COVID-19 Tip #2: Canada Emergency Wage Subsidy
Ed. Note: Since posting, the CEWS was extended to August 29, 2020. The Government is consulting with business and labour representatives on potential adjustments to the program to incent jobs and growth, including the 30% revenue decline threshold. Further updates will be provided once available.
How much is the Canada Emergency Wage Subsidy (CEWS)?
75% of the wages normally earned by an employee between March 15 and June 6, 2020, up to a maximum of $847 per week.
Here is an example:
An employer has four full‑time employees, each earning $800 per week, and 6 part-time employees, each earning $400 per week, for a total weekly payroll of $5,600. The employers are keeping all of their employees on the payroll, paying them their full regular wages, despite their revenues being down by 30 per cent. The employers would be eligible for a weekly wage subsidy of $4,200 ($600 for each of their full-time employees and $300 for each of their part-time employees).
Who is eligible?
To be eligible, you must:
- be an employer of any size across all sectors of the economy, other than public sector entities; and
- suffer a drop in gross revenues of at least 15% in March, and/or 30% April or May compared to the same month in 2019, or to an average of their revenue earned in January and February 2020.
The subsidy applies to non-profit organizations and registered charities.
The subsidy could also apply to salaries and wages paid to new employees.
How is the CEWS calculated?
To measure revenue loss, employers may compare their revenue in March, April and May 2020 to the same month in 2019, or to an average of their revenue earned in January and February 2020. The periods which may be subject to claims are:
- March 15 to April 11;
- April 12 to May 9; and
- May 10 to June 6.
An eligible employer’s entitlement to the wage subsidy will be based entirely on the salary or wages actually paid to employees. All employers would be expected to at least make best efforts to top up salaries to 100% of the maximum wages covered.
Exceptions or Reductions in CEWS:
- employers that are eligible for both the CEWS and the 10% cent wage subsidy for a period, any benefit from the 10% wage subsidy will generally reduce the amount available to be claimed under the CEWS in that same period;
- an employer cannot claim the CEWS for remuneration paid to an employee in a week for which the employee is eligible for the Canada Emergency Response Benefit; and
- the usual treatment of tax credits and other benefits provided by the government would apply. This means that the wage subsidy received by an employer would be considered government assistance and be included in the employer’s taxable income.
- Employment Insurance benefits received through the Work-Sharing Program, will reduce the benefit that the employer is entitled to receive under the CEWS.
An employer will be required to repay amounts paid under the CEWS if they do not meet the eligibility requirements and pay their employees accordingly.
Penalties may apply in cases of fraudulent claims. In addition, anti‑abuse rules will be proposed to ensure that the subsidy is not inappropriately obtained and to ensure that employees are paid the amounts they are owed.
The government may also create new offences that will apply to individuals, employers or business administrators who provide false or misleading information to obtain access to this benefit or who misuse any funds obtained under the program. The penalties may include fines or even imprisonment.
How do I apply?
CEWS is available from March 15, 2020, to June 6, 2020.
Applications for the CEWS is made through the Canada Revenue Agency’s My Business Account portal as well as a web-based application. Employers have to keep records demonstrating their reduction in arm’s-length revenues and remuneration paid to employees. The government will be releasing more details about the application process shortly.