Support Program for Employers
CANADA EMERGENCY WAGE SUBSIDY (CEWS)
NOTE THAT LEGISLATION HAS NOT BEEN PASSED SO THE INFORMATION BELOW IS CONCEPTUAL IN NATURE
• This program is meant to support employers through COVID-19
• Eligible employers are individuals, taxable corporations, some partnerships, not for profit organizations (NPO) and registered charities
• To be eligible for a period below, the employer has to be able to demonstrate a drop of revenue per the chart below by comparing revenue in the current period to a prior period per the chart below
• Employers will have to attest to the drop in revenue in their subsidy application
• The program is designed to motivate employers to rehire employees on layoff, and ideally put them on leave with pay. Employees rehired would not be eligible for the Canada Emergency Response Benefit (CERB) so they would cancel their CERB claim and repay the amount
Definition of Revenue
• Revenue is from arm’s length sources only
• Revenue uses the employer’s normal accounting method
• Revenue excludes extraordinary items or amount on account of capital
• Revenue can be calculated using the accrual method or the cash method
• The employer will elect when first applying for the CEWS which method is to be used
• This method must be used for all 3 periods in the chart
• NPOs and charities have special rules
• It is a bit complicated
• Greater of:
• 75% of the amount paid, to a maximum of $847 per week
• Lessor of
• Amount paid to a maximum of $847 per week
• 75% of the pre-crisis weekly employee pay
• Pre-crisis pay is the average of the pay between January 1 and March 15, excluding any seven day periods with no pay
• Employers are expected where possible to maintain existing employees’ pre-crisis employment earnings
• New employees are eligible for the CEWS
• Pay includes salary, wage and taxable benefits but excludes severance pay, stock option benefits and corporate vehicle benefits
• If the employee does not deal at arm’s length with the employer there are special rules limiting the subsidy to the lessor of:
• maximum of $847 per week
• 75% of the pre-crisis pay
• The non-arm’s length employee had to be employed prior to March 15, 2020, no new additions
• There is no maximum overall limit to the subsidy
• Employers are expected to make their best efforts to top up employee’s pay to bring them to pre-crisis levels
Refund of Payroll Contributions
• 100% refund of the employer portion of CPP \ QPP and EI if
• Employee qualifies for the CEWS subsidy AND the employee is on leave with pay
• Working from home is a disqualification from this payroll contribution refund
Both the CEWS and the payroll contribution refund are applied for by the employer through the CRA My Business Account portal.
Employers found NOT to be in compliance with the rules will be required to repay the ineligible amount and will be subject to interest, substantial penalties and in some cases incarceration for fraudulent claims. The government is VERY serious about the potential for abuse so a robust audit regime will likely be put in place. Records should be retained to support the application.
The CEWS and refund of payroll contributions are considered revenue but are excluded from the revenue calculation as discussed above.
There is a tie in with the 10% temporary wage subsidy, this subsidy will reduce your CEWS.
Work sharing program will reduce the benefit that their employer is entitled to receive under the CEWS.
FROM THE CRA
Maude and Stéphane own a corporation that operates an automobile repair shop. They are working full time, each drawing a salary of $1,300 per week, and have three part-time employees, each earning $800 per week, for a total weekly payroll of $5,000. Maude and Stéphane have reduced their opening hours due to decreased demand for their services. They had initially laid off their employees, but they have now decided to re-hire them following the announcement of the Canada Emergency Wage Subsidy. Their employees are not being asked to report to work during this challenging period.
Maude and Stéphane are now keeping their employees on the payroll, paying them 75 percent of their pre-crisis salary ($600 per week). Maude and Stéphane would be eligible for a weekly wage subsidy of $3,494 ($847 for each of themselves and $600 for each of their employees). Maude and Stéphane would also be eligible for a 100-per-cent refund of their employer-paid contributions to Employment Insurance and the Canada Pension Plan in respect of their employees, providing an additional benefit of up to $124 per week.
At the end of each claiming period, Maude and Stéphane would submit an application through the Canada Revenue Agency portal, attesting that their decline in revenues in each month is sufficient to qualify when compared to the average of January and February. They would also report the total remuneration paid to themselves and their furloughed employees during the month. As Maude and Stéphane have access to direct deposits with the Canada Revenue Agency, they would receive their subsidy shortly after each application.