15% Reduction to Revenue and Other Proposed Changes to the 75% Canada Emergency Wage Subsidy Program

Today, Justin Trudeau has announced a few changes to the proposed 75% Canada Emergency Wage Subsidy Program. Canada Emergency Wage Subsidy was announced on March 27, 2020 to provide a 75% subsidy to eligible employers for up to 12 weeks, retroactive to March 15, 2020 so that employers can re-hire workers previously laid off as a result of COVID-19

What is CEWB

The Canadian government will provide 75% wage subsidy for eligible small businesses under CEWB.

  • The proposed CEWS would apply at a rate of 75 per cent of the first $58,700 normally earned by employees – representing a benefit of up to $847 per week, per employee.
  • The program would be in place for a 12-week period, from March 15 to June 6, 2020. Employers of all sizes and across all sectors of the economy would be eligible, with certain exceptions including public sector entities.
  • An eligible employer’s entitlement to this wage subsidy will be based entirely on the salary or wages actually paid to employees.

Proposed Changes

  • The government is proposing that employers eligible for the CEWS be entitled to receive a 100-per-cent refund for certain employer-paid contributions to Employment Insurance, the Canada Pension Plan, the Quebec Pension Plan, and the Quebec Parental Insurance Plan. This refund would apply to the entire amount of employer-paid contributions in respect of remuneration paid to furloughed employees in a period where the employer is eligible for the CEWS. This will make it easy and cost effective for employers to rehire people previously laid off.
  • Eligibility for the CEWS of an employee’s remuneration will be limited to employees that have been without remuneration for more than 14 consecutive days in the eligibility period, i.e., from March 15 to April 11, from April 12 to May 9, and from May 10 to June 6. This rule replaces the previously announced restriction that an employer would not be eligible to claim the CEWS for remuneration paid to an employee in a week that falls within a 4-week period for which the employee is eligible for the Canadian Emergency Response Benefit.
  • To measure their revenue loss, it is proposed that all employers have the flexibility to compare their revenue of March, April and May 2020 to that of the same month of 2019, or to an average of their revenue earned in January and February 2020.
  • For March, the Government proposes to make the CEWS more accessible than originally announced by reducing the 30-per-cent benchmark to 15 per cent, in recognition of the fact that many businesses did not begin to be affected by the crisis until partway through the month.
Eligible Periods
Claiming period Required reduction in revenue Reference period for eligibility
Period 1 March 15
to
April 11
15% March 2020 over:

  • March 2019 or
  • Average of January and February 2020
Period 2 April 12
to
May 9
30% April 2020 over:

  • April 2019 or
  • Average of January and February 2020
Period 3 May 10
to
June 6
30% May 2020 over:

  • May 2019 or
  • Average of January and February 2020
  • In recognition that the time between when revenue is earned and when it is paid could be highly variable in certain sectors of the economy, it is proposed that employers be allowed to measure revenues either on the basis of accrual accounting (as they are earned) or cash accounting (as they are received). Special rules would also be provided to address issues for corporate groups, non-arm’s length entities and joint ventures.
  • Registered charities and non-profit organizations would also be able to benefit from the additional flexibilities being provided to employers with respect to the revenue loss calculation. In addition, to recognize that different types of organizations are experiencing different types of funding pressures, it is proposed that charities and non-profit organizations be allowed to choose to include or exclude government funding in their revenues for the purpose of applying the revenue reduction test.

How to Apply

Once the government recalls the Parliament and the proposed legislation is passed, eligible employers would be able to apply for the CEWS through the Canada Revenue Agency’s My Business Account portal as well as a web-based application. Employers would have to keep records demonstrating their reduction in arm’s-length revenues and remuneration paid to employees. How to apply.

More Information is available here.

Leave a Reply