Short-Term Disability vs. EI Sickness Benefits in Ontario

Current as of October 2026. Government programs, tax rules and prices change. Check the official sources listed at the end of this page before making a decision, and confirm details with a licensed advisor.

Two ways to replace a paycheque during illness

Picture a team member recovering from surgery or a bad back injury. They still have rent, groceries and the car payment, but no regular pay coming in. In Ontario, income during that time usually comes from one or both of two places: an employer-sponsored short-term disability (STD) plan, sometimes called weekly indemnity, or EI sickness benefits paid by the federal government through Service Canada.

They are not competitors. EI is a public safety net with fixed rules. An STD plan is a benefit you choose to provide, and its terms (how much it pays, when it starts, how long it lasts) are set by the plan contract. Knowing how they interact helps you design a plan that does not leave gaps, and helps employees know what to expect when they file a claim.

EI sickness benefits at a glance (as of October 2026)

According to the Government of Canada, as of October 2026 EI sickness benefits work like this:

• Duration: up to 26 weeks of sickness benefits, depending on how long the person cannot work for medical reasons.
• Amount: 55% of insurable earnings, up to a maximum of $729 a week in 2026.
• Eligibility: normal weekly earnings reduced by more than 40%, and at least 600 hours of insurable employment in the qualifying period.
• Paperwork: a medical certificate signed by a doctor or approved medical practitioner, and the claimant pays any fee for it.
• Waiting period: a one-week waiting period normally applies, though Service Canada rules allow it to be waived in some cases where the employer pays sick leave after the person stops working.

What an employer short-term disability plan adds

A group STD plan can be designed to start sooner, pay more or last longer than EI. Common design choices include the waiting (elimination) period before benefits begin, the percentage of pay replaced, a weekly maximum, and the benefit period. These vary by plan, and an advisor can show you how each lever affects the premium.

For employees, the real-life difference is often about timing and size. A plan that pays a higher share of salary from the first week of an accident can mean someone does not have to dip into savings while they focus on physiotherapy and recovery. Many employers pair STD with long-term disability coverage, so that a longer illness moves from one benefit to the next instead of hitting a cliff.

Keep in mind that Ontario's Employment Standards Act only requires up to 3 days of unpaid, job-protected sick leave per calendar year for employees who have worked for the employer for at least 2 consecutive weeks (as of October 2026). Anything beyond that, including paid sick days and STD, is a benefit you choose to offer. See are employee benefits mandatory in Ontario for more.

Who pays first: the STD plan or EI?

As of October 2026, if your plan is registered in the EI Premium Reduction Program (PRP), your plan is the first payer: employees use it before accessing EI. Service Canada says that once wage-loss indemnity or paid sick leave payments end, the employee may be entitled to EI benefits. While the employee is receiving payments from a registered plan, those payments are deducted dollar for dollar from EI, so EI does not stack on top of the plan.

If the employer is not registered in the PRP, Service Canada applies its usual rule for earnings while on claim: 50 cents of EI is deducted for every dollar earned, up to a cap. Either way, the details of an individual claim are decided by Service Canada, so employees should confirm their situation directly with them.

The EI Premium Reduction Program, explained

Here is the part many small business owners have never heard of. If your short-term disability plan meets federal standards and you register it, you can pay lower EI premiums. As of October 2026, Employment and Social Development Canada sets these 2026 reduction rates per $100 of insurable earnings: Category 1, $0.21; Category 2, $0.38; Category 3, $0.38; Category 4, $0.42. Rates are set each year, so check the current figures before budgeting.

Categories 1 and 2 are cumulative paid sick leave plans. Category 3 is a weekly indemnity plan with a benefit period of at least 15 weeks, which is the category a typical weekly indemnity (STD) plan would be assessed under. Category 4 is a weekly indemnity plan of 52 weeks or more and is limited to public and para-public employers.

To qualify, the federal guide says a short-term disability plan must, among other things (as of October 2026):

• Pay at least 15 weeks of benefits (or until the disability ends, if sooner).
• Pay at least 55% of normal weekly insurable earnings, with a weekly maximum at least equal to EI's ($729 in 2026).
• Start paying no later than the eighth day of disability, so the waiting period is no more than 7 consecutive days.
• Cover new employees no later than the first day of the month after 3 months of continuous employment.
• Cover employees 24 hours a day, for both occupational and non-occupational illness or injury.
• Act as first payer, without using EI as part of its payment structure.

Sharing the savings and applying

The PRP is not purely an employer discount. EI premiums are shared between employers and employees, and the program requires employers to return five-twelfths (5/12) of the savings to the employees covered by the plan. That can be done in different ways, and an advisor or your accountant can help you choose a method that fits your payroll.

Employers apply using the Application for Employment Insurance Premium Reduction (Form NAS5022), with supporting plan documents, through the online PRP portal, by mail or at a Service Canada office. According to the program page, you do not need to reapply each year, but changes to your plan must be reported. Plan design, tax and payroll rules all interact, so it is worth looking at your benefits taxation picture at the same time. For example, the CRA requires income tax to be withheld on payments from an employer-funded wage-loss replacement plan, while a plan funded entirely by employees is treated differently.

Choosing the right approach for your team

Some employers rely on EI alone, some offer a few paid sick days, and others build a full STD and LTD structure. The right mix depends on your workforce, your budget and how long your people could realistically manage without pay. A licensed benefits advisor can explain whether your current plan already meets PRP requirements, what it would take to qualify, and how STD fits with the rest of your life and disability coverage.

When you are ready to compare options, get matched with a licensed benefits advisor who works with Ontario employers. GroupBenefitPlans.ca is a referral service: we introduce you to an advisor, and they handle the plan conversation from there.

Common questions

Can an employee collect short-term disability and EI sickness benefits at the same time?

Not as a simple top-up in most cases. If the employer plan is registered in the EI Premium Reduction Program, its payments are deducted dollar for dollar from EI, and EI may become payable once the plan payments end. If the employer is not registered, Service Canada's general earnings deduction rules apply. Employees should confirm their own claim with Service Canada.

How long do EI sickness benefits last?

As of October 2026, the Government of Canada says up to 26 weeks of EI sickness benefits are available, depending on how long the person is unable to work for medical reasons.

Is short-term disability mandatory for Ontario employers?

No. As of October 2026, Ontario's Employment Standards Act provides up to 3 days of unpaid, job-protected sick leave per year for eligible employees. Paid sick days and short-term disability coverage are optional benefits an employer can choose to provide.

How much can the EI Premium Reduction Program save?

Savings depend on your payroll and plan category. For 2026, ESDC lists reduction rates of $0.21 to $0.42 per $100 of insurable earnings depending on category, and 5/12 of the savings must be returned to employees. Rates change every year, so check the current rates page.

Are short-term disability benefits taxable?

It depends on who funds the plan. The CRA requires employers to withhold income tax on payments from an employer-funded group wage-loss replacement plan, while a plan funded entirely by employee contributions is not treated as a wage-loss replacement plan. An advisor or accountant can explain how this applies to your plan.

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