The Road Less travelled: Navigating Parental Leave as a Self-Employed Entrepreneur
The entrepreneurial journey is often paved wiht both excitement and challenges.For those balancing the demands of a business with the joys of parenthood, accessing parental leave benefits can feel particularly daunting. “When I was expecting our first daughter in 2021,the reality of parental leave as a self-employed individual truly hit home,” shares Erin Bury,co-founder and CEO of online estate planning platform Willful.co. “it wasn’t something we had given a lot of thought to during the early days of building our company, but I quickly learned how crucial it is to understand the complexities involved.”
Employment Insurance (EI) is a vital resource for new parents, providing financial support during their leave.”Employees and employers contribute to EI premiums,and those who have worked the required hours in the previous year are eligible for weekly payments,” explains Bury. “These payments can cover up to 55% of your salary, with a maximum of $695 per week.” This programme extends to self-employed individuals who pay themselves a salary and meet the eligibility criteria for claiming EI benefits.
However, navigating EI as a self-employed individual can be a minefield. “Not all self-employed people contribute to EI, even if they take a salary,” Bury observes. “It’s not always top of mind as it’s typically associated with layoffs, which aren’t as common for those who are their own bosses.” She recounts a personal anecdote: “Despite being a salaried employee in our company, my husband wasn’t eligible for parental leave benefits with our first daughter as we hadn’t been contributing to EI for him. That was a meaningful learning experience that prompted us to rectify the situation for our second child’s arrival.”
The challenges don’t end there. Some self-employed individuals might choose dividends over a traditional salary or own more than 40% of their company. “In those cases, there’s a separate program available for business owners who fit these criteria,” Bury notes. “However, this self-employed program also has a minimum requirement for self-employment income claimed in the prior tax year, potentially leaving out those who are just starting out or haven’t yet established a consistent income stream.”
Adding another layer of complexity, this alternative program requires registration 12 months in advance, a significant hurdle for expectant parents planning their leave. “It’s crucial to plan ahead and be proactive,” stresses Bury. “The responsibility to ensure EI coverage or register for the self-employed program lies with the self-employed individual.”
When calculating benefits, EI often relies on either your salary or the prior year’s self-employment income, which presents a challenge for entrepreneurs who haven’t had an opportunity to build up significant income or choose to prioritize reinvesting profits over personal compensation. “EI benefits being tied to either salary or self-employment income can be very limiting for those starting a new business or opting for below-market compensation,” Bury observes. “It can create a financial strain for entrepreneurs who are dedicated to growing their companies.”>
Financial security during those crucial months after welcoming a new child is a top concern for any parent, and the road can be particularly bumpy for self-employed individuals navigating the untamed waters of parental leave.
Navigating the world of parental leave as a self-employed entrepreneur in Canada can be a minefield. Unlike their employed counterparts, self-employed individuals don’t automatically qualify for the same government support programs. This often forces entrepreneurs to make arduous choices, potentially jeopardizing their businesses or delaying their dream of becoming parents.
Erin bury, co-founder and CEO of online estate planning platform Willful.co,knows this struggle all too well. As a mother herself, Bury faced the realities of navigating parental leave firsthand in 2021.
“when we started our company eight years ago, parental leave wasn’t really on our radar. We where focused on growing the business and serving our customers,” she explains. “but when I became pregnant with our first daughter,I realized that taking time off wouldn’t be as straightforward as I’d hoped.”
Bury discovered that many entrepreneurs face a significant hurdle when it comes to EI benefits. While most employees have access to Employment Insurance (EI) to supplement their income during leave, self-employed individuals often find themselves ineligible or facing unexpected roadblocks.
“Many entrepreneurs, like us, didn’t consistently contribute to EI as it’s frequently enough associated with unemployment, not maternity or paternity leave,” Bury shared. “Consequently,my husband wasn’t eligible for any parental leave benefits when our daughter was born.”
The complexity of EI for self-employed individuals goes beyond mere eligibility.There are often gray areas and inconsistencies in how it is applied. One such situation involved a business owner whose EI benefits were clawed back by the Canada revenue Agency (CRA).The CRA determined that the individual was still actively involved with their business, despite fulfilling the EI website’s criteria of reducing their involvement by 40 percent.
This instance highlights the need for greater clarity and support for self-employed individuals seeking to navigate parental leave. “We need to provide better support for self-employed new parents, especially women who represent 28 percent of entrepreneurs in Canada,” emphasizes Bury.
Advocating for change, Bury calls for a review of the current system, suggesting, “We should revisit when entrepreneurs have to sign up for government support programs, how much they can earn while on leave, how it’s calculated, and how they can stay involved in their business in a limited way while on leave.”
The takeaway? The current system leaves many self-employed individuals in a precarious position, forcing them to choose between their businesses and their families. Addressing this inequity is crucial, not only for the well-being of entrepreneurs and their families, but also for the health of the Canadian economy, which relies heavily on small businesses.
As bury poignantly concludes, “Small businesses are the lifeblood of our economy, and people shouldn’t have to pick between starting a business and starting a family.”
Navigating Parental Leave as a Self-Employed Entrepreneur
Starting a family is a joyous occasion, but it also brings about significant life changes, especially for self-employed individuals. Balancing the demands of a growing family with the responsibilities of running a business can be challenging. Understanding your employment insurance (EI) benefits and planning ahead are crucial steps in navigating this transition smoothly.
Erin, a seasoned self-employed entrepreneur, shares valuable insights on how to approach parental leave when you’re your own boss.”Self-employed individuals can opt to contribute to EI alongside their income tax, similar to employed individuals,” Erin explains. “If they’ve paid into EI for at least 12 months in the last five years and earned a minimum amount (currently around CAD 7,428 from insurable earnings), they may be eligible for benefits.”
While eligibility exists, the process can be nuanced. “There’s a catch,” Erin cautions. “Self-employed individuals must apply and register for EI before they can start receiving benefits. That’s where a lot of people,including us initially,get confused – and why it’s essential to plan ahead.”
For those with unconventional income streams or significant ownership stakes in their companies, there’s a separate program called the Special Benefits for Self-Employed Persons. “Individuals in these situations need to have earned a minimum amount of self-employment income in the previous year and must have been actively engaged in self-employment within the last five years,” Erin clarifies.
It’s important to remember that even with this alternative program, self-employed individuals might not qualify for the full 15 weeks of parental leave benefits typically received by employees. “Thus, saving up and planning for the financial impact of taking parental leave is crucial,” Erin advises.
when asked for advice for entrepreneurs planning to expand their families, Erin emphasizes the importance of early planning. “Make sure you understand your leave entitlements and how EI works.If you’re self-employed, consider contributing to EI from the start,” she recommends.
“Don’t forget to consider other financial aspects, like maternity or paternity disability insurance, if available. Lastly, foster a supportive work habitat where everyone understands the importance of family time,” Erin adds.
For self-employed entrepreneurs, navigating parental leave requires careful planning and a proactive approach. Understanding your options, securing financial stability, and fostering a supportive work environment are vital steps in ensuring a smooth transition into parenthood.
What are some of the challenges self-employed individuals face when navigating parental leave?
Title: A Conversation with Erin Bury: Navigating parental Leave as a Self-Employed Entrepreneur
Archyde News: Good afternoon, Erin. Thank you for joining us today. First, could you give our readers a brief introduction about yourself and your role at Willful.co?
erin Bury: Hi, thank you for having me. I’m Erin Bury, the co-founder and CEO of Willful.co, an online estate planning platform. We help Canadians create legal wills, powers of attorney, and other estate planning documents, all done conveniently online.
Archyde news: That’s a unique and important service. Now, we understand that you’ve recently gone through the parental leave journey as a self-employed individual. Can you share some insights into how you navigated this process?
Erin Bury: Absolutely. When I became pregnant with our first daughter,I realized that taking parental leave wouldn’t be as simple as I’d initially thought. As a self-employed individual, I didn’t have the same automatic access to government support programs that employed individuals do. This was a learning experience for me, and I want to share my insights to help other entrepreneurs navigate this journey.
Archyde News: Let’s start with Employment Insurance (EI). How does it work for self-employed individuals, and what challenges did you face?
Erin Bury: EI is a vital resource for new parents, providing financial support during their leave. Normally, employees and employers contribute to EI premiums, and those who have worked the required hours in the previous year are eligible for weekly payments, covering up to 55% of their salary, with a maximum of $695 per week.
However, the landscape changes for self-employed individuals. Not all self-employed people contribute to EI, even if they take a salary. It’s not always top of mind as it’s typically associated with layoffs, not maternity or paternity leave. In my case, even though my husband was a salaried employee in our company, he wasn’t eligible for parental leave benefits with our first daughter because we hadn’t been contributing to EI for him. That was a important learning experience for us.
Archyde News: How about the option programme for self-employed individuals?
Erin Bury: There is indeed an alternative program for business owners who own more than 40% of their company or those who choose dividends over a traditional salary. However,this program also has a minimum requirement for self-employment income claimed in the prior tax year,perhaps leaving out those who are just starting out or haven’t yet established a consistent income stream.
moreover, this program requires registration 12 months in advance, which can be a significant hurdle for expectant parents planning their leave. It’s crucial to plan ahead and be proactive, as the duty to ensure EI coverage or register for the self-employed program lies with the self-employed individual.
Archyde News: That’s a complex process. How would you suggest changes to make this process more straightforward for self-employed individuals?
erin Bury: I believe we need to provide better support for self-employed new parents,especially women who represent 28% of entrepreneurs in Canada.We should revisit when entrepreneurs have to sign up for government support programs, how much they can earn while on leave, how it’s calculated, and how they can stay involved in their business in a limited way while on leave.
Ideally, the system should be more flexible, taking into account the nuances of self-employment and the ups and downs of entrepreneurship. It’s not only about the well-being of entrepreneurs and their families but also about the health of the canadian economy, as self-employed individuals contribute significantly to it.
Archyde News: Thank you, Erin, for sharing your insights and advocating for change.We hope these challenges will be addressed soon to support self-employed individuals better.
Erin Bury: Thank you. It’s crucial that we keep this conversation going. we all have a role to play in pushing for clearer policies and better support for self-employed parents. After all, they’re not just building businesses; they’re building families too.
Archyde news: That’s a perfect note to end on. Thank you again, Erin, and congratulations on your growing family and your triumphant business!
Erin Bury: Thank you. It’s been my pleasure.
