Additional Information on the Canada Emergency Wage Subsidy (CEWS)

April 9, 2020

Further to our communication yesterday regarding the Canada Emergency Wage Subsidy (CEWS), additional information and details have been provided by the Department of Finance in addition to a hypothetical numerical example.   We anticipate draft legislation concerning the CEWS forthcoming shortly from which we anticipate being able to provide further details and clarification.  Additional information has been provided concerning the CEWS eligibility and computation of revenue decline, the CEWS Amounts, and refund for certain payroll contributions.

CEWS Eligibility and Computation of Revenue Decline

To be eligible for CEWS, companies must apply each month and show a minimum 15% revenue decline in March and a minimum 30% revenue decline in April and May.  This decline can be computed by:

  • Comparing March, April or May 2020 revenues to the same month’s revenues in 2019


  • Comparing March, April, or May 2020 revenues to an average of January and February 2020 revenues

Once an approach is chosen, the employer would have to apply it consistently throughout the program period.

Eligible employers can use either a cash or accrual accounting method for the purposes of calculating their CEWS revenue decline and must use the same accounting method for the full duration of the CEWS period.

CEWS Amounts

For eligible employers, the CEWS covers 75% of an employee’s pre-crisis remuneration up to a maximum of $847 per week per employee.  Effectively, employers may then be eligible for a subsidy of up to 100 per cent of the first 75 per cent of pre-crisis wages or salaries of existing employees.

Note that employers are expected to make their “best efforts” to top-up employees’ salaries to bring their salaries to pre-crisis levels.  Future clarification is likely forthcoming on this particular aspect of CEWS.  Presumably, if the employer has sufficient liquidity and cash flows to pay 100 per cent of remuneration factoring in CEWS, they may then be expected to pay the employees’ unsubsidized portion of their wages.

Refund for Certain Payroll Contributions

If employees are on leave with pay and the employer is eligible to claim the CEWS for those employees, 100% of the employer-paid contributions to CPP, EI, the Quebec Pension Plan (QPP), and the Quebec Parental Insurance Plan (QPIP) will be refunded for each full week that employees are on leave. An employee will be considered to be on leave with pay throughout a week if that employee is remunerated by the employer for that week but does not perform any work for the employer in that particular week.  This refund would not be available for eligible employees that are on leave with pay for only a portion of a week.

There is no overall limit on the aggregate refunded amounts for these payroll contributions.  Employers are required to collect and remit these contributions as usual and will apply for a refund when they apply for the CEWS.

Hypothetical CEWS Example

For further clarity, the Department of Finance has provided the following example:

  • Maude and Stéphane own a corporation that operates an automobile repair shop in Saint Boniface, Manitoba. They are working full time, each drawing a salary of $1,300 per week, and have three part-time employees, each earning $800 per week, for a total weekly payroll of $5,000. Maude and Stéphane have reduced their opening hours due to decreased demand for their services. They had initially laid off their employees, but they have now decided to re-hire them following the announcement of the Canada Emergency Wage Subsidy. Their employees are not being asked to report to work during this challenging period.
  • Maude and Stéphane are now keeping their employees on the payroll, paying them 75 per cent of their pre-crisis salary ($600 per week).
  • Maude and Stéphane would be eligible for a weekly wage subsidy of $3,494 ($847 for each of themselves and $600 for each of their employees). Maude and Stéphane would also be eligible for a 100-per-cent refund of their employer-paid contributions to Employment Insurance and the Canada Pension Plan in respect of their employees, providing an additional benefit of up to $124 per week.
  • At the end of each claiming period, Maude and Stéphane would submit an application through the Canada Revenue Agency portal, attesting that their decline in revenues in each month is sufficient to qualify, when compared to the average of January and February. They would also report the total remuneration paid to themselves and their furloughed employees during the month. As Maude and Stéphane have access to direct deposits with the Canada Revenue Agency, they would receive their subsidy shortly after each application.

For more information, visit the Finance Canada website that covers the CEWS.

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