Written by Katelyn Weller, Jordan Fremont, Carl Cunningham and Anu Nijhawan
On April 21, 2020, the federal government announced that applications for the Canada Emergency Wage Subsidy (CEWS) will open on April 27, and provided details on the application process as well as information on (and access to) a new calculator to assist eligible employers with determining the amounts that might be received under the CEWS program. On April 24, 2020, the government published a Frequently Asked Questions (FAQs) document to provide additional guidance on some of the key CEWS operational and process issues, and also sets out a series of examples which may provide guidance in certain circumstances.
The CEWS is a federal program established to aid eligible employers who have been negatively impacted by COVID-19 by providing a subsidy of up to 75 percent of an eligible employee's weekly remuneration (to a maximum of $847 per week) for up to 12 weeks, retroactive from March 15, 2020, to June 6, 2020. Key details of the CEWS program, including information respecting employer eligibility, applicable revenue tests and the employee remuneration that is eligible for the subsidy can be found in our blog, COVID-19 Relief for Employers: The Canada Emergency Wage Subsidy is Approved.
Here we provide an overview of key steps to be taken and issues to consider respecting the CEWS application process.
How to Apply
Starting on April 27, 2020, eligible employers can apply for the CEWS using the Canada Revenue Agency's My Business Account or a separate online CEWS application process. Employers seeking to use this alternate method should register to get an online web access code.
The CEWS will be processed at the payroll program (RP) account level, and so employers having multiple RP accounts will be required to file a separate application for each RP account.
An application in respect of a claim period can be made only after the end of the claim period. Before an application is made, an eligible employer must ensure that it has paid the eligible remuneration that it is claiming for that period.
Steps Employers Should Take to Prepare
Employers applying for the CEWS through the My Business Account should make sure that they have registered for the My Business Account program and that their business details and direct deposit information for each RP account is up-to-date. For employers that are registered for direct deposit, the government has indicated that payment is expected within 10 business days of applying. Any payments by cheque will take longer.
As part of the CEWS application process, employers will be required to estimate the amount of the subsidy that will be payable. Any employers expecting to receive $25 million or more under the CEWS program will also need to ensure that they are registered for the large value transfer system (LVTS).
Employers should be aware that the Canada Revenue Agency (CRA) is permitted to publish the name of any eligible employer that makes an application for the CEWS. The process for making this information available is still under consideration.
Calculating Expected Wage Subsidy
The CRA has launched a calculator for employers to use to help determine the amount of CEWS that they can expect to receive and information that they will need to complete the CEWS application. To use the calculator, employers will need to know the:
- total number of eligible employees;
- total eligible remuneration paid to these employees during the claim period for which they are applying;
- amount that the employer is eligible to claim under the 10% Temporary Wage Subsidy for employers, if any; and
- amount eligible employees have received under a Work-Sharing benefit program, if any.
As part of the CEWS program, employers can claim a 100% refund for the employer-paid Employment Insurance, the Canada Pension Plan, the Quebec Pension Plan, and the Quebec Parental Insurance Plan contributions made on behalf of eligible employees who are on leave with full or partial pay (e.g., employees who are directed to stay home with pay as a result the temporary closure of or reduction in the employer's business) for any full week in the claim period. This is built into the CEWS calculator and requires that the employer know the total employer-paid contributions with respect to employees on leave.
Retroactive Payments Need to Be Made Before Applying
While eligibility for the CEWS is limited to those employees who have not been without remuneration for 14 or more consecutive days in a particular claim period, the government's publications indicate that the CEWS will be available in respect of laid off employees who are rehired/recalled on a retroactive basis, as long as their retroactive pay and status meet the eligibility criteria for the claim period. This means that an employee who has been on layoff or furlough without pay for 14 or more consecutive days in a qualifying period will be eligible if the employee is retroactively recalled and paid such that, once retroactively recalled and paid the employee would not be without remuneration for 14 or more consecutive days in the qualifying period. The government's publication indicates that any laid-off employees would need to be recalled from layoff and paid before they are included in the CEWS calculation.
Any employees recalled from layoff who have received the Canada Emergency Response Benefit (CERB) may be required to repay some or all of the amounts they received depending on their situation. Employers recalling employees on a retroactive basis may therefore wish to make it clear to such employees that they will each be personally responsible for any CERB repayment obligation.
Some employers may be asked to provide a full list of employees and their social insurance numbers after they apply. All employers must keep adequate books and records that support that their application for the CEWS and that are complete and accurate. Books and records include ledgers, journals, financial statements, contracts, elections, calculations or other working papers, payroll records, sales invoices and any other relevant document.
Records should include adequate calculations which clearly demonstrate the required reduction in revenue for the reference period. The government's publications also indicate that such records should generally be prepared and maintained through working papers, but that the CRA will make reasonable exceptions for a small employer that does not maintain detailed monthly records. Any assumptions made in any calculation be should be included in the documentation and available for review if requested.
In addition to showing the calculation of the CEWS claimed for each eligible employee, the documentation maintained must also include an analysis of the nature of the remuneration. Records should show that ineligible remuneration (e.g., retiring allowances) has been removed from the calculation.
A signed attestation, and record of any elections made for the purposes of determining an employer's qualifying revenue, must also be maintained and be made available to the CRA upon request.
The Bennett Jones Employment Services, Tax and Public Policy groups are working with employers, government and other national and local organizations on the CEWS and other government assistance programs related to the COVID-19 pandemic, and we would be pleased to assist you as you look to identify and implement solutions to help support your business needs.
While the government's most recent publications continue to provide guidance on the CEWS, many issues remain and the eligibility of any particular entity to the subsidy should be reviewed on a case-by-case basis.
In addition, please visit our COVID-19 Resource Centre for other COVID-19-related materials.