Canada Emergency Wage Subsidy (CEWS) Update
The implications of COVID-19 continue to disrupt many businesses and organizations. Federal and Provincial governments have announced many relief programs for Canadians in the past five months. The Canada Emergency Wage Subsidy (CEWS) originally passed legislation on April 11, 2020 but has since evolved and expanded to support workers and employers for a longer period, as well as minimizing the requirements for more employers to qualify for assistance.
We continue to receive a number of queries on CEWS as the program is extensive and complex. The highlights below are not meant to be inclusive; each business will require specific attention and review, so we encourage you to reach out with your specific needs to one of our qualified resources.
Some of the highlights for revised CEWS is as follows:
CEWS has been extended until November 21, 2020.
A wider range of employers can now qualify including:
· Sole proprietorships and taxable corporations
· Certain Indigenous government-owned corporations
· Non-profit organizations
· Partnerships consisting of 50% or more eligible employers
· Registered charities
Qualifying Claim Periods
The definition of claim periods remains unchanged and refers to the period of time that an eligible employer can claim the wage subsidy for remuneration paid to eligible employees. The extended periods are now as follows:
Accessible Base Subsidy
All eligible employers who have a revenue drop can now qualify for a base subsidy, starting with the claim period that began July 5, 2020. Your subsidy amount is based on your revenue drop.
The base subsidy is at a specified rate, applied to the amount of remuneration paid to the employee for the eligibility period, on maximum remuneration of up to $1,129 per week. The rate of the base CEWS varies depending on the level of revenue decline. Employers that experience a revenue drop of 50% or more qualify for the maximum base CEWS rate. The maximum base subsidy rate will gradually decline from 60% for Periods 5 and 6 (July 5 to August 29), to 20% in Period 9 (October 25, 2020 to November 21, 2020). Employers with a revenue drop of less than 50% are eligible for a lower base CEWS rate on a similar declining scale.
Under the safe harbour provisions of the revised CEWS legislation, employers with a revenue decline of 30% or more in Periods 5 and 6 (July 5 to August 29) would still be eligible for the 75% wage subsidy consistent with the program rules prior to July 5, 2020.
For the purposes of the revenue test, the reference periods and comparative approaches for the base subsidy are as follows:
Employers that have experienced a three month average revenue drop of more than 50% can receive a top-up CEWS rate equal to 1.25 times the average revenue drop that exceeds 50%. The maximum top-up CEWS rate of 25% is attained where there is at least a 70% revenue decline. As with the base CEWS rate, the top-up CEWS rate would apply to remuneration of up to $1,129 per week.
The top-up CEWS rate for selected average revenue drop levels is as follows:
You can calculate your revenue drop in different ways, and choose the way that works best for your situation.
To provide certainty as you make business decisions, you can calculate your base subsidy using your revenue drop in the current period or the previous period – whichever is greater. If your revenue drop is 30% or more in Periods 5 and 6 (July – August) you are entitled to a CEWS rate of at least 75% - what you’d get under the previous CEWS rules – or potentially even more if you qualify for a higher rate under the new rules.
How to Apply for CEWS
Employers can apply through CRA’s My Business Account portal. You will need to register online in advance (see MRSB blog, “How to Register for CRA account”).
A few final reminders about this legislation:
· The government reiterated that there will be penalties for any organization abusing the system, including significant penalties for employers manipulating revenues, excessive claims of false statements or negligence and criminal charges for fraud or tax evasion.
· The Minister reserves the right to make public in any manner, the name of any person or partnership that makes an application under the CEWS.
· Money under the CEWS is expected to be available within two to four weeks
· CEWS application deadline has been extended to January 31, 2021
Our team of professionals are well versed on this program and all other Federal and Provincial relief programs announced due to COVID-19. You can find some helpful information available on dedicated COVID-19 page on our website or by reaching out to any member of our team.