On April 11, 2020, the Canada Emergency Wage Subsidy legislation was passed. Here is a final summary of the important details of the program.
What employers are eligible for the CEWS?
- Eligible entities include individuals, corporations and partnerships.
What is the eligibility threshold for the CEWS? - An employer will be eligible, if the decline in “qualifying revenue” is 15 % or more for March 2020, and 30% or more for April 2020 and May 2020. Employers will be required to attest to this revenue drop in their application.
- There are three qualifying periods for remuneration as follows:
- Period 1 (March 15 to April 11): the employer must show a reduction in revenue of 15% in March 2020 as compared to either March 2019 or an average of January and February 2020.
- Period 2 (April 12 to May 9): the employer must show a reduction in revenue of 30% in April 2020 as compared to either April 2019 or an average of January and February 2020.
- Period 3 (May 10 to June 6): the employer must show a reduction in revenue of 30% in May 2020 as compared to either May 2019 or an average of January and February 2020.
- If employers qualify for any given month, they automatically qualify for the following month.
What is “qualifying revenue”?
Qualifying revenue is computed using the employer’s normal accounting method. An employer may elect to use the cash method of accounting for revenues for this test however. It excludes revenues derived from non- arm’s length persons or partnerships.
What is the amount of the subsidy?
- The government will provide eligible employers with the subsidy equivalent to the greater of:
a. 75% of the amount of remuneration paid up to a maximum benefit of $847 per week per employee; and
b. the amount of remuneration paid, up to a maximum benefit of $847 per week or 75% of the employee’s pre-crisis weekly remuneration (referred to as “baseline remuneration”), whichever is less. - For non-arm’s length employees, the subsidy amount will be limited to 75% of the baseline remuneration paid which is defined as an average of weekly eligible remuneration PAID from January 1, 2020 to March 15, 2020 (excluding any 7 or more consecutive day period unpaid).
- Baseline remuneration includes wages, salary, benefits, commissions but does not include dividends.
- The subsidy is reduced by any amounts claimed under the 10% Temporary Wage Subsidy for the qualifying period.
Does the subsidy extend to payroll remittances?
- In addition to the base subsidy, the CEWS will cover 100% of the employer paid contributions of Employment Insurance, and Canada Pension Plan for eligible employees who are on leave with pay, i.e. those who are not performing any work for the employer in any particular week and for whom the employer is eligible to receive the base CEWS subsidy. The subsidy does not apply to employees who work part of the week.
Do employees, currently on layoff, have to be recalled?
- As employer you are expected to make best efforts to recall your employees, but it is not a condition of eligibility for the subsidy.
- The subsidy payments however will not be available in respect of employees who are without remuneration in respect of 14 or more consecutive days during the qualifying period.
Will employers be taxed on the subsidy?
- Any wage subsidy received by employers will be considered government assistance and will be included in the employer’s taxable income.
How does CEWS interact with CERB?
The government wants employers to rehire employees as quickly as possible and apply to the CEWS. It will not allow a doubling up with CERB benefits.
Are there penalties for misusing the CEWS?
- any artificial transactions to reduce revenue for the purposes of claiming the CEWS will be subject to a penalty equal to 25% of the value of the subsidy claimed plus, of course, the full repayment of the subsidy
How do employers apply for the CEWS? - Employers will be able to access the application through the CRA’s My Business Account online portal which will become available within 2 to 4 weeks. See registration link below:
