# Can I work in my Corporation for free while receiving Parental Employment Insurance



## taxMonkey (Mar 21, 2018)

Hello,

Currently I am getting Parental Employment Insurance. There is a short term project I am interested to take. Based on EI rules if I start work - I will be loosing Parental Employment Insurance (and can't continue it after the end of the project). Is it possible to open a corporation (to take the project), but work there for free without salary - all money from the project will remain in corporation and I will not pay to myself. After the end of the project and Parental EI payments I can get money from corporation as dividends or salary. How EI or CRA will look on that (if they exchange information at all): as from EI perspective I will take care for my child during the project and from CRA perspective I will pay all taxes ? Is it legal to do that ? Maybe there is any other option to save Parental EI during short term project ?

Thank you in advance.


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## Just a Guy (Mar 27, 2012)

You realize that setting up a corporation, filing corporate taxes, and others costs associated with running a corporation would probably eat up a good chunk of your parental benefits? If you are only planning on doing this short term, it's probably not worth the hassle and expense.


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## OnlyMyOpinion (Sep 1, 2013)

taxMonkey, you are being paid parental leave to allow you to take a break from your paying job and spend time with your child. If you choose not to take the full time off that is up to you, but trying to "double dip" or "gaming the system" by working and still getting EI is illegal. It is also morally wrong. It is cheating like this that eventually ruins benefits for everyone.
This is your first post, so I will say welcome to CMF and I will assume you just haven't thought this idea through.


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## taxMonkey (Mar 21, 2018)

OnlyMyOpinion said:


> working and still getting EI is illegal.


Could you please clarify why that is not illegal (as I am as individual will not formally work)?

Regarding the moral side: there is one issue here - you can't do a small break during parental EI (even if you provide care for your child and do project when he is sleeping) as you will be loosing the rest of your parental benefits. And by the way it is my first unemployment in whole my life (and hopefully the last one). So I am not the one who "break" the system. More likely I am the person who pays EI, but maybe gets it once in whole life.


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## OnlyMyOpinion (Sep 1, 2013)

taxMonkey said:


> Could you please clarify why that is not illegal (as I am as individual will not formally work)?
> Regarding the moral side: there is one issue here - you can't do a small break during parental EI (even if you provide care for your child and do project when he is sleeping) as you will be loosing the rest of your parental benefits. And by the way it is my first unemployment in whole my life (and hopefully the last one). So I am not the one who "break" the system. More likely I am the person who pays EI, but maybe gets it once in whole life.


_"As I am as individual will not formally work"_ What do you call accepting a project and hiding its income in a corp you have opened for that purpose so you can continue to collect EI while you are putting renumeration into the corp? Who is going to be doing the work, the baby? You would be scamming the system, short and simple.

As to morality, yes there is one issue - you either take the parental leave and EI or you work. Not both. Your contribution history has no bearing on it. I paid into UIC (renamed EI for some reason) for 42 years and never collected. As a society we do a lot of that - supporting those who really need it, and we are grateful to live in a country where those suppports exist.

I have nothing but disdain for people who have no scruples, no moral compass, or a sense of entitlement - whatever you want to call it. As I said, I will continue to assume for now that you are not one of those people, but were just genuinely trying to understand your options.


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## nobleea (Oct 11, 2013)

taxMonkey said:


> Regarding the moral side: there is one issue here - you can't do a small break during parental EI (even if you provide care for your child and do project when he is sleeping) as you will be loosing the rest of your parental benefits. And by the way it is my first unemployment in whole my life (and hopefully the last one). So I am not the one who "break" the system. More likely I am the person who pays EI, but maybe gets it once in whole life.


You're just using semantics to try and justify this. You know it's not right, otherwise why would you bother with setting up a corp to hide the income?
It's like 1800$/mo or less. It's done on a weekly basis, if you get all the work done in one week, great, you just lose the 450$ for that week. Yes, you are allowed to work while on EI. It gets reduced on a weekly basis. Setting up a corp is going to cost you 500-1000$, and that's not including the tax filing and accounting costs, which would be that much again, at a minimum. JAG has pointed this out.

Separately, I think you are allowed to go on parental leave, go back to work, and go back on leave as long as it's within the first year. There is an example on the govt website that mentions this.

I took EI parental leave with our first child. We traveled while on leave and certainly didn't work. On the second child I didn't bother with EI as it was a hassle in itself and just took a few weeks off combination paid/unpaid. It was only a month of leave for both cases.


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## taxMonkey (Mar 21, 2018)

nobleea said:


> if you get all the work done in one week, great, you just lose the 450$ for that week.


I believe you are talking here about regular EI, right ? For Parental EI - you are going to loose the rest of your Parental EI if you start to work (and get a good salary - not 50$ per week). If my understanding correct - it works like this: you are eligible to get 35 weeks of parental EI. Let's assume you just got 2 weeks and then there is unexpectedly pop-up a project for 1 month (4 weeks) with your regular good salary. In this case you will stop getting the rest of your parental EI (33 weeks = 35 -2). So you can't put it on hold during the project and then resume it. Please correct me if I am wrong.


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## nobleea (Oct 11, 2013)

taxMonkey said:


> So you can't put it on hold during the project and then resume it. Please correct me if I am wrong.


You are essentially wrong.

"Standard parental benefits:

In total, there are 35 weeks of standard parental benefits available to eligible parents of a newborn or newly adopted child.

There are many ways you can decide to use your standard parental benefits. For instance, one of the parents can take the entire 35 weeks of standard parental benefits, or both parents can share them.
Examples

If the biological mother wants to return to work after her maternity leave, the other parent can then take the 35 weeks of standard parental benefits.
If one parent decides to take only 10 weeks of standard parental benefits before returning to work, the other parent can use the remaining 25 weeks of standard parental benefits.
*If one parent decides to return to work after taking a few weeks of standard parental benefits, but then realizes a few weeks later that he or she would prefer to stay home with the child, he or she is still entitled to the unused weeks of standard parental benefits, as long as the 52-week period after the birth or adoption placement has not expired.*"

https://www.canada.ca/en/employment...ms/ei/ei-list/reports/maternity-parental.html


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## taxMonkey (Mar 21, 2018)

nobleea said:


> *If one parent decides to return to work after taking a few weeks of standard parental benefits, but then realizes a few weeks later that he or she would prefer to stay home with the child, he or she is still entitled to the unused weeks of standard parental benefits, as long as the 52-week period after the birth or adoption placement has not expired.*"


It is interesting. My understanding is based on this one:
ontario.ca/document/your-guide-employment-standards-act/pregnancy-and-parental-leave :

"*Employees may decide to take a shorter leave if they wish. However, once an employee has started parental leave, he or she must take it all at one time. The employee cannot use up part of the leave, return to work for the employer and then go back on parental leave for the unused portion.

(Note that under the federal Employment Insurance Program, employees are able to return to work and earn a certain amount of wages without having their employment insurance benefits reduced. However, under the ESA, a return to work, even on a part-time basis, would end the parental leave.)*"

The same information I got from EI phone service.


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## OnlyMyOpinion (Sep 1, 2013)

Two different things:
Federal EI will pay while you are off work with your new child up to its limit and with intervening work subject to some conditions (clawback and/or deferral of EI). 
Ontario ESA will protect your right to return to your employer and job after being off work for an uninterrupted period with your new child.
Your question was about maintaining your full EI payments at the same time you have an income from working - but are hiding that income within a corp formed for that purpose.
Make sense?


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## Mukhang pera (Feb 26, 2016)

OnlyMyOpinion said:


> _" I paid into UIC (renamed EI for some reason) for 42 years and never collected._


_

I believe that "unemployment insurance" was renamed "employment insurance" in a rare moment of government candour.

Insurance is generally named by the type of risk insured against. For example, fire insurance insures against the risk of fire; accident and sickness insurance insures against those risks; theft insurance insures against theft; liability insurance against liability, et c. Unemployment insurance was conceived as insurance against that risk. But that is no longer the case. It's more in the nature of a handout to the indolent. It allows some to choose, for example, to become "seasonal workers" who can vacation for a good part of the year at the expense of those who work hard all year. It now allows one to say "I am pregnant" or "I am a parent", ergo i am unemployed. So now, it's much more honest to admit that "employment insurance" insures against the risk of, heaven forbid, actually having to work. I suppose the EI program might soon be replaced by the universal income program that was the topic of some discussion on this board awhile back. Never mind that a government that pays you to do nothing destroys your willingness to do anything.

OMO, as for the comment about never having collected in 42 years, I probably paid in about as long, usually at the max insurable earnings. Never collected a dime. But today, almost everyone feels entitled to have at least one claim in which they can draw out what they have paid in. But there are thousands (if not tens of thousands) who draw for a good part of the year, year after year, taking out far more then they will ever contribute. The program is designed to facilitate that._


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## taxMonkey (Mar 21, 2018)

OnlyMyOpinion said:


> Two different things:
> Federal EI will pay while you are off work with your new child up to its limit and with intervening work subject to some conditions (clawback and/or deferral of EI).
> Ontario ESA will protect your right to return to your employer and job after being off work for an uninterrupted period with your new child.


Thank you and *nobleea*. It looks like my understanding was wrong. 
Opening corporation is required to take the project (that is the requirement from those who offer it - they agree to work with corporation only). I am just checking what legal options are better in my case. There is nothing to hide. Hopefully that clarifies the topic.
If there is no legal option to save EI during the project - I need to call EI and say that I am starting to work for my corporation, right ?
Taking into account that salary is very high for the project - what they will do (deduct all money I got during the project from the rest weeks of parental EI or I will not be getting EI just during the time of the project) ?


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## nobleea (Oct 11, 2013)

Either:

A) take the project, earn the money, then when it's over, apply for parental leave/EI. No harm, no foul.
B) Go on parental leave/EI, go off to go back to work, do the project, when it's over, go back on parental/ei leave.
C) go on parental leave/EI. While doing the work, call in to EI each week that you are working and tell them what you are earning on a weekly basis (or the equivalent). They'll dock your benefits for that week (probably to 0). Then when it's done, stop calling them since they only need a call if you are earning money. benefits and earning are on a weekly basis. You are allowed to work while on EI/parental leave but you have to let them know about it. My wife did some personal training later on in her parental leave. She called and let them know the hourly rate and hours for that particular week and they adjusted the EI benefit for that week.
D) don't go on parental leave. Just do the work when it comes up and use savings to tide you over if necessary.
E) go on parental leave and enjoy the time with your child/children and spouse. don't think about work.

All the above are above board, legal, and most would say ethical.

What you are proposing is not.


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## taxMonkey (Mar 21, 2018)

* nobleea*

Thank you a lot. These are good advises.
Just want to make sure I understood correctly C) from your post. Let's take following as example:
a. I am on parental benefits (and getting them 2 weeks ; have max allowance of ~480$ per week and remaining 33 weeks: 480*33=15840$ : total sum to get from EI)
b. I am taking project for 1 month (4 weeks: week 3 to 6). Earning for each week is 3K
c. I will call EI between week 3 to 6 and report my earnings
d. Starting week 7 I am not working at all and continue EI

What EI is going to do in the case above:
1. Due to high earnings I will not get payments for week 3 to 6, but starting week 7 I will be getting regular ~480$ per week
2. I will not get payments for week 3 to 6 and EI will deduct my earnings from total remaining amount : 15840$ - (3000$ x 4w) = 3840$. So 3840$ will be divided by remaining 33 weeks and I will be getting around 116$ per week (3840/33) starting week 7 to 35.
3. EI will consider that it is too much earnings, they will do some recalculation, waiting period and pay only some part 
4. If I will be Self-Employer in the project (without deductions to EI) - could it cause that I will be loosing parental EI for the remaining weeks (week 7 to 35). 
5. Some other option not mentioned above


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## nobleea (Oct 11, 2013)

Option 1. is what's supposed to happen.

All they'll ask for is your hourly rate and number of hours. They may ask for employer and work, but I don't recall that, or they didn't care.

Employees who make 400K a year are just as eligible for parental benefits as those who make 30K a year. So the fact that you're making 3K a week vs 300$ a week shouldn't have a bearing on parental leave benefits in future weeks.

Just call them and ask hypothetical questions.

If you're self employed, your tax software may take off the EI contributions regardless and pay them for you when you do your 2018 taxes.


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## Just a Guy (Mar 27, 2012)

One thing I don’t get...you are worried about losing $480 a week if you accept a contract which would pay you $3000/wk. 

If you took the $3k/week project, you wouldn’t be spending that time with your family as you’d be working. 

So basically you just want to grab an extra $480/week, about $15k in total I believe (which is supposed to allow you to spend time with your family) to not spend time with your family since you’ll be working. You’re thinking of spending a good chunk of money to set up a corporation, not to mention a heck of a lot of time thinking about the issue. 

In 5 weeks you’d have made the same amount of money. 

I’m confused as to why you’re spending so much time for such a small amount of money that could get you into a lot of trouble, especially since the size of the contract implys you don’t really need the money.


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## taxMonkey (Mar 21, 2018)

nobleea said:


> Option 1. is what's supposed to happen.



Thank you very much. I appreciate your help.




nobleea said:


> your tax software may take off the EI contributions regardless and pay them for you when you do your 2018 taxes


I am planning to do that with tax accountant. Should I tell her on what she needs to pay attention ?

Here is very well described why what I thought initially in this topic is not going to work:
https://www.canada.ca/en/employment-social-development/programs/ei/ei-list/reports/digest/chapter-5/earnings-selfemployment.html#a5_16_2_3


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