Canada Emergency Wage Subsidy – Supporting Employers in Canada

Posted
April 1, 2020
in

More details were released today regarding the previously announced 75% Canada Emergency Wage Subsidy (“CEWS”). The CEWS program is effective for 12 weeks, from March 15, 2020, to June 6, 2020.  Department of Finance has estimated the cost of this program to be $71 billion.

CEWS Amount

The CEWS will cover 75% of the first $58,700 of regular salary per employee.  The CEWS amounts to a maximum of $847 per week per employee and is retroactive to March 15, 2020.  An employee’s regular salary will exclude severance pay, employee stock option benefits and benefits associated with personal use of a corporate vehicle.

Eligibility

Employers of all sizes, across all sectors of the economy, excluding public sector entities, are eligible to obtain CEWS. Employers must show a gross revenue decrease of at least 30% during the months of March, April, or May 2020 compared to the gross revenues of the same months during 2019.  For each claim period, companies must reapply and confirm the 30% drop in revenues in the new month compared to the same month in the prior year.

The government announced relaxed restrictions on the CEWS on April 8th, 2020.

Revenues, for the purposes of determining the CEWS eligibility, are to be based on the employer’s revenues from its business carried on in Canada earned from arm’s-length sources.  Revenues also must be calculated using the employer’s normal accounting method, and would exclude revenues from extraordinary items and amounts on account of capital.

The table below outlines each claiming period and the period in which it has a decline in revenue of 30 per cent or more.

  Wage Subsidy Claiming Period Revenue Comparison Reference Period for Eligibility
Period 1 March 15 – April 11 March 2020 over March 2019
Period 2 April 12 – May 9 April 2020 over April 2019
Period 3 May 10 – June 6 May 2020 over May 2019

Entitlement to the CEWS is based entirely on the salary or wages actually paid to employees and employers are expected to “make best efforts” to top up employees’ salaries to 100%.

In addition, an employer would not be eligible to claim the CEWS for remuneration paid to an employee in a week that falls within a 4-week period for which the employee is eligible for the Canadian Emergency Response Benefit.

Businesses less than one year old may be eligible on a month over month revenue comparison; however, the federal government has not announced these details. The government is working with non-profit organizations and charities to ensure the definition of revenue is appropriate to their circumstances.

Applying for the CEWS

A CRA online portal will be launched shortly in this regard.  The federal government has described the CEWS as a high trust program, implying that proving the 30% revenue decrease will be relatively straightforward.  Companies should ensure they can access their CRA My Business Account online (you can register for one here)and establish a direct deposit to have the quickest access to funds. Companies will have to reapply for CEWS every month.  Any companies attempting to abuse the system will face severe consequences.

Receiving Funds

The federal government has stated that CEWS funds will be available in approximately six weeks.

For those employers that are not eligible to claim the CEWS, the 10% Wage Subsidy previously announced will be available to them subject to the thresholds of $1,375 per employee to a maximum of $25,000 per employer.

More information can be found on the Department of Finance website.

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