Last week the Federal Government announced it would provide a 75% wage subsidy through a program known as the Canada Emergency Wage Subsidy (“CEWS”), which we previously reported on here.
In his press conference today, Prime Minister Justin Trudeau provided the following details regarding the CEWS:
- Businesses whose revenues have decreased by at least 30% because of COVID-19 will be eligible for the wage subsidy.
- All businesses whether “big or small” that meet this requirement, including non-profits and charities, qualify for the wage subsidy regardless of their number of employees.
- For qualifying businesses, the Federal Government will pay up to 75% of each employee’s wages on the first $58,700.The maximum wage subsidy is $847 per week per employee.
- The wage subsidy will be back-dated to March 15, 2020.
A number of important details remain uncertain, including the following:
- How is the 30% revenue decrease measured? There are presently no details on how the Federal Government will determine whether a business has suffered a 30% revenue decrease, or what evidence will be required to show the decrease was caused by COVID-19.
- Can the CEWS subsidy be the only wages employees receive? Prime Minister Trudeau urged businesses receiving the CEWS subsidy to pay the remaining 25% of wages to each employee, but he did not say this was mandatory.This suggests qualifying businesses might rely exclusively on the wage subsidy to pay their employees.
- Is the CEWS subsidy taxable? It is unclear if the CEWS subsidy is gross or net of applicable tax withholdings. We presume it will be taxed as income from employment.
- Is the CEWS subsidy only available for employees actually doing work? It is unclear how the CEWS will work with the Canada Emergency Response Benefit (“CERB”), which we discussed here.Based on the limited information available to-date, the CERB is intended to provide income protection for Canadians who cease working because of COVID-19.This suggests the CEWS will only be available to subsidize the wages of employees who are actually performing work and are not on layoff.
- Does the CEWS replace the 10% Temporary Wage Subsidy for Employers? On March 18, 2020 Prime Minister Trudeau announced the Temporary Wage Subsidy for Employers, which we discussed here.This is a three-month measure that allows eligible employers to reduce their payroll deductions by 10% up to $1,375 per employee to a maximum of $25,000.This subsidy remains on the CRA’s website but is not mentioned on the Government of Canada’s COVID-19 Economic Response Plan website.It is therefore unclear if the CEWS will replace this program.
Finance Minister Bill Morneau is scheduled to deliver further details tomorrow (Tuesday, March 31, 2020), which we hope will provide greater clarity on these issues.
Prime Minister Trudeau said the CEWS will be made available in the next few weeks. Practically speaking, employers should continue to pay their employees in the ordinary course and apply for the CEWS when it is available.
In the meantime, small businesses can access the interest free loans made available through the new Canada Emergency Business Account, which we discussed here. Small businesses can access a $40,000 loan that is interest free for the first year. It has been announced that qualifying businesses for this $40,000 loan must have a payroll of no more than $1 million for 2019. A quarter of this loan (up to $10,000) is eligible for complete forgiveness if certain conditions are met.
Our firm will continue to provide you with updates as the Federal Government’s response to the COVID-19 pandemic evolves.
The foregoing is for informational purposes only and should in no way be relied upon as legal advice. For legal advice tailored to your circumstances and business, please contact any of SOM LLP’s lawyers by email or telephone.