Canada emergency wage subsidy

APRIL 13, 2020

The Canada Emergency Wage Subsidy (CEWS) legislation was passed on the weekend and the details are now available. The CEWS reimburses eligible employers for up to 75% of eligible remuneration for each of three 4 week periods commencing March 15.  

Does my business qualify? 

Provided your business has employees and revenue or cash collections are down by 15% in March or will be down by 30% in April and May then you qualify. Alternatively, you can also qualify if your revenue is down by the same percentages against the average of January and February of 2020. Remember each month is a separate test and separate qualification period – so you can qualify for one, two or three periods. Importantly, if you qualify as an eligible employer for one month you automatically qualify for the succeeding month as well. So, if you qualify for March then you will be an eligible employer for the first two 4 week periods; and if you qualify in April then you automatically qualify for both the final two periods.

Does the 75% reimbursement apply to non-arm’s length employees? 

Yes, so long as they were on the payroll throughout the period January 1 to March 15, 2020.

How do I apply and when? 

Soon, but date not known yet. Businesses will apply either through their CRA My Business Account portal or a new web-based application. Applications must be made no later than October, 2020. It is anticipated that you will receive your subsidy by cheque or direct deposit within one month of application.

If your cash flow permits, you may be wise to delay applying until you can determine which of the 4 methods of revenue comparison yields the best result. Once you have chosen a method you must keep the same methodology for all 3 periods so having more information will help you make the optimal decision.

How does it work if my business has multiple related companies? 

If those companies are part of a group of related businesses that consolidate their results in normal practice then you can use the consolidated revenue to determine if your business qualifies. This is particularly helpful for our clients where a service company provides services to related companies that sell to 3rd parties.  

Which salaries are eligible for reimbursement? 

In most cases it's straight forward – all salaries up to 75% up to $847 a week. There are a number of technical exceptions that will apply if an employer artificially inflates income to take advantage or if the pay is part of a termination package. There are other exceptions and complications that will apply in some circumstances.

What if my business already applied for the 10% wage subsidy?

No problem, the benefit of that program will simply reduce the benefit paid under the CEWS.

If my business can’t afford to pay the remaining 25% can the program help?

Yes, there is a methodology that permits employers to reduce employee's compensation but have the reimbursement based on average earnings in the period January 1, 2020 to March 15, 2020. The reimbursement cannot exceed the amount paid to the employee. Employers are expected to attempt to pay the 25% but the plan contemplates that some employers will not be able to do that.