Additional Details on the Canada Emergency Wage Subsidy for Employers Impacted by COVID-19

Written By Jordan Fremont, Carl Cunningham, Sara Parchello and Katelyn Weller

On April 1, 2020, the federal government disclosed additional eligibility and coverage information on its proposed Canada Emergency Wage Subsidy (CEWS), the preliminary details of which were introduced in announcements made on March 27, 2020, and on March 30, 2020. Prime Minister Trudeau has indicated that Parliament will be recalled with the purpose of adopting enabling CEWS legislation, but as disclosed in briefings and government publications on April 1, 2020, key parameters for the proposed CEWS are as follows:

Employer Eligibility

The CEWS would be available to a broad swath of employers, including individuals, taxable corporations, and partnerships consisting of eligible employers as well as non‑profit organizations and registered charities. However, the CEWS will not be available to public bodies, including municipalities, Crown corporations, public universities, colleges, schools and hospitals.

To receive the CEWS, eligible employers would have to attest that they have experienced a drop in revenue of at least 30 percent in March, April or May, when compared to the same month in 2019, determined as follows:

Revenue for this purpose would be the revenue from the employer's business carried on in Canada, earned from arm's-length sources.

The government intends to work with the not-for-profit and charitable sector to ensure that the definition of revenue is appropriate to their specific circumstances. Also, for eligible employers established after February 2019, eligibility would be determined by comparing monthly revenues to a reasonable benchmark.

Scope and Duration

For eligible employers, the CEWS will cover up to 75 percent of salaries and wages paid to new hires (up to a maximum benefit of $847 per week). For current employees, the amount of the CEWS for a given employee would be the greater of:

• 75 percent 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 percent of the employee's pre-crisis weekly remuneration, whichever is less.

For an employee who does not deal at arm's length with their employer, the CEWS would be limited to the eligible remuneration paid in any pay period between March 15 and June 6, 2020, up to a maximum benefit of $847 per week or 75 percent of the employee's pre-crisis weekly remuneration.

Employers would be required to make best efforts to top-up employees' remuneration to pre-crisis levels. It is presently unclear whether (or to what extent) employers will be required to demonstrate the efforts undertaken to top-up employees' remuneration.

The CEWS would be in place and provide subsidy payments covering a period of up to 12 weeks, from March 15 to June 6, 2020.

How to Apply

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 (to be established).

Tax Treatment

The CEWS or 10 percent subsidy would be considered government assistance and included in the employer's taxable income. Either subsidy would reduce the amount of remuneration expenses eligible for other federal tax credits calculated on the same remuneration.

Compliance Considerations

Employers receiving the CEWS that are determined to be ineligible would be required to repay CEWS amounts received. Penalties may apply in cases of fraudulent claims, and the government has indicated that anti-abuse rules will be introduced to ensure that the CEWS is not inappropriately obtained and to ensure that employees are paid the amounts that they are owed.  

Interactions with Other Programs

• 10 Percent Wage Subsidy: Employers that do not qualify for the CEWS may continue to qualify for the previously announced wage subsidy of 10 percent of remuneration paid (from March 18 to before June 20) up to a maximum subsidy of $1,375 per employee and $25,000 per employer. For employers that are eligible for both the CEWS and the 10 percent wage subsidy for a period, the CEWS would generally be reduced by any amount paid through the 10 percent wage subsidy.
• Canada Emergency Response Benefit (CERB): An employer would not be eligible to claim the CEWS in respect of remuneration paid to an employee in a week that falls within a 4-week period during which the employee is eligible for the Canada Emergency Response Benefit. For details on the CERB, see our blog post of April 2, 2020. 

Anticipated Cost

The government has estimated the cost of the CEWS at $71 billion dollars. 

We will be monitoring for additional updates on the CEWS and will update you as more information is made available. If your business or organization has questions in respect of the CEWS or other employment-related matters, please contact a member of the Bennett Jones Employment Services group. In addition, please visit our COVID-19 Resource Centre for other COVID-19-related materials.

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