Canada Emergency Wage Subsidy | KBH Chartered Professional Accountants

(Updated 07.20.2020)

On April 1, 2020, Minister of Finance, Bill Morneau announced further details of the Canada Emergency Wage Subsidy. The Canada Emergency Wage Subsidy (CEWS) provides a 75% wage subsidy to eligible employers for up to 12 weeks, retroactive to March 15, 2020. Applications for the subsidy will launch on Monday, April 27, 2020, with a payout expected May 5, 2020.

Eligibility would generally be determined by the change in an eligible employer’s monthly revenues, year-over-year, for the calendar month in which the period began. All employers are allowed to calculate their change in revenue using an alternative benchmark to determine their eligibility. Under this approach, businesses are able to compare income earned in January and February, as opposed to just March and April. Once an evaluation approach is chosen, the employer would have to apply it throughout the program period. Businesses will need to reapply for the subsidy monthly. The program has been expanded by three months, to August 29, 2020, to assist employers as they look to reopen their businesses. The government will announce shortly, details of potential changes to the program’s framework for the fifth (July 5 to August 1, 2020) and/or sixth (August 2 to August 29, 2020) periods.

The government is proposing a further extension of the CEWS, until December 19, 2020, providing proposed program details until November 21, 2020, and has shared draft legislative proposals. These proposals would adapt the CEWS to support more workers and businesses, better protect jobs and promote growth, and effectively respond as the economy continues to reopen.

Employers eligible for this subsidy include:

Individuals
Taxable corporations
Partnerships consisting of eligible employers, non‑profit organizations and registered charities. Those that see a drop of at least 15% of their revenue in March 2020 and 30% for the following months.
Charities and NPOs have the option to include or exclude government subsidies when calculating their loss of revenue.
Publicly funded entities were specifically excluded from qualifying for this subsidy. Publicly funded entities include municipalities and local governments, Crown corporations, public universities, colleges, schools, hospitals, and other similar organizations.
This subsidy would not be available for eligible employees that are on leave with pay for only a portion of a week.

Changes to the regulations include extending the eligibility to:

Partnerships that are up to 50-per-cent owned by non-eligible members;
Indigenous government-owned corporations that have a business;
Registered Canadian amateur athletic associations;
Registered journalism organizations; and
Non-public colleges and schools such as arts, language, driving and flight schools.

The Government also intends to propose legislative amendments to ensure that the CEWS continues to meet its objectives. These proposed amendments would:

Provide flexibility for employers of existing employees who were not regularly employed in early 2020, such as seasonal employees;
Ensure that the CEWS applies appropriately to corporations formed on the amalgamation of two predecessor corporations and
Better align the treatment of trusts and corporations for the purpose of determining CEWS eligibility.

Eligibility periods are as follows:

	Claiming period	Required reduction in revenue	Reference period for eligibility
Period 1	March 15 to April 11	15%	March 2020 over: March 2019 or Average of January and February 2020
Period 2	April 12 to May 9	30%	Eligible for Period 1 OR April 2020 over: April 2019 or Average of January and February 2020
Period 3	May 10 to June 6	30%	Eligible for Period 2 OR May 2020 over: May 2019 or Average of January and February 2020
Period 4	June 7 to July 4	30%	Eligible for Period 3 OR June 2019, or average of January and February 2020

To receive the subsidy:

Ensure you have access to your CRA – My Business Account (if you do not have one, we encourage you to start the setup process now, it can take a few days) Start here.
Register for direct deposit with the CRA to ensure funds are received promptly. You can do that here.
Apply through a CRA portal (using My Business Account) which is expected to be available around the 22^nd of April.
Renew your application every month.
Funds will become available sometime between late April and mid-May.

If funding is received, employers must attest to doing all they can to pay the remaining 25% of their workers’ salaries. The 25% is not mandatory for business owners, however, they are encouraged to pay the remaining 25%. Further, misuse of subsidy funds will be evaluated and there are to be severe consequences for fraudulent claims and use for non-purpose.

There is a new 100% refund for certain employer-paid contributions to Employment Insurance, the Canada Pension Plan, the Quebec Pension Plan, and the Quebec Parental Insurance Plan. This refund covers 100% of employer-paid contributions for eligible employees for each week throughout which those employees are on leave with pay and for which the employer is eligible to claim for the CEWS for those employees.

This refund is not subject to the weekly maximum benefit per employee of $847 that an eligible employer may claim in respect of the CEWS. There is no overall limit on the refund amount that an eligible employer may claim. Eligible employers apply for a refund at the same time that they apply for the CEWS.

A link to a spreadsheet to track the subsidy is available here: Wage Subsidy Template.

Due to the timing of applications and the need to be able to compare monthly revenues, up to date bookkeeping becomes even more important. Applications for the 75% subsidy are expected to be available by the 3^rd week of April. Source deductions for March payroll are typically due April 10^th or 15^th. In order to know whether to reduce income taxes remitted under the 10% program or make a full remittance and apply for the 75% subsidy, business owners will need to assess whether or not March 2020 revenues are 30% less than March 2019 revenues prior to remitting March source deductions. Timely reporting will help with this decision. If an employer reduces its remittance under the 10% program and then realizes it qualifies for the 75% program, the subsidy under the 75% program will be adjusted for the 10% reduction in remittances.

To illustrate using an example provided by the Department of Finance, suppose an employee was paid $1,000 per week prior to March 15, 2020, and the employer has reduced the employee’s hours so now the employee is only being paid $600. In this case, the employer would be entitled to a $600 CEWS payment for that employee, which is the least of the amount the employee was paid, 75% of pre-crisis earnings and $847 per week. If the employer increased the amount the employee was being paid to $750 per week, the CEWS payment to which the employer is entitled would increase to $750 per week since the amount paid to the employee would now be equal to 75% of the employee’s pre-crisis weekly earnings.

The CRA has launched a calculator to help determine the amounts and preview your subsidy claim based on the information you enter. You can access the calculator here. The CRA has also released an application guide, here.

For these purposes, employees’ remuneration will not include stock option benefits, motor vehicle benefits, severance pay, or other non-taxable employment benefits in respect of which an employer would not be expected to withhold source deductions.

The subsidy programs are set for three months as of now, however, the Federal Government will look at additional programs and benefits as time goes on. For help on how to calculate and apply for the subsidy visit our post here.

The Federal Government will be penalizing those businesses that abuse the subsidy with a penalty equal to 25% of the value of the subsidy claimed, in addition to the requirement to repay in full the subsidy that was improperly claimed.

It is important to note that those who had initially been qualified and received the subsidy but were later deemed “ineligible” will be required to repay the amounts received.

The legislation allows the Minister to publicly disclose names of applicants for the CEWS, therefore you should be aware that the fact you applied for the CEWS may become public information and by extension, your business has suffered a significant revenue decline.

As always, KBH is Here to Help You Succeed. For any assistance in reviewing your business needs, determining eligibility and overall financial planning please contact us: info@kbh.ca

In Good Health,

KBH Chartered Professional Accountants