The facts on self-employed maternity leave

I was self-employed when both of my children were born. Since I didn’t contribute to Unemployment Insurance, as it was called back then, I couldn’t claim maternity benefits. I was in the same boat as a lot of small-business owners and contract workers.

Last year the federal government decided to try and level the playing-field by offering self-employed people the option of buying into the Employment Insurance program so they can qualify for mat leave benefits, along with a slew of others including parental, sickness and compassionate care benefits.

• Maternity benefits — up to 15 weeks for birth mothers
• Parental — up to 35 weeks for biological or adoptive parents
• Sickness — up to 15 weeks for people who can’t work because of sickness or injury
• Compassionate care — up to six weeks for people who can’t work because they need to care for a severely ill family member

As long as you earned a minimum of $6,222 in 2011, you can sign up (this amount increases and is always based on the previous years income, so some checking and planning are required). And you have to wait a year before you can claim benefits. Those benefits aren’t huge. You’ll get 55% of tour average weekly earnings to a maximum of $485.

Outside of Quebec (which already gives self-employed people maternity benefits), EI premiums are 1.83% of insurable earnings, which means that for every $100 a week you earn, you’ll have to cough up $1.83 in EI premiums. That’s the same as employees pay. The maximum you’ll have to pay for 2012 is $839.97.

Sounds like a great deal, right? You pay in $839.97 and you get your year of maternity leave income, which at the maximum would work out to about $24,000 for the year. (Don’t forget that EI income is taxable.)

Hold your horses. Before you rush off to sign up, you need to know some more facts:

Fact #1: Once you sign up, you can only opt out if you have never received benefits as a self-employed person. So you’ll have to keep paying those EI premiums as long as you’re self-employed. Over your 30-year self-employment history, that’d amount to about $25,200.

Fact #2: If your business is a bust and you end up unemployed, even though you paid the same EI premium as employees, you will NOT be eligible to collect regular EI benefits.

Fact #3: Any earnings while on mat leave will reduce your benefits on a dollar-for-dollar basis. (On parental or compassionate benefits, you can earn up to 25% of your weekly benefit.) This can really gum up the works if your business continues to generate income while you are receiving EI special benefits. Even if you are not actually working, you must report any self-employment income that accrues to you and it will reduce your EI cheque.

The decision to join the EI system or save for your own maternity leave comes down to math. You must weigh the cost of paying into the system forever against how often you plan to collect EI special benefits. For some, the premiums are a small price to pay. Two full-year maternity leaves put you on the winner’s side of the balance sheet, never mind the other benefits you’re entitled to claim.

Of course hardly anyone who is self-employed has the luxury of taking a year off from their business. I was off for 12 weeks. If you take only the first 15 weeks, you’ll be coughing up a lot of money for $7,275 in benefits. You’d have to have three mat leaves and some sick time off just to break even.