Canada Emergency Wage Subsidy (CEWS) Opens Monday April 27, 2020
April 26, 2020
As a Canadian employer whose business has been affected by COVID-19, you may be eligible for a subsidy of 75% of employee wages for up to 12 weeks, retroactive from March 15, 2020, to June 6, 2020. This wage subsidy will enable you to re-hire workers previously laid off as a result of COVID-19, help prevent further job losses, and better position you to resume normal operations following the crisis.
Eligible employers include:
– taxable corporations
– Partnerships consisting of eligible employers, non‑profit organizations and registered charities. Those that see a drop of at least 15% of their revenue in March 2020 and 30% for the following months. A link to the CEWS information and application on Canada.ca may be found HERE
Details of Subsidy
An employer’s revenue for this purpose is its revenue in Canada earned from arm’s-length sources. Revenue is calculated using the employer’s normal accounting method, and exclude revenues from extraordinary items and amounts on account of capital. Employers are allowed to calculate their revenues under the accrual method or the cash method, but not a combination of both. Employers select an accounting method when first applying for the CEWS and require to use that method for the entire duration of the program.
For registered charities and non-profit organizations, the calculation includes most forms of revenue, excluding revenues from non-arm’s length persons. These organizations are allowed to choose whether or not to include revenue from government sources as part of the calculation. Once chosen, the same approach applies throughout the program period.
Special rules for the computation of revenue are provided to take into account certain non-arm’s length transactions, such as where an employer sells all of its output to a related company that in turn earns arm’s length revenue. As well, affiliated groups are able to compute revenue on a consolidated basis.
The subsidy amount for a given employee on eligible remuneration paid for the period between March 15 and June 6, 2020 is the greater of:
75% of the amount of remuneration paid, up to a maximum benefit of $847 per week; and
the amount of remuneration paid, up to a maximum benefit of $847 per week or 75% of the employee’s pre-crisis weekly remuneration, whichever is less.
In effect, employers may be eligible for a subsidy of up to 100% of the first 75% of pre-crisis wages or salaries of existing employees. These employers are expected where possible to maintain existing employees’ pre-crisis employment earnings.
The pre-crisis remuneration for a given employee is based on the average weekly remuneration paid between January 1 and March 15 inclusively, excluding any seven-day periods in respect of which the employee did not receive remuneration.
Employers are also 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. These are amounts for which employers are generally required to withhold or deduct amounts to remit to the Receiver General on account of the employee’s income tax obligation. 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 applies to employees that do not deal at arm’s length with the employer. The subsidy amount for such employees is 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 is only available in respect of non-arm’s length employees employed prior to March 15, 2020.
There is no overall limit on the subsidy amount that an eligible employer may claim. Employers are expected to make their best effort to top-up employees’ salaries to bring them to pre-crisis levels.