The Rural Voice, 1996-06, Page 61PERTH
Mary McIntosh, President, R.R. 7, St. Marys N4X 1C9 393-6232
PCFA Office 229-6430
Rural Voice is provided to farmers
County Federation of Agriculture NEWSLETTER ' The in Perth County by the PCFA.
Unemployment Insurance coverage
In the past year I have been
working on farm related
Unemployment Insurance issues in
Huron and Perth Counties,
specifically farm wives working off
the farm and their status with respect
to reporting farming income for U.I.
benefits. This issue is yet to be
completely settled, but along the way
I discovered some other U.I. facts
that may be of assistance to farm
businesses. I have learned that some
farm businesses have been able to
obtain refunds of U.I. premiums paid
in the past because the employee was
related to the owner, and therefore his
or her employment was not
considered to be "insurable
employment".
Under Bill C-21, which came into
effect on November 18, 1990,
spouses and other relatives are
considered insurable for U.I.
purposes, as long ashe or she does
not control more than 40 per cent of
the corporation's voting shares in his
or her own right. However, this does
not mean that spouses and other
relatives are necessarily insurable.
This fact is usually discovered after
the person has found themselves out
of work and applies for U.I. benefits
and finds out that they do not qualify
even though they and their employer
have paid significant amounts in U.I.
premiums. People who do not dcal
with their employer on an arm's
length basis are those who may be
denied U.I. benefits. In order to be
truly insurable, spouses and other
relatives must have a definite
employer-employee relationship and
be deemed to be dealing at "arm's
length" with the employer, i.e. as
non -related parties. To deal at "arm's
length" means that a valid contract of
service must exist between the
employer and employee and the
employee should be earning a
reasonable salary.
Two common situations could
exist in a family farming business
where an employee will be U.I.
58 THE RURAL VOICE
exempt because their employment is
not considered to be "insurable
employment".
1. If the employee owns more than
40 per cent of the voting shares of a
corporation, they will be exempt from
paying U.I. premiums.
2. If an employee is not dealing with
the employer on an "arm's length"
basis, and it is reasonable to assume
that the conditions of employment are
not similar to those offered to other
third party employees, the
employment will not be considered
"insurable employment".
It is this second situation that leads
to many related employees being
denied U.I. benefits. Revenue
Canada does not appear to be
consistently applying criteria in
determining whether the conditions
of employment are similar. The
following provides some general
criteria to assist in determining
whether an individual related to the
employer, may be exempt from
paying U.I. premiums:
• non-scheduled work hours
• hours of work not recorded
• worker paid a flat salary
regardless of hours worked
• salary paid once a year
• Salary not pre -determined prior to
commencement of duces
• worker provided with preferential
treatment, i.e. use of company vehicle
• position created for relative only
• no accountability
• works out of residence
• works around child care schedule
or other personal agendas
• bonus or incentives paid in
addition to salary
• vacation provided in excess of
that offered to non -related employees
• worker has signing authority on
business bank accounts
This list is not intended to be an
all inclusive list and a positive answer
to one of them may not conclude that
the employee is U.I. exempt.
What does all of this mean? If
you are a spouse or other relative of
your employer, or you employ your
spouse or relative, do yourself a
favour and. check with Revenue
Canada CPP/UI Rulings to see
whether or not you should be paying
U.I. premiums. To obtain a ruling,
you must complete Form CPT -1
Payer Request for a Ruling. It is also
recommended that you complete
Form CPT -59 Corporate Share
Arrangement Form. There is no
negative side to this procedure which
may provide you with some
assurance whether or not your
employment is insurable. If a ruling
finds that you, or an employee, are
not insurable under the U.I. Act, you
may claim back premiums paid to
Revenue Canada. This form is called
PD 24 - Statement of Overpayment &
Application for U.I. Premiums
Refund. Submit this form with a
copy of your ruling letter. Both the
employee and the employer may
obtain a refund going back three
years if premiums were paid over that
period. Unfortunately, there is a
three-year refund claim limitation
period, so any premiums paid for
more than three years ago, will have
to be forfeited.
To request the above forms call
Revenue Canada Forms Request at 1-
800-265-2210 or Kitchener office at
576-89512 or London office at 645-
4244.0
submitted by Paul Nairn
PERTH COUNTY FEDERATION
OF AGRICULTURE
June Monthly Meeting
Thursday, June 20, 1996
8:30 p.m.
Downie Mutual Insurance
Office, Sebringville
ALL MEMBERS ARE WELCOME