Canada Emergency Wage Subsidy – COVID-19
Canada Emergency Wage Subsidy
Detailed information on this program is available on the Government of Canada websites here and here.
What Is It?
The Canada Emergency Wage Subsidy (CEWS) is a $73 billion subsidy intended to assist Canadian businesses to keep and return their workers to their payroll during COVID-19, reduce claims on employment insurance, and to ease the challenge of returning to normal operations following the crisis.
|How It Works|
|Amount||Employers will generally get a subsidy of 75% of the amount of remuneration paid to an employee, for up to three months (max of $847/week), if they continue to pay their employees during the COVID crisis.
A special rule applies to employees that do not deal at arm’s length with the employer.
Employers will be eligible for a subsidy of up to 75% of salaries and wages paid to new employees.
*There is no overall limit on the subsidy amount that an eligible employer may claim.
|Duration||The program will be in place for 12 weeks, from March 15 to June 6, 2020 (applications can be backdated to March 15).
|Eligibility||Employers of all sizes and across all sectors of the economy, with the exception of public sector entities. The number of employees does not determine eligibility.
Revenues must have decreased by at least 15% for March and 30% for April/May.
Companies can compare their revenue of March, April and May 2020 to that of the same month of 2019, or to an average of their revenue earned in January and February 2020. Once employer selects the general year-over-year approach or the alternative approach to calculate their monthly revenues, it would be required to use the same approach for the entire duration of the program.
Employers are permitted to use either the accrual accounting or the cash accounting method to calculate revenue, but must use the same accounting method throughout.
Once an employer is found eligible for a specific period, that employer would automatically qualify for the next period.
|Application||Applications opened on April 27, 2020 on the CRA website and must be made before October 2020.
Applications in respect of a claim period can be made only after the end of the claim period and provided that the employer has paid the remuneration to the employee that it is claiming for that period.
CEWS Claim Periods
An eligible employer be claim the wage subsidy for one or more of the following three claim periods:
|Claim period||Reference period for eligibility|
|Period 1||March 15 – April 11||March 2020 over either March 2019 or January and February 2020*|
|Period 2||April 12 – May 9||April 2020 over either April 2019 or January and February 2020*|
|Period 3||May 10 – June 6||May 2020 over either May 2019 or January and February 2020*|
*Once the reference period for eligibility is selected, it must be used for the entire duration of the program.
Special Rules Apply for Registered Charities and Non-Profit Organizations
These employers may elect to exclude funding received from government sources when determining their qualifying revenue.
Refund for Certain Payroll Contributions
Under the CEWS, employers are able to claim 100% refund for certain employer-paid contributions for eligible employees for each week throughout which these employees are on a leave with pay, are not performing any work for the employer and for which the employer is eligible to claim for the CEWS.
Refund for employer-paid contributions is available for remittances made to Employment Insurance, the Canada Pension Plan, the Quebec Pension Plan, and the Quebec Parental Insurance Plan. Employers are able to apply for this refund at the same time as they apply for the CEWS.
CEWS is available to Employers that Hire Back Workers and Provide Retroactive Pay
An eligible employer that hires back employees and pays them retroactively in respect of a claim period will be able to qualify to receive the wage subsidy. An important caveat: an employer will not be able to receive the wage subsidy for a claim period in which an individual employee has not been paid any remuneration for a period of 14 or more consecutive days in respect of that claim period.
In cases where the employee has already received the Canada Emergency Response Benefit (CERB) payment from the CRA for that same claim period and they are no longer eligible for the CERB due to the employment or otherwise, the employee can return or repay the CERB amount.
Interaction with the 10 Per Cent Wage Subsidy
The CEWS is different than the 10% Temporary Wage Subsidy (“TWS”) for small businesses. The TWS is a reduction of payroll remittances that an employer must pay to the government. Whereas, the CEWS is a cash subsidy paid by the government to the employer.
Eligible employers can apply for both the CEWS and the TWS, but assistance under the TWS will be deducted from the amount an employer can receive under the CEWS.
Interaction with the Work-Sharing Program
The Work-Sharing program provides income support to employees eligible for Employment Insurance (EI) who agree to reduce their normal working hours because of developments beyond the control of their employers.
The EI benefits received by employees through the Work-Sharing program will reduce the benefit that their employer is entitled to receive under the CEWS.
CEWS is Taxable
Assistance received under the CEWS is considered government assistance and is included in the employer’s taxable income. However, the employer will be entitled to a deduction for the amount of remuneration paid to employees.
The wage subsidy received by the eligible employer will not be included in the calculation of its qualifying revenue.
The federal government has developed Canada COVID-19 app to help Canadians track their symptoms and access the latest updates from trusted information sources directly on their smartphones. Alternatively, individuals can sign up to receive regular updates from the Government of Canada about COVID-19 directly to their email here.