Canada Emergency Wage Subsidy Program - 75%

Please find following a summary of the legislation, courtesy of an anonymous friend. Will post details of how to apply as soon as it is available. In the meantime, please ensure your business is able to apply by starting a ‘My Account’ and a ‘My Business Account’ with CRA.

I hope you and your family were still able to enjoy a nice Easter under these difficult circumstances.

Below please find some of the highlights from the Canadian Emergency Wage Subsidy program (CEWS) that was passed into law over the weekend;
Please note it could still be a few weeks before the subsidy application is made available to everyone by the CRA.

– Businesses that operate as Proprietorships (ie sole owners of unincorporated businesses), Corporations, Partnerships (as well as non profit organizations) are all potentially eligible for the CEWS;

– There are up to 3 payroll periods that an employer can qualify to receive the CEWS (March 15 to April 11, April 12 to May 9, and May 10 to June 6).

– To qualify for period 1 (wages paid from March 15 to April 11) business revenue for the calendar month of March (ie March 1st to March 31st 2020) must have dropped at least 15% compared to March of 2019.  For added flexibility, an election can be made to use an alternative benchmark to calculate the revenue drop which uses the “average revenue” from the months of January & February of 2020 instead of using the same period last year approach.  Once selected, the employer is required to use that same approach to calculate eligibility for all 3 periods.  This flexibility was added for employers that may not have been in business in March of 2019 or perhaps have seasonal revenues.

– Regardless of whether you use the “month over month” approach or the “alternative benchmark” approach it seems if you are eligible for the CEWS in period 1 then you will automatically be eligible for period 2.  If you are not eligible for period 1 then you would need to experience a 30% drop (April 2020 sales vs April 2019 sales) or (April 2020 sales vs your January & February 2020 average sales) to be eligible for period 2.  If you are eligible for period 2 then it seems you are automatically eligible for period 3 as well.  If you are not eligible for period 2 then you need to experience a 30% revenue drop (May 2020 sales vs May 2019 sales) or (May 2020 sales vs your January & February 2020 average sales).

– The subsidy during a period is equal to the greater of 75% of the wages & salaries paid up to $847 per week per employee or 75% of the employee’s pre crisis earnings up to $847 per week. This means an employer could technically receive up to 100% of first 75% of the pre-crisis earnings.  Pre-crisis earnings are determined by the average remuneration paid during the period January 01, 2020 to March 15, 2020.  Allowances are made to discount any full weeks during that pre-crisis period the employee didn’t work (ie vacation) so it will not reduce their average.

– The 75% subsidy extends to new employees that are hired (but not non arms length family members hired).

– Some taxable benefits are included in the calculation of remuneration (but not personal use of auto, stock options, or severance pay).

– Wages & Salaries paid to non arms length employees (ie business owners & family members) also qualify provided those people were already employed prior to March 15th.  The limitation for non-arms length employees is the lesser of $847 per week and 75% of the average of their pre-crisis earnings (defined as earnings during the period between January 1st and March 15th).

– No upper limits to how much an employer can receive and employers are expected to “do their best” to bring the levels of wages and salaries back to pre-crisis levels.

– A further incentive of a 100% refund of the employer’s share of CPP and EI premiums payable on salaries & wages paid to arm’s length employees who are being paid to “stay home” is available provided the employer qualifies for the CEWS for those employees.  CPP and EI is still required to be deducted from those wages & salaries, it is just the employer’s portion that is refundable.

– The subsidy is not available on the wages and salaries on any employees who are effectively eligible for CERB benefits.  To further clarify, the subsidy is not eligible for employees who have been without remuneration for 14 or more consecutive days in the following periods;

March 15 to April 11
April 12 to May 9
May 10 to June 6.

It looks like there will be some mechanism whereby an employee who is rehired during a period while they have received the $2,000 CERB benefit will have that payment clawed back.  This could potentially discourage employees from wanting to return to work, or at least to consider the actual date in which they would be willing to come back to work.

– Period 1 would be considered wages & salaries paid between March 15th and April 11th
To qualify: You experienced a 15% drop in Revenue over March 2019 or a 15% drop in Revenue over the average of January & February 2020
(if you select the average of January & February (rather than March 2019) then you must use that same benchmark for periods 2 and 3)

– Period 2 would be considered wages & salaries paid between April 12th and May 9th
To qualify: You were eligible for period 1 or experienced a 30% drop in Revenue over April 2019 or a 30% drop in Revenue over the average of January & February 2020

– Period 3 would be considered wages & salaries paid between May 10th and June 6th
To qualify: You were eligible for period 2 or experienced a 30% drop in Revenue over May 2019 or a 30% drop in Revenue over the average of January & February 2020

– Applications will be processed through the CRA My Business Account portal, so a business that wishes to apply for this credit should either have an online CRA My Business Account, or should be in the process of registering for that service.  In order to have a CRA My Business Account the client will first need to have personally registered with the CRA or with a Sign in Partner and already received their CRA security code in the mail.

– Stiff penalties expected to be imposed for fraudulent claims or for manipulating revenues which may include; repayment of the claim, fines, possible imprisonment, and a penalty equal to 25% of the subsidy claimed for manipulating revenue.

– If you are eligible for both the 10% wage subsidy (announced earlier in March) and the 75% CEWS then any benefit an employer has received under the 10% wage subsidy will reduce the amount of the CEWS.

– The CEWS payments will be made via a direct deposit into the employers bank account.  If your business is not already on direct deposit with the CRA you can set up Direct Deposit from within the CRA My Business Account portal.

– If an employer does not qualify for the 75% CEWS, they will still qualify for the 10% Wage subsidy; which is a program whereby any wages and salaries paid between March 15th and June 18th qualify for a 10% rebate (up to a maximum of $1,375 per employee).  This 10% subsidy is claimed by reducing your monthly (or bi-weekly) source deduction payments by the amount of the credit rather than by a direct deposit from the CRA.

Immediately below is a link to the latest information on the CEWS

I hope some of the above information is of some help to you.