The Federal Government just announced details regarding the 75% wage subsidy that will help businesses keep their workers. This program is called the Canada Emergency Wage Subsidy (CEWS).

Extension to August 29, 2020: The Federal Government announced that it will extend the CEWS) by an additional 12 weeks to August 29, 2020 instead of the previously announced end date of June 6, 2020. (Update as of May 15, 2020)

Please note that this is different from the temporary 10% wage subsidy previously announced by the Federal Government. Employers may be eligible for both the Canada Emergency Wage Subsidy and the 10% wage subsidy for a period. In other circumstances, some employers may not qualify for the Canada Emergency Wage Subsidy but may be able to qualify for the wage subsidy of 10% of remuneration. Please take note of the interaction of these 2 programs below.

What is the Canada Emergency Wage Subsidy?

The Canada Emergency Wage Subsidy will provide a 75% wage subsidy to eligible employers for up to 12 weeks, retroactive to March 15, 2020. This program was designed to prevent further job losses and allow businesses to re-hire previously laid off workers.

Who are eligible to apply?

Eligible employers include:

  • Individuals
  • Taxable corporations
  • Partnerships consisting of eligible employers
  • Non-profit organizations
  • Registered charities

Eligible employers will be able to access this wage subsidy provided they see a drop of at least 15% of their revenue in March 2020 and 30 percent for the following months (refer to Eligible Periods below). Employers applying for the wage subsidy must attest to the decline in revenue. (Updated on April 11, 2020 as per Department of Finance news release)

Who are not eligible?

Public bodies are not eligible for the wage subsidy including:

  • Municipalities
  • Local governments
  • Crown corporations
  • Public universities
  • Colleges
  • Schools
  • Hospitals

How to calculate for your revenues?

The employer’s revenue is defined as its revenue from the business it carried on in Canada earned from arm’s length sources. To calculate the revenue, employers must use normal accounting method and should exclude revenues from extraordinary items and amounts on account of capital. If you need assistance with your calculations, please contact KD Professional.

For non-profits and charities, the government will continue to work with the sector to ensure the definition of revenue is appropriate to their specific situation.

Amount of Subsidy

The subsidy amount for an employee on eligible remuneration between March 15 to June 6, 2020 would be the greater of:

  • 75% of the amount of remuneration paid, up to a maximum benefit of $847 per week and;
  • The amount of remuneration paid, up to a maximum benefit of $847 per week or 75% of the employees pre-crisis weekly remuneration, whichever is less.

Important note: CRA has made available a page to understand the wage subsidy calculation details here Calculate your subsidy amount. You may need assistance with your calculations so please we encourage you to contact KD.

What is eligible remuneration?

Eligible remuneration includes:

  • Salary
  • Wages
  • Other remuneration for which employers would generally be required to withhold or deduct amounts to remit on account of the employee’s income tax obligation.

Eligible remuneration does not include severance pay or items such as stock option benefits or personal use of a corporate vehicle.

What if the employee does not deal at arm’s length with the employer?

There is a special rule for employees that do not deal at arm’s length with the employer. The subsidy amount for such employees will be limited to the eligible remuneration paid in any pay period between March 15 and June 6, 2020, up to a maximum benefit of $847 per week or 75% of the employee’s pre-crisis weekly remuneration.

Is there a limit on the subsidy amount that an eligible employer can claim?

No, there is no limit on the subsidy amount that an eligible employer may claim.

Employers are encouraged to make their best effort to top-up their employees’ salaries to bring them to pre-crisis levels.

Eligible Periods (Updated April 11, 2020)

Generally, eligibility will be determined by the change in an eligible employer's monthly revenues, year-over-year, for the calendar month in which the period began.

The Government announced flexibility to the eligibility requirements on April 8, 2020. Employers, for which the general approach is not appropriate, will be allowed to calculate their change in revenue using an alternative benchmark to determine their eligibility. Employers including high-growth firms, sectors that faced difficulties in 2019, non-profits and charities and employers established after February 2019 will be allowed to compare their revenue using an average of their revenue earned in January and February 2020.

In addition to this, the Government also announced that once an employer is found eligible for a specified period, the employer would automatically qualify for the next period.

Note that the amount of wage subsidy received through the COVID-19 Response Plan in a given month would be ignored for the purpose of measuring year-over-year changes in monthly revenues.

Eligible Period:

  • Period 1: March 15 to April 11 (Claiming period); March 2020 over March 2019 (Reference period for eligibility); 15% required reduction in revenue
  • Period 2: April 12 to May 9 (Claiming period); April 2020 over April 2019 (Reference period for eligibility); 30% required reduction in revenue
  • Period 3: May 10 to June 6 (Claiming period); May 2020 over May 2019 (Reference period for eligibility); 30% required reduction in revenue

Note: As mentioned above, the CEWS has been extended by an additional 12 weeks to August 29, 2020.

How to apply:

Eligible employers can apply through the CRA’s My Business Account portal. If you have not set-up your CRA My Business Account yet, please do so as soon as possible. Note that employers must keep records demonstrating their reduction in arm’s length revenues and remuneration paid to employees.

Interaction with the 10% Wage Subsidy

The Federal Government announced a temporary 10% wage subsidy last March 18th. These are 2 separate programs and some employers may be eligible for both. But for employers that are eligible for both the Canada Emergency Wage Subsidy and the 10% wage subsidy for a period, any benefit from the 10% wage subsidy for remuneration paid in a specific period would generally REDUCE the amount available to be claimed under the Canada Emergency Wage Subsidy in that same period.

Interactions with the Canadian Emergency Response Benefit (CERB)

An employer would not be eligible to claim the Canada Emergency Wage Subsidy for remuneration paid to an employee in a week that falls within the 4-week period for which the employee is eligible for the CERB.

Is the Wage Subsidy received by an employer taxable?

Yes, as with an other tax credit or benefits provided by the government, the wage subsidy received by an employer should be included in the employer’s taxable income.

Note: Penalties may apply in cases of fraudulent claims. Also, employers will be required to repay amounts paid under the Canada Emergency Wage Subsidy if they do not meet eligibility requirements and pay their employees accordingly.

*We will make further updates to these details as new information is released.
**If you would like help determining if this is the appropriate measure for your business, please do not hesitate to contact KD. We will be happy to go through your options with you.

Sources:
https://www.canada.ca/en/revenue-agency/services/e-services.html
https://www.canada.ca/en/department-finance/economic-response-plan.html
https://www.canada.ca/en/department-finance/news/2020/04/the-canada-emergency-wage-subsidy.html
https://pm.gc.ca/en/news/releases