Introduction
Parental leave planning is a practical challenge for any self-employed professional — but for a dentist who is both the practice owner and its primary clinician, the financial implications of an extended absence are more complex than for an employee. Personal income stops. Practice overhead continues. And the interaction between the professional corporation, EI eligibility, and the practice's operational coverage requires planning well in advance.
Employment Insurance for Incorporated Dentists
Dentists operating through a professional corporation and paying themselves salary are considered self-employed for Employment Insurance purposes if they control more than 40% of the voting shares of the corporation. This is the case for most owner-dentists.
Under the standard EI rules, self-employed individuals and incorporated professionals who control more than 40% of their corporation's voting shares are not eligible for regular Employment Insurance benefits. However, since 2010, self-employed Canadians have been able to opt into a voluntary EI program that provides access to special benefits — including maternity, parental, sickness, and compassionate care benefits.
To access these benefits, the dentist must have registered for the voluntary program at least 12 months before the claim begins, and must have paid self-employed EI premiums during that period. Registering for the program only when pregnancy is confirmed or parental leave is imminent does not satisfy the 12-month waiting period.
Planning implication: Dentists who anticipate the possibility of parental leave at any point in the near future should consider registering for the voluntary EI self-employment program well in advance — not when the need becomes immediate.
EI Benefits from the Corporation
Where the dentist is employed by their professional corporation and pays themselves an arm's-length salary, the corporation pays EI premiums on the salary (employer and employee portions). In this case, the dentist may be eligible for EI benefits in the same manner as any other employee, provided the employment arrangement is genuine and at arm's length.
Whether an owner-manager's employment arrangement is genuinely insurable for EI purposes depends on whether the employer-employee relationship is arm's length and the arrangement is on comparable terms to what the corporation would offer an unrelated employee. Arrangements that are structured to generate EI eligibility but do not reflect genuine employment may be challenged by Service Canada.
Corporate Cash Flow During Parental Leave
The practice's overhead — staff wages, facility costs, equipment financing, supplies — continues during parental leave regardless of whether chair time is being produced. For a practice where the owner-dentist generates most of the clinical revenue, a six-to-twelve-month parental leave creates a significant revenue gap against a continuing fixed cost base.
Planning options include:
Hiring a locum dentist to cover clinical production during the leave period. The locum arrangement (employee or independent contractor) creates its own payroll or T4A obligations, as discussed in Article 14 and Article A7.
Reducing clinic hours proportionally and managing practice overhead to match the reduced revenue. This may involve temporary staff reductions or amended facility arrangements, depending on the lease and employment contracts.
Building a practice reserve fund before the leave — retained earnings in the corporation that can fund overhead during the period of reduced production.
Corporate Salary During Leave
Where the owner-dentist continues to draw salary from the corporation during parental leave, those salary payments are deductible to the corporation as a business expense — provided the salary is reasonable and documented. A salary that continues to be paid during a period where no services are rendered may attract CRA scrutiny if it is unusually high relative to what would be paid to an arm's-length employee for a similar arrangement.
Maintaining accurate documentation of the leave period, the coverage arrangements in place, and the basis for any salary continuation supports the deductibility of those payments.
When to Speak With a CPA
Parental leave planning for an incorporated dentist involves EI eligibility, corporate cash flow, locum arrangements, salary continuance, and post-leave ramp-up. A CPA familiar with professional corporation structures can help model the financial impact and structure the arrangements to minimise both personal income disruption and corporate tax inefficiency.