COVID-19: Canada Emergency Wage Subsidy (CEWS)
The Canada Emergency Wage Subsidy (CEWS) is one of the federal government’s flagship measures in response to COVID-19 to help protect jobs and support economic recovery. The program, originally introduced for the 12-week period from March 15 to June 6, 2020, provided a 75% wage subsidy to eligible employers. On May 15, 2020, the government announced that the wage subsidy would be extended to August 29, 2020, for a total of 24 weeks. Bill C-20, passed by the Senate on July 21, makes a number of important changes to the CEWS, including extending it to November 21, 2020. In summary, here is what you need to know about the new version of this program.
To be a qualifying employer, you must have experienced a decrease in qualifying earnings and be one of the following qualifying entities (non-exhaustive list) :
- Individuals, taxable corporations and partnerships made up of eligible employers, regardless of their size.
- Non-profit organizations and registered charities, excluding public bodies
- Indigenous government-owned corporations that carry on business, as well as partnerships whose partners are Indigenous governments and eligible employers.
Note that the maximum eligible weekly earnings for the purpose of calculating the subsidy is $1,129.
CEWS must be requested for the following predefined periods :
|Period 1||March 15 to April 11, 2020|
|Period 2||April 12 to May 9, 2020|
|Period 3||May 10 to June 6, 2020|
|Period 4||June 7 to July 4, 2020|
|Period 5||July 5 to August 1st, 2020|
|Period 6||August 2 to August 29, 2020|
|Period 7||August 30 to September 26, 2020|
|Period 8||September 27 to October 24, 2020|
|Period 9||October 25 to November 21, 2020|
Claims may be filed retroactively until January 31, 2021, for all periods.
In terms of eligibility criteria for active employees, the periods are now divided into two groups:
- Periods 1 to 4
- Periods 5 to 9
For all periods, one of the following methods must be used to calculate the decrease in allowable income:
- Monthly allowable income for 2020 compared to the same period in 2019 (example: March 2020 compared to March 2019); or
- Monthly allowable income for 2020 compared to the average allowable income for January and February 2020
It is possible to adopt a different method for each of the period groups.
Periods 1 to 4
The eligibility criteria remain the same as before and allow for a grant rate of 75%:
- Eligible income reduction of at least 15% for the month of March 2020
- Eligible income reduction of at least 30% for the months of April, May and June 2020
It is important to note that where there is a decrease in allowable earnings demonstrated for a given period, the employer is deemed to meet this test for the following period. For example, if an employer meets the criteria for the month of March 2020, it is automatically deemed to meet the criteria for the month of April 2020 as well.
Periods 5 to 9
As of July 5, the employer must now determine its subsidy rate, since it is no longer unique and becomes a combination of the following 2 factors: basic and supplementary CEWS.
For periods 5 to 9, employers have access to a variable base rate if they have a decline in revenues of 50% or more. Employers with a loss of revenue of less than 50% will have access to a rate based on their revenue decline. In both cases, the rate will be gradually decreased for each period. The objective is to have a gradual reduction in financial assistance as the economy recovers.
Here is a table summarizing the different rates:
|Revenue Drop||Period 5||Period 6||Period 7||Period 8||Period 9|
|50 % and over||60 %||60 %||50 %||40 %||20 %|
|0 % to 49 %||1.2 x revenue drop||1.2 x revenue drop||Revenue drop||0.8 x revenue drop||0.4 x revenue drop|
Here is an example of an employer with an income loss of less than 50%:
|Period 5*||Period 6*||Period 7*||Period 8*||Period 9*|
|Basic CEWS rate||48%||48%||40%||32%||16%|
*For periods 5 and 6, the government has provided a transitional rule whereby employers who could have obtained a higher rate under the rules in effect for periods 1 to 4 could qualify for a 75% subsidy if they have a revenue decline of 30% or more.
For employers hardest hit by COVID-19, it would be possible to increase the CEWS rate. Employers who have experienced an average loss of more than 50% of their allowable earnings over three months would receive a top-up CEWS rate equal to 1.25 times the average loss of allowable earnings in excess of 50%, up to a maximum top-up CEWS rate of 25%. The calculation of the three-month loss of allowable earnings is based on one of the following two methods:
- The loss of eligible income incurred during the previous three months compared to the eligible income of the same months of the previous year.
- The decrease in eligible income recorded, by comparing the average eligible income in the previous three months with the average eligible income in January and February 2020.
This choice must be the same as for the basic CEWS and the reference period must be the same for periods 5 to 9.
The following is an example of the calculation of the top-up CEWS rate:
|3-Months Average Revenue Drop||Top-up Calculation =
1.25 x (3-months revenue drop – 50 %)
|Top-up CEWS Rate (max 25%)|
|70%||1.25 x (70% – 50%) = 25%||25%|
|65%||1.25 x (65% – 50%) = 18.75%||18.75%|
|60%||1.25 x (60% – 50%) = 12.5%||12.5%|
|55%||1.25 x (55% – 50%) = 6.25%||6.25%|
|50% and less||1.25 x (50% – 50%) = 0%||0%|
To obtain the overall CEWS rate under the new method for periods 5 to 9, the basic and supplementary CEWS must be added together. As an example, the maximum aggregate CEWS rate that an employer could obtain for period 5 is 85% (60% + 25%).
These are employees who continue to receive a salary for a full week, but who do not perform any work for the employer during that week. For periods 1 to 6, the subsidy would be the greater of the following amounts:
- For arm’s length employees, 75% of the amount of earnings paid, to a maximum weekly benefit of $847;
- 75% of the employee’s pre-pandemic weekly earnings up to a maximum weekly benefit of $847 or the amount of earnings paid, whichever is less
Beginning in period 7, the amount of CEWS paid for temporarily laid-off employees would be adjusted to provide an incentive for employers to re-employ laid-off employees who have exhausted their Canadian Emergency Response Benefit (CERB) in Period 7, since the CERB will officially end on September 26, 2020. More details to come.
As in periods 1 to 4, employers will be entitled to a refund of certain employer contributions for periods 5 to 9 for eligible employees on paid leave.
The request can be made through the ”My Business Account” portal of the Canada Revenue Agency (CRA) (option 1) or directly on the CRA site (option 3). Click here to access these options. You must first have calculated the amount of the grant using the CRA calculator.
FNQLEDC has prepared a video tutorial to guide you through the application process.
Although the Government of Canada has only indicated that “employers should keep records to demonstrate the reduction in income and compensation paid to employees”, we recommend that you prepare the following documents:
- 2019 financial statements;
- 2019 Monthly Sales Report;
- Updated internal financial statements;
- Updated Monthly Sales Report;
- Payroll Register;
- Justification of the decrease in your revenues (loss of customers, decrease in sales, partial or complete closure, etc.).
Businesses can expect to receive payment within 10 business days if they are registered in direct deposit.
Note: The information presented has been simplified for communication purposes. We refer you to the Government of Canada Web site for detailed information.
To learn more about the other assistance programs launched by the government of Canada, we invite you to consult our website.