may be denied in the event that it is ever needed.
The process can be long and complicated, and good advice is essential. If you are part of a family business where this might apply, contact our office for more information.Download the printable version of this article