On October 14, 2020, the Department of Finance released a backgrounder detailing proposed amendments to the Canada Emergency Wage Subsidy (CEWS). This follows an announcement by the Federal Government to introduce new legislation aimed at helping businesses that have experienced a drop in revenue as a result of COVID-19.
Key Proposed Changes
- The CEWS would be extended until June 2021.
- The maximum base subsidy rate would be set at 40 percent and the maximum top-up subsidy rate would remain at 25 percent.
- For application periods after September 27, 2020, employers would be able to calculate their base and top-up subsidy percentage by using a year-over-year monthly revenue comparison, as opposed to the current method of averaging 3-month revenue-declines.
- From September 27 to December 19, 2020, employers would be entitled to choose between the current and new formulas for calculating subsidies. This “safe harbour” rule is designed to ensure that employers would not receive a lesser subsidy under the new formula.
- As of October 25, 2020, the wage subsidy for furloughed employees would be aligned with the benefits provided through Employment Insurance (EI), meaning that the subsidy for these employees would be dependent on their renumeration. Generally, this would result in a subsidy of up to $573 per employee.
CEWS – General Refresher
The CEWS is aimed at protecting jobs by providing businesses with funds so that they may retain and rehire workers. Currently, employers can apply for subsidies retroactive to March 15 and until December 19, 2020. We have previously reported on the CEWS here, here, and here.
Eligibility Criteria for Employers
To be eligible to receive the CEWS, employers must meet the following criteria:
- Have had a CRA payroll account on March 15, 2020
- Be an eligible employer, including:
- Sole proprietorships and taxable corporations
- Certain Indigenous government-owned corporations
- Non profit organizations
- Partnerships consisting of 50% or more eligible employers
- Registered charities
- Have experienced a drop in revenue compared to a period prior to the pandemic. The employer’s subsidy amount is based on the quantity of their revenue drop.
Scope of Subsidy
The CEWS provides employers with a base subsidy rate of up to 60 percent of eligible wages. The subsidy rate varies based on how much an employer’s revenue has dropped.
As of July 5, 2020 the wage subsidy is calculated on a sliding scale, meaning that any revenue decrease will entitle an employer to a wage subsidy. Furthermore, employers that experience a 3-month average revenue drop of at least 50 percent are eligible for a scaled top-up subsidy. The subsidy rates gradually decrease over subsequent months.
To determine if the required revenue decline has occurred, employers have the option to compare their monthly revenue with the average of revenues for January and February 2019 or 2020. Alternatively, employers can compare the revenue from the qualifying application period to the same month in 2019.
When calculating baseline renumeration to be subsidized, employers can rely on the average wages between January 1 to March 15, 2020 or those of July 1 to December 31, 2019. For applications on and after July 5, 2020, employers can claim the CEWS for employees that have been unpaid for 14 or more days.
Application Periods
The following periods are currently open for CEWS applications:
The following are upcoming application periods:
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.