Updates for Periods 5 to 10 of the Canada Emergency Wage Subsidy (CEWS)

CEWSupdate

The rules of the CEWS have been modified for periods 5 (July 5, 2020 to August 1, 2020) to 10 (November 22, 2020 and ends on December 19, 2020) with transitional rules available for periods 5 and 6.

For periods 5 to 10 (starting July 5 to December 19, 2020), the CEWS has been adjusted to allow access to all eligible employers that have experienced a decline in revenue for a claim period, with a base wage subsidy amount and an additional top-up wage subsidy amount for those employers that have been adversely affected by the pandemic. Also, for periods 5 and 6, an eligible employer can calculate their wage subsidy in certain circumstances under the rules that apply to the first four periods if the result is more favourable (safe harbour rules for periods 5 & 6).

Qualifying Periods
The qualifying periods, their corresponding dates and current reference period (the period in respect of which an eligible employer’s qualifying revenue would be compared to its qualifying revenue in the applicable prior reference period to determine revenue reduction) are as follows:
• Period 5- begins on July 5, 2020 and ends on August 1, 2020;
• Period 6- begins on August 2, 2020 and ends on August 29, 2020;
• Period 7- begins on August 30, 2020 and ends on September 26, 2020;
• Period 8- begins on September 27, 2020 and ends on October 24, 2020;
• Period 9- begins on October 25, 2020 and ends on November 21, 2020;
• Period 10- begins on November 22, 2020 and ends on December 19, 2020;
• A prescribed period that ends no later than June 30, 2021 (currently there are no prescribed periods).

General or Alternative Approach
Under the general approach, the eligible employer compares its qualifying revenue in the current reference period to that of the same month for 2019.

Under the alternative approach, the eligible employer compares its qualifying revenue in the current reference period with that of its average revenue earned in January and February 2020.

For periods 5 to 10, if the eligible employer used the general approach for the periods 1 to 4, it can continue to use this approach for periods 5 to 10. It can also elect to apply the alternative approach for periods 5 to 10.

If the eligible employer used the alternative approach for claim periods 1 to 4, it can elect to continue using this approach for periods 5 to 10 or it can apply the general approach for periods 5 to 10.

Note that once an approach is chosen, the eligible employer would be required to use the same approach for all of the periods from 5 to 10. Also, the approach chosen must be used for both the base revenue reduction percentage calculation and the top-up revenue reduction percentage calculation.

Determining the revenue reduction for periods 5 to 10
The two available approaches mentioned above for the reduction in revenue determination will continue to apply for periods 5 to 10.
For periods 5 to 7, the top-up wage subsidy is calculated based on the three-month revenue reduction test.

Example: For period 5, the reference periods for comparison under the general year-over-year approach is April to June average OVER April to June 2019 average. And the reference period for comparison under the alternative approach is April to June 2020 average OVER January and February 2020 average.

For periods 8 to 10, the top up wage subsidy is the greater of the amount determined under the three-month revenue reduction test and the one month revenue reduction test.

Example: For period 8 for the one month revenue reduction test, the reference periods for comparison under the general year-over-year approach is October 2020 OVER October 2019 or September 2020 OVER September 2019. The reference periods for comparison under the alternative approach is October 2020 or September OVER average of January and February 2020.

No revenue reduction for a claim period
For periods 5 to 10, if an eligible employer has not experienced a revenue reduction for a particular period, it may still claim the wage subsidy in the particular claim period if the deeming rule applies or if it is eligible for top-up portion of the subsidy.

Deeming rule for periods 5 to 10
For period 5 to 10, if an eligible employer had a greater reduction in revenue in the immediately preceding claim period than it has otherwise determined for the current claim period, the reduction in revenue for the immediately preceding period is deemed to be the eligible employer’s reduction in revenue for the purposes of determining its base wage subsidy amount for the current claim period.
This deeming rule for periods 5 to 10 applies in respect of each particular claim period subsequent to claim period 4, but a reduction in revenue considered to be the current claim period’s reduction in revenue (because of the deeming rule) cannot apply beyond the current claim period.
In order to determine if the deeming rule applies, an eligible employer must compare its reduction in revenue for the current claim period with its reduction in revenue for the immediately preceding claim period. For this purpose, the reduction in revenue for the immediately preceding claim period is calculated using the rules (that is, the elections and approaches) that were applicable to that specific claim period for the eligible employer.

Safe Harbour rule for periods 5 to 10
Under the safe harbour rule for periods 5 and 6, if an eligible employer that qualifies for the wage subsidy has a revenue reduction of 30% or more, then the employer would be entitled to a wage subsidy not lower than the amount calculated under the rules in place for periods 1 to 4 in respect of an eligible employee who is not on leave with pay for that week.

Important note on qualifying revenue
An eligible employer qualifying revenue for a reference period CANNOT be adjusted to account for changes in business operations of an eligible employer’s business. An eligible employer must use its normal accounting practices when determining its qualifying revenue.

Source: https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-wage-subsidy.html

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