By Katherine Marshall
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Although 'priceless' in many ways, there are financial costs to having children. One factor is earnings lost from employment absences after childbirth. Most mothers are employed before birth and most of those receive benefits from either the federal or Quebec maternity and parental leave programs. However, since these benefits replace only a proportion of insurable earnings—up to 75% in Quebec and 55% outside Quebec—most households experience a reduction in household income during the work absence (see Employment Insurance and Quebec Parental Insurance Plan (EI and QPIP).
The costs of parental leave can go beyond short-term income losses. Birth-related employment absences may result in missed training opportunities, promotions and the accumulation of work experience, which might explain some of the persistent earnings gap between women with and without children. Long career interruptions of three or more years have been shown to be a significant factor linked to the “motherhood earnings gap” (Zhang 2009).
To compensate for earnings lost by employees on leave, some employers provide parents with a Supplemental Unemployment Benefit (SUB), also known as a top-up. The SUB is a government initiative that employers use as a means of reducing the net earnings loss of their employees on leave (see The SUB Program). Employer top-ups are only available to those already entitled to Employment Insurance/Quebec Parental Insurance Plan (EI/QPIP) benefits. Payments cover some or all of the difference between what parents receive from EI/QPIP and their regular earnings. The earnings replacement rate, duration of payment and coverage (mothers, fathers and adoptive parents) vary among companies. Top-ups could also indirectly enhance long-term earnings since they often stipulate a return to employment within a specified time, thus encouraging job continuity.
By providing a higher level of overall earnings replacement, employer top-ups may enable more parents to remain on leave for a longer period. EI maternity and parental benefits comprise a core element of the National Children's Agenda designed to help parents better manage the demands of employment and infant care (HRSDC 2005). Starting in January 2001, EI shareable parental benefits increased from 10 to 35 weeks. It is unclear whether employer top-up plans have expanded to the same degree as the public benefit programs.
Although top-ups have become a well-known discretionary employer benefit, little is known about which employees are covered. Findings from Canada's Top 100 Employers suggest “there has been a distinct surge in the availability of parental leave top-up payments, particularly for adoptive parents and fathers” (Yerema 2007). This study uses the Employment Insurance Coverage Survey (EICS) to examine first-time information on the trends in the proportion of mothers with a paid job who receive a maternity or parental leave benefit top-up from their employers.1 By way of descriptive and regression analysis, it also addresses the question of who is likely to receive an employer top-up and whether that receipt influences the rate of returning to work, average time off, and rate of return to the previous employer (see Data source and definitions).
Of all new mothers in 2008, 327,000 (85%) were employed before giving birth (Chart A). Of this group, 262,000 (80%) reported receiving paid maternity and/or parental leave benefits (EI/QPIP), and 51,000 received an employer top-up to these benefits—representing one in five EI/QPIP beneficiaries.2 In 2008, top-ups lasted for an average of 19 weeks with average payments of $300 per week, such that employers collectively paid out more than $290 million towards supplementary benefits for mothers (Table 1).
From 2000 to 2006, approximately three-quarters of previously employed mothers were in receipt of EI/QPIP benefits after birth. Those without benefits during this period included the self-employed, those without enough insurable hours of employment, and those who did not apply. With the introduction of QPIP in 2006 and the subsequent inclusion of the self-employed along with the more lenient qualifying rules, the benefit coverage rate of mothers in Quebec rose to 9 in 10 for 2007 and 2008, which also pushed up the overall national coverage rate.
Among EI/QPIP benefit recipients, the proportion also receiving an employer top-up (around 1 in 5) has remained stable over the nine-year period, as has the average duration of the top-up benefit payments (around 18 weeks). Although parental leave benefits increased from 10 to 35 weeks starting in 2001, there was no corresponding increase in the duration of top-ups. Many employers may not top-up extended parental leave benefits because of the cost or terms imbedded in collective bargaining agreements (HRSDC 2007).
The top-up payment period averaged between 16 and 19 weeks,3 or about four months, suggesting that most women receive a top-up to their paid maternity leave only: 15 weeks for women outside Quebec and 18 weeks for women in Quebec (as of January 1, 2006). Some companies also cover the two-week waiting period: “…a number of collective agreements also stipulate that the employer will provide employees on maternity leave with an allowance to offset the two-week waiting period for EI benefits” (Ibid. 2007).
Most mothers, 80% in 2008, reported receiving payments for less than six months—further evidence that most top-up benefits do not cover the entire paid leave period (Chart B). However, as will be shown, most new mothers eligible for EI/QPIP benefits are on leave for almost one year. Therefore, with only a minority of women receiving top-up payments for six months or longer, the reality is that relatively few mothers are on paid leave with full earnings replacement—EI/QPIP plus an employer top-up—for the duration of their time off.
More mothers with paid jobs in Quebec reported having an employer top-up to their EI/QPIP benefits in 2008 than did mothers outside Quebec—28% versus 17% (Table 2). When several employer attributes are controlled for in a logistic regression model—such as firm size, sector and rate of unionization—Quebec employees are 2.7 times more likely to receive a maternity or parental leave top-up from their employers than are those living elsewhere. Research has shown that Quebec was one of the first provinces to include paid maternity leave in collective agreements. Also, the first major SUB plan for maternity leave was implemented in 1979 in Quebec by a group of public sector unions (Moloney 1989).
With a top-up rate of 39%, working in a unionized job appears to be strongly associated with this employer benefit. However, regression results indicate that unionization is not a key factor. Two workplace characteristics that do significantly increase the chances of receiving a top-up include working for a larger versus smaller company, and working in the public versus the private sector. Large companies of over 500 employees, whether unionized or not, often have the human and financial resources to use incentives, such as top-up plans and other discretionary benefits, to recruit and retain employees. Not only do larger companies have a greater ability to oversee and pay for such benefits, but their large workforce also allows for savings through economies of scale. “By spreading liability over a large number of participants, premiums are lower. Larger firms need more people and, especially in labor-short boom times, need incentives to recruit. They also tend to have more employees who are covered by collective bargaining contracts” (Social.jrank 2009).
Since the SUB Program is a government-initiated program, public sector workplaces are more likely to participate. The public sector includes, for example, employees in all levels of public administration, Crown corporations, public schools, universities, and hospitals (see Data source and definitions). One in two mothers (48%) working in the public sector received an employer top-up to their EI/QPIP benefits—making them 5.7 times more likely to do so than their counterparts in the private sector. While one-quarter of public sector employees are not unionized, 40% of this group still received a top-up.
Finally, having a wage of at least $20 per hour significantly increases the likelihood of receiving an employer top-up compared with those with lower wages. The top-up rate among those earning less than $20 was 9%, compared with 30% for those with a $20 to $24.99 hourly wage, and 36% for those who earn $25 per hour or more. Those with high earnings are more likely to be in professional or skilled jobs and are more costly to replace for companies. Employers use various forms of non-wage compensation to recruit and retain employees—and top-ups may be one such benefit. Other research indicates that higher quality jobs are associated with both better wages and better benefits (Marshall 2003a). Conversely, those with low wages are the least likely to receive supplementary benefits.
Although women in Quebec are more likely to receive an employer top-up than those in other provinces, the duration of payments is not significantly longer—22 versus 18 weeks, respectively (Table 3). The only job characteristic to have a strong significant influence on the number of weeks of top-up payments received is the sector of employment. Mothers employed in the public sector received payments for an average of 22 weeks compared with 12 weeks for those in the private sector. This is further indication that employer top-ups are a common and substantial benefit mainly for public sector employees.
Most employers offering a top-up do so on condition that the mother return to her job within a fixed period of time and remain with the employer for a period of time or she must repay the benefits (see The SUB Program). Therefore employer top-ups act as a strong incentive for women to not only return to the paid workforce, but also to stay with the same employer. In 2008, of all mothers with a paid job before childbirth, 96% with a top-up returned to the same employer compared with 77% of mothers with EI/QPIP benefits and no top-up, and 46% of mothers without any benefits (Table 4). Furthermore, where virtually all mothers with top-ups returned or planned to return to employment within 18 months, 85% of those with EI/QPIP benefits but no top-up stated they would return to work, compared with 71% of mothers without benefits. These findings align with research showing that women's labour market attachment is strongest in countries where women have access to extended paid leave programs, public day care facilities and other family support programs (Rønsen and Sundström 2002). Whether it's the risk of repayment or the desire to re-enter the labour force—women with top-ups are not only more likely to go back to work, but back to their previous jobs.
Of the mothers who had returned or planned to return to work, those with EI/QPIP benefits, with or without an employer top-up, were on leave for an average of 46 to 48 weeks. This is significantly longer than for women without paid leave benefits, who returned after an average of 34 weeks. Although longer leave may impose some costs for employers, the high return-to-work rate equates to positive employee retention.
An employer top-up may lessen the financial impact of childbirth, but since it generally lasts for less than six months, it may not influence the total leave time a mother takes. Most women experience some income loss while on leave since EI/QPIP replaces a maximum of 55% to 75% of previous earnings. However, this level of compensation, with or without an employer top-up, appears to enable most women to remain at home for most of the benefit period. Mothers eligible for EI/QPIP must claim and use the benefits or forfeit them. The results suggest that the opportunity to be at home during the first year of an infant's life outweighs the net earnings loss. Indeed, among couples where at least the mother is entitled to EI/QPIP benefits, 9 in 10 report that the family will claim all benefits available—with no significant difference between those with or without an employer top-up. Of couples who do not claim all available benefits, 50% report the reason for not doing so as either work-related or their own preference to return to work.
With 85% of women working at a paid job before giving birth, employers must regularly manage the short-term absences of new mothers, and, increasingly, of new fathers too. Paid maternity and parental leave programs allow parents time away from the job to care for their newborns with some level of earnings replacement. The federal Employment Insurance (EI) and Quebec Parental Insurance Plan (QPIP) programs allow parents to take up to one year of combined benefits, and under all provincial and territorial labour codes, they are guaranteed employment with their previous employer upon return to work (Baker and Milligan 2005).
With most parents in the labour force, some employers offer policies to help employees manage their work and family responsibilities.4 Some employers offer a Supplemental Unemployment Benefit, a plan that tops up EI/QPIP maternity benefits and, in certain instances, parental leave benefits. The program is regulated by Human Resources and Skills Development Canada but is financed by employers. Payment level and duration varies from company to company. In 2008, 1 in 5 mothers who received EI/QPIP benefits after birth also received an employer top-up. The average weekly top-up for these mothers, which lasted for an average of 19 weeks, was $300. This implies that many employer top-ups cover only the maternity leave portion of public benefits.
Working for a public sector employer significantly increases the chances of a mother receiving a top-up and the length of the payment period: 48% of mothers in the public sector received a top-up for an average of 22 weeks compared with 8% and 12 weeks for those in the private sector. Working for a company with a staff of more than 500, being employed in Quebec and having an hourly wage of $20 or more were also associated with the receipt of employer top-ups.
Of mothers with an employer top-up, only 1 in 5 received payments for six months or more. Therefore only a fraction of all mothers receive full-earnings replacement for the entire period they are on leave. Whether or not the top-up replaces full-earnings or lasts the full EI/QPIP benefit period, the program influences career continuity such that 96% of mothers with a top-up returned to the same employer.
The federal Supplemental Unemployment Benefit (SUB) Program was introduced in 1956 with the goal of subsidizing employees with Employment Insurance (EI) benefits while they were temporarily laid-off. With EI replacing only 55% of previous earnings, a SUB payment helps to further reduce the net loss of earnings. Under the current program, employers are encouraged to create and register SUB plans that cover not only temporary work stoppages, but training, illness and injury or quarantine. Registered plans must meet the requirements of article 37 of the Employment Insurance Regulations set by Service Canada (Service Canada 2009). The program helps increase employees' level of earnings replacement during work absences, but the payments are not counted as insurable and as such EI benefits are not reduced. Employers are meant to gain from this program since employees are enticed to return to the same employer, which helps retain experienced employees and reduce retraining or new hiring. Financing of the plans is the sole responsibility of the employer. At the end of 2008, roughly 3,000 employers had approved SUB plans covering more than 885,000 employees (Service Canada 2008).
SUB plans can also supplement EI or QPIP maternity or parental benefits and EI compassionate care benefits, but they do not need to be registered. Although employers with maternity and parental leave SUB plans, also known as 'top-ups,' do not have to obtain formal approval from Human Resources and Skills Development Canada, records must be kept and two conditions regarding the supplementary payments must be met. First, top-ups must not exceed an employee's normal weekly earnings, and second, the payment must not reduce other accumulated employment benefits such as banked sick leave, vacation leave, or severance pay.5
A study of the maternity and parental leave SUB plans found in major collective agreements, including those covering more than 200 employees in sectors under federal jurisdiction or more than 500 employees under provincial jurisdiction, indicates that most have a number of standard conditions. For example, most plans restrict top-up payments to employees with a minimum number of weeks or months of service, employees must prove they are eligible for EI/QPIP benefits, and coverage is usually offered to full-time regular staff only (HRSDC 2007). Furthermore, most employees must sign an agreement committing to returning to work within a set period of time and for a minimum period of time and acknowledge that failure to do so results in their indebtedness to the company for the amount of benefit received. A 93% income replacement rate of combined EI/QPIP benefits and top-up payments is assumed to equal the usual full salary, due to tax and other advantages. However, the agreements offer a range of different replacement rates, and the offered number of weeks of top-up payments is even more variable (Ibid.).
The Employment Insurance Coverage Survey (EICS), a supplement to the Labour Force Survey, is conducted four times per year and collects information about coverage under the Employment Insurance (EI) program. In 2000, women at home with infants under 13 months began being interviewed regarding access to maternity, parental and adoption benefits. Questions in this section relate to additional payments from employers, private insurance or other benefits while mothers are on leave from a job following the birth of a child. Respondents are asked to report on the number of weeks payments were received and the payment amounts. It is not possible to determine the percentage of total weekly earnings replaced by the payments. More than one-quarter of respondents did not know the amount they received. Finally, outliers with values of more than $800 per week were excluded from the calculations (representing 1% of records in 2008).
The target population for this article includes all mothers with children age 0 to 12 months. In 2008, approximately 1,250 mothers were interviewed, representing a weighted count of 387,000.
The firm size refers to the total number of employees found at all locations of the mother's employer.
The public sector refers to those employed in federal, provincial or municipal public administration, Crown corporations, liquor control boards, public primary and secondary schools, universities, hospitals and public libraries, and other government institutions. The private sector consists of all other employees.
A logistic regression model is used to examine the probability of receiving an employer top-up among all previously employed mothers with paid jobs and who were in receipt of EI/QPIP benefits. Bootstrap estimation techniques were employed to adjust for the complex sampling design of the survey.
Starting in January 2006, the Quebec Parental Insurance Plan (QPIP) replaced the federal Employment Insurance (EI) program for the administration of paid benefits associated with birth or adoption for parents in Quebec. Below is a summary of the benefits and rules for the two programs in 2009. More detailed information on the two programs can be found on the respective government websites (Gouvernement du Québec, Quebec Parental Insurance Plan and Service Canada).
|EI||QPIP (basic plan)1|
|15 weeks of maternity leave||18 weeks of maternity leave|
|55% of average earnings up to a maximum of $42,300 in 2009 ($447 per week)||70% of average earnings up to a maximum of $62,000 in 2009 ($835 per week) (adjusted every year)|
|Two-week waiting period||No waiting period|
|Requires 600 hours of paid work in past year||Requires at least $2,000 of earnings in past year|
|Self-employed excluded||Covers salaried and self-employed|
|Not applicable||5 weeks of paternity leave|
|All parents (birth and adoptive)|
|35 weeks of parental leave||32 weeks parental leave for birth parents, 37 weeks parental leave for adoptive parents|
|Taken by one or shared by both parents||Taken by one or shared by both parents|
|Same rules as maternity leave but no second waiting period required||Same rules as maternity leave except for benefit rate: 7 weeks at 70%, rest at 55% for birth parents; 12 weeks at 70%, rest at 55% for adoptive parents|
|1. Parents can chose between the basic or the special plan. For all types of benefits (maternity, paternity, parental or adoption) the special plan offers fewer benefit weeks (15, 3, 25 and 28, respectively) at an income-replacement rate of 75%.|
Baker, Michael and Kevin Milligan. 2005. How Does Job-protected Maternity Leave Affect Mothers' Employment and Infant Health? National Bureau of Economic Research (NBER) Working Paper 11135. Cambridge, Massachusetts. NBER. 58 p. (accessed January 27, 2010).
Human Resources and Skills Development Canada. 2007. Work and Family Provisions in Canadian Collective Agreements. Ottawa. p. 13. (accessed January 27, 2010).
Human Resources and Skills Development Canada. 2005. Summative Evaluation of EI Parental Benefits: Final Report. January. Catalogue no. HS28-25/2005E. Ottawa. (accessed January 27, 2010).
Marshall, Katherine. 2003a. “Benefiting from extended parental leave.” Perspectives on Labour and Income. Vol. 15, no. 2. Summer. Statistics Canada Catalogue no. 75-001-XPE. (accessed January 27, 2010).
Rønsen, Marit and Marianne Sundström. 2002. “Family policy and after-birth employment among new mothers: A comparison of Finland, Norway and Sweden.” European Journal of Population. Vol. 18, no. 2. June. p. 121-152. (accessed January 27, 2010).
Service Canada. 2009. Guide for the Supplemental Unemployment Benefit (SUB) Program. Ottawa. 13 p. (accessed January 27, 2010).
Katherine Marshall is with the Labour and Household Surveys Analysis Division. She can be reached at 613-951-6890 or email@example.com.