Employment insurance for the self-employed

Originally published in OVMA Focus Magazine May/June 2024

BY GREG TONER

Melissa has been one of my clients since shortly after she graduated. She started working as an associate, and after about three years, she started working as a locum at a local emergency clinic. About six months ago, she and her husband, Tony, who is also a veterinarian and owns half of the practice that his father started 25 years ago, let me know that Melissa was pregnant.

In both of their cases, they aren’t covered by employment insurance (EI) for maternity and parental benefits. Melissa because she’s self-employed, and Tony because he owns more than 40 per cent of the voting shares of the corporation that operates the practice he works in.

Melissa and Tony are in their mid-thirties, and they’re planning on having three children. They both love practising veterinary medicine and plan on having long careers. Melissa loves the control that she has over her schedule as a locum, and Tony plans on purchasing the rest of his father’s practice in the coming years.

We recently discussed whether they were eligible for EI benefits, and how they would fund the time that they both plan to take off with their child.

There’s an option for self-employed individuals to register for EI benefits, however, there are two main issues for people in Melissa and Tony’s situation:

1. You need to register for the self-employed program 12 months before you make a claim.

2. Once you register, you’re bound to make premium payments to EI for employment (or self-employment) income for the rest of your life.

Timing

For the first issue, with the average gestation period for a baby being about 40 weeks, Melissa and Tony would have had to apply for the program about four months before they started trying to conceive their baby.

Economics

The second issue is more of an economics question. If you’re planning on having three children spaced two years apart, and inflation (which determines the annual increases in EI benefits) is about five per cent, you’ll receive about $105,000 in EI benefits over all three maternity leaves.

If you miss applying for the EI for self-employed program for your first child, or you only plan on having two children, you’ll only receive about $68,000 in benefits.

EI contributions for 2024 are $1,049.12. In Melissa’s case, she has another 30 years to practice, so using the same assumption of five per cent for inflation, she’ll contribute about $69,000 to the EI system.

It’s about break-even in her case. She gets about $68,000 in benefits when she needs them and pays roughly the same amount back into the system over the rest of her career. On top of that, she’s also eligible for these additional benefits under the EI system:

1. Sickness benefits (15 weeks).

2. Compassionate care benefits (26 weeks).

3. Family caregiver benefits—children (35 weeks).

4. Family caregiver benefits— adults (15 weeks).

For more information about these special benefits visit www. canada.ca/en/services/benefits/ei/ ei-self-employed-workers.html.

Spouses

What about Tony? He wants to take time off as well. In his situation, he would need to register for the same self-employed program and make the same commitment to contributing to EI for the rest of his working life. So, another roughly $69,000.

On top of that, he would need to contribute the employer’s portion of EI through his company, which would be roughly $97,000, since employers pay 1.4 times as much as employees to the EI system.

The total contribution is over $235,000 to receive about $68,000 in EI benefits, since Melissa and Tony need to share the benefits. In Tony’s case, it’s not worth registering for EI. He’ll have to fund his parental leaves from corporate savings.

What should you do?

It depends on your situation. Generally, it only makes sense to consider applying four months before conception.

When the birthing mother owns more than 40 per cent of the corporation they practice in, it likely doesn’t make sense to register for EI self-employment benefits— you’ll need to fund any leave from corporate or personal savings.

With both parents being self-employed, consider having only one parent register for the EI self-employed program. Since the birthing mother is eligible for 15 weeks more of benefits than the other parent, it likely makes sense for that parent to register with EI as a self-employed individual. It doesn’t make sense for both parents to register.

Greg Toner, CPA, CA, TEP, CLU, is principal at VetCPA.

Reprinted from the Ontario Veterinary Medical Association’s Focus magazine www.ovma.org

The benefits of pet insurance and wellness plans

Originally published in OVMA Focus Magazine March/April 2024

BY NANCY POPPE

Many pet owners express confusion on the topic of pet health insurance and veterinary wellness plans. There are clear benefits for both pet owners and veterinary practices when pets have insurance and a wellness plan. As such, it’s worthwhile to provide clients with good information to make informed decisions.

Wellness plans

A wellness plan provides planned annual veterinary care costs bundled as a package that can be paid in monthly installments. For pet owners, when considering the cost of paying veterinary bills all at once or spreading the cost over monthly payments, there’s a financial bud- get benefit to having a wellness plan. For veterinary practices, the benefits of wellness plans include client retention and compliance regarding veterinary recommendations. A wellness plan takes time to set up and administer, but the benefits are significant enough to warrant the effort.

A wellness plan should incorporate all preventive veterinary recommendations for a one-year period and divide that cost into monthly payments. When setting up your plan, consider the preventive care needed to maintain optimal health. From there, you may consider add-on options for senior pets, dental procedures and specialized plans for puppies and kittens, which have higher costs the first year (e.g. spay/neuter) that can be daunting to pet owners.

In addition to its development, consider how the plan will be implemented within your practice management software and how payments will be collected. Educate all team members on your wellness plan, so they can educate clients on what a wellness plan is, what it covers and how it works. Use printed materials such as brochures to help further explain your wellness plan to clients.

Pet insurance

Pet insurance is very different than a wellness plan and provides compensation for unexpected veterinary costs. Treatment of injured and ill pets is costly, and when it’s a surprise, it can force owners into a financially difficult decision at an emotional time. Pet owners with pet insurance can receive lifesaving treatments that they may not be able to otherwise afford for their pet. Promoting pet insurance is a win-win: clients will be better prepared for unexpected veterinary costs and veterinarians will see more compliance of treatment recommendations when cost is no longer the driving factor for clients’ decisions.

Pet health insurance and wellness plans differ in patient care needs: one is for unexpected veterinary costs, the other for expected costs. However, they are the same in that they both enable clients to provide the best care for their pets. Veterinary practices offering wellness plans and promoting pet insurance provide clients with valuable options.

Nancy Poppe, CVPM, CPB, is a practice advisor at VetCPA.

Reprinted from the Ontario Veterinary Medical Association’s Focus magazine www.ovma.org

The value of an annual fee increase

Originally published in OVMA Focus Magazine January/February 2024

BY NANCY POPPE

A new year has rolled around again and it’s time to consider the fees you’re charging. Should they be increased? Over the past year you may have had clients complain about your fees, and you may be sensitive to your clients’ ability or willingness to pay more for services.

We’ve all felt the effects of inflation at the grocery store, gas pumps and with any purchases we make. Your practice isn’t immune to inflation and its effect on your bottom line. As OVMA’s Accounting Service, we know that DVM and non-DVM wages make up half of the expenses in a veterinary hospital. To retain and attract staff, wages need to increase as the cost- of-living increases. An annual fee increase is a necessity to keep your practice financially healthy.

Ultimately how your fees are perceived comes down to value. Veterinarians offer a valuable service to pet owners, who want to provide the best care for their animals. When clients are educated on what they’re paying for, they will value the service.

OVMA’s 2023 Ontario Pet Owners Report indicates that being interested in a pet’s well-being was the most important factor for pet owners when choosing a veterinarian. However, offering reasonably priced services was also highly rated when choosing a veterinarian. How do we reconcile these two factors? Clients value honesty and communication— they must understand procedures and feel comfortable with the recommendations being made. Team members who communicate services with confidence and clarity will give clients the knowledge they need to see the value in the service being recommended. Once the value of a service is understood by the client, the fee becomes less of a concern and more readily accepted. All team members need to be on the same page. A team that speaks with one voice will give clients a consistent message and achieve the goal of excellent client education.

Review your current fees and compare them to OVMA’s fee guides. Now is the time to make the necessary corrections to your fees. Once you’ve decided on your annual increase, be sure to educate your staff on the changes. It’s imperative that staff understand the fees. If they think a fee is too high, they won’t effectively communicate value to clients.

Team members see revenue coming in, but they don’t see the costs of running the practice. Without a clear understanding of the whole picture, they may jump to the conclusion that the clinic is charging too much. Share this information with the team. You might consider using a pie chart to illustrate the cost percentages for your clinic, without sharing your financials. Staff will understand that the practice needs to set fees appropriately to cover the costs of day-to-day operations. Once your team is on board, they will be your best asset in advocating for your practice.

Annual fee increases should be embraced rather than dreaded. They’re necessary to operate a healthy practice. When you have your team on board, the fee increase will go smoothly and be accepted by clients.

Nancy Poppe, CVPM, CPB, is practice advisor at VetCPA.

Reprinted from the Ontario Veterinary Medical Association’s Focus magazine www.ovma.org

Payroll is like riding a bike

BY GREG TONER

Originally published in OVMA Focus Magazine Nov/Dec 2023

This year, I got to teach two things that I love to do: I taught my daughters how to ride a bike, and I taught practice owners and their administrators how to run payroll using cloud tools.

Like riding a bike, payroll is easy until something unexpected happens. Riding a bike on a flat path with no cars, potholes, cracks, hills, puddles, wind, pedestrians or other cyclists is easy. Riding a bike on a city street during rush hour in a rainstorm is an entirely different experience.

Similarly, running payroll on a regular cycle, where no one was sick, no one took a vacation, every- one showed up on time, there were no statutory holidays and there were no banking holidays to mess with processing timelines, is easy. Get your hours, enter them into your system and go. No problems at all.

With the holidays approaching, payroll is about to start looking like biking down a city street, during rush hour, in the rain.

There are four big issues to watch out for:

Statutory holiday pay

In Canada, there are designated holidays where employees are entitled to a day off with pay. Two of them fall in December: Dec. 25 (Christmas Day) and Dec. 26 (Boxing Day). Shortly after, there’s also New Year’s Day.

Depending on how your pay periods land, all three may be in the same pay cycle.

In Ontario, statutory holiday pay is calculated as 1/20 of the hours that an employee worked in the preceding four weeks. Essentially, the average length of their workday over the last four weeks. Some software automatically calculates this for you, while others require that you do it on your own, and if you’re calculating payroll manually, you’ll obviously need to calculate this as well.

Vacation pay

With so many holidays in such a short period of time, it’s likely that you’ll have staff off during the two weeks leading up to the end of the year. It’s a good idea to have a calendar and know who’s on and who’s off throughout those two weeks and figure out who is using vacation days and who might have run out of vacation days.

Most software can track your staff’s accrued vacation time, so it’s easy to know how many hours your team members have that can be used over the holidays.

If you don’t have up-to-date calculations, determine the year-to-date vacation entitlement and how many hours are left. Compare this to your team’s vacation plans to see if there’s anyone who doesn’t have enough vacation time, and then decide whether you’ll let them carry a negative vacation balance into the beginning of the next year.

Sick pay

As kids go back to school and winter descends, it’s inevitable that you’ll have staff members off. Depending on your policies, some will use sick days or vacation days, and some will have unpaid time off, adding another level of complexity to your payroll around the holidays.

Bank holidays

If you’re paying your team through direct deposit, you know that your payroll provider will need several business days to withdraw the funds from your account and deposit them into your staff members’ bank accounts.

Over the holidays, with the statutory holidays outlined previously, you’ll need to make sure that you don’t miss deadlines, as the banks will be closed, meaning you’ll need to run payroll earlier. Take a moment in early December to note your payroll processing deadlines and mark those dates in your calendar.

Payroll around the holidays can be messy, but if you’re paying enough attention to what’s going on around you, it can be just like a solo ride down a bike path on a sunny day.

Greg Toner, CPA, CA, TEP, CLU, is principal at VetCPA.

Reprinted from the Ontario Veterinary Medical Association’s Focus magazine www.ovma.org