New EI bill could take some of the sting out of severance payments
December 10th, 2010 - 3:00am
For people facing the loss of steady employment, a severance package can present a double edged sword. It can be much larger than the eligible portion available to an individual for an RRSP contribution and the amount counts against employment insurance benefits. New Democrats don’t believe this is fair and, given the way our economy has shed full-time jobs recently, it doesn’t represent an effective response to our employment crisis.
This week I was able to second the tabling of a piece of legislation that will hopefully make the loss of a job a little more bearable. The bill, C-601, will allow Canadians receiving severance payouts to make a one-time, over-the-limit contribution to their Registered Retirement Savings Plan (RRSP). It will also remove the amount of severance pay received from Employment Insurance calculations.
These small measures can make a big difference for people who lose their jobs and receive a severance package. People who can afford to direct their severance payment into RRSPs will be able to put away more money than they are eligible for. This could help make up for some of the shortfall in their pensions. In that respect, the bill has a long-term vision that reflects what is actually happening in the Canadian job market.
The legislation addresses the short-term implications of severance payouts as well. By allowing for people who lose their jobs, through no fault of their own such as a plant closure, to keep their severance payouts without having that money included in the determination of earnings, it will end an unfair claw-back and help ease household budgets as they adapt to the challenges of finding new work.
Measures like these help make Employment Insurance responsive to the needs of out-of-work Canadians, and tailor the program to more accurately reflect our current circumstance. Many people view EI as a handout from the government, ignoring the fact that the program is funded by employers and workers. In better times, when alternative work was more readily available, it may have made sense to have EI be more stick than carrot. That is not the case now.
I have detailed in past columns the many benefits of a vibrant and responsive Employment Insurance program - not the least of which is the way that provides economic stimulus, with laser-like accuracy, to exactly the areas that need it. For a stalled economy and communities in shock because of plant closures and mass layoffs, it only makes sense to creatively adjust this program so that it can appropriately provide first-response assistance to the people who have paid the freight for it in the first place.
In today’s economy, Canadians should be given every possible opportunity to save money for their future. We hear all too often of seniors living below the poverty line and of families not being able to put food on their tables due to plant closures and job losses. This will provide Canadians with an opportunity to save for their retirement as well as ensure they earn maximum Employment Insurance benefits in their time of need.