New Business Subsidy Programs
The Canada Emergency Wage Subsidy (CEWS)
The goal is to help businesses keep and return workers to their payroll through the challenges posed by the COVID-19 pandemic. This would provide a 75 per cent wage subsidy to eligible employers for up to 24 weeks, retroactive to March 15, 2020.
Updates to the program were announced on May 15, including an extension of the program to August 29, 2020, allowing employers to use CEWS for up to 24 weeks (up from 12 weeks) as well as regulatory changes which have expanded the program to more businesses.
More details on these changes are coming soon. The full release from May 15 regarding the expansion of CEWS is available here: https://www.canada.ca/en/department-finance/news/2020/05/extending-eligibility-for-the-canada-emergency-wage-subsidy.html
Eligible employers would include individuals, taxable corporations, partnerships consisting of eligible employers, non-profit organizations and registered charities. This subsidy would be available to eligible employers that see a drop of at least 15% of their revenue in March 2020 and 30% for the following months (see Eligible Periods). In applying for the subsidy, employers would be required to attest to the decline in revenue.
An employer’s revenue for this purpose would be its revenue in Canada earned from arm’s-length sources. Revenue would be calculated using the employer’s normal accounting method.
Employers would be allowed to calculate their revenues under the accrual method or the cash method, but not a combination of both. Employers would select an accounting method when first applying for the CEWS and would be required to use that method for the entire duration of the program.
For registered charities and non-profit organizations, the calculation will include most forms of revenue, excluding revenues from non-arm’s length persons. These organizations would be allowed to choose whether or not to include revenue from government sources as part of the calculation. Once chosen, the same approach would have to apply throughout the program period.
Amount of Subsidy
The subsidy amount for a given employee on eligible remuneration paid for the period between March 15 and August 29, 2020 would be 75% of the amount of remuneration paid, up to a maximum benefit of $847 per week.
Employers will also be eligible for a subsidy of up to 75% of salaries and wages paid to new employees.
Eligible remuneration may include salary, wages, and other remuneration like taxable benefits. However, it does not include severance pay, or items such as stock option benefits or the personal use of a corporate vehicle.
A special rule will apply to 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 the lesser of $847 per week and 75% of the employee’s pre-crisis weekly remuneration. The subsidy would only be available in respect of non-arm’s length employees employed prior to March 15, 2020. There would be no overall limit on the subsidy amount that an eligible employer may claim.
Emergency Wage Subsidy Example: Bruno and Tisha run a floral shop in Winnipeg, Manitoba. They have four full‑time employees, each earning $800 per week, and 6 part-time employees, each earning $400 per week, for a total weekly payroll of $5,600. Bruno and Tisha have closed their shop and are only fulfilling online orders during this challenging period. They are keeping all of their employees on the payroll, paying them their full regular wages, despite their revenues being down by 30 per cent. Bruno and Tisha would be eligible for a weekly wage subsidy of $4,200 ($600 for each of their full-time employees and $300 for each of their part-time employees).
Eligibility would generally be determined by the change in an eligible employer’s monthly revenues, year-over-year, for the calendar month in which the period began. All employers may calculate their change in revenue using an alternative benchmark to determine their eligibility. This would provide more flexibility to employers for which the general approach may not be appropriate. Under this alternative approach, employers would be allowed to compare their revenue using an average of their revenue earned in January and February 2020.
Employers would select the general year-over-year approach or the alternative approach when first applying for the CEWS and would be required to use the same approach for the entire duration of the program.
The amount of wage subsidy received by the employer in a given month would be ignored for the purpose of measuring year-over-year changes in monthly revenues.
- For example, if revenues in March 2020 were down 20% compared to March 2019, the employer would be allowed to claim the CEWS on remuneration paid between March 15 – April 11, 2020.
- Alternatively, this employer could use its average revenue from the months of January and February 2020, instead of March 2019, to determine if it is eligible for the CEWS.
- Once an approach is chosen, the employer would have to apply it throughout the program period.
Here is a link to the CEWS calculator: https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-wage-subsidy/cews-calculate-subsidy-amount.html
I hope you found this information helpful. If you have any questions on this or anything else please don't hesitate to contact my office at 604-466-2761 or email me at [email protected]
Marc Dalton MP
Pitt Meadows/Maple Ridged