We caution readers that due to the fluidity of the situation that the information may change on a daily basis. We will continue to update the examples as new information is provided. This post was revised on April 21th, 2020.

On April 8, 2020, the Federal Government provided additional details on two subsidy programs connected to COVID-19, the Canada Emergency Wage Subsidy and the previously announced Temporary Wage Subsidy.

The FAQ below is intended to provide further guidance on the Canada Emergency Wage Subsidy, also known as CEWS. Click here to read our related post on the COVID-19 Temporary Wage Subsidy for Employers, also known as the TWS.

Employers should review both posts to understand their options. Do you have questions about other COVID-19 topics? Please see all of our COVID-19 articles here.

Emergency Wage Subsidy Summary

  • Canada Emergency Wage Subsidy (CEWS) – Retroactive to March 15, 2020 and available for 12 weeks to June 6, 2020.  Separated into 3, 4 week periods.
  • CEWS will be equal to the greater of,
    • 75 per cent of the amount of remuneration paid, up to a maximum benefit of $847 per week; and
    • the amount of remuneration paid, up to a maximum benefit of $847 per week or 75 per cent of the employee’s pre-crisis weekly remuneration, whichever is less.
  • Payments to non-arm’s length individuals are eligible for the subsidy; however, the benefit will be limited to a maximum of $847 per week or 75% of the employee’s pre-crisis weekly remuneration.
  • For employees that work for multiple related employers, the maximum combined benefit for that employee is $847 per week.
  • Eligible employers have to demonstrate a gross revenue decrease of at least 15% in March and 30% in April and May 2020 compared to the same month in 2019 or an average of January and February of 2020 (if using the January and February average this becomes the basis for April and May as well). Applicants can use a cash or accrual method for determining revenues, but the application must be consistent. Revenues do not include non-arm’s length revenues, extraordinary revenues or capital amounts.
  • Eligible employers include corporations, non-profit organizations, charities, partnerships and proprietors. Business of all sizes and sectors (except public sector entities).
  • CEWS will be based entirely on salary or wages actually paid to employees. This means that employers will pay employees normal earnings in March, apply for the benefit in April and receive a CEWS reimbursement if eligible shortly thereafter.
  • Employers will apply for the CEWS through a CRA portal to be created, on a monthly basis. Applications will be open on April 27, 2020 through a CRA portal or alternatively, a separate online application form. Each payroll program account (RP) will require a separate application and a separate CEWS benefit calculation.
  • To calculate the benefit download the calculation spreadsheet and keep for your records. For any employees included in the benefit calculation, keep records of all employee details including SIN numbers.
  • Employers can expect payments of CEWS to start in approximately 3-6 weeks.
  • Employers found to be subsequently ineligible will have to repay the subsidy.  Any employers abusing the system will be subject to a penalty of 225% of the subsidy and up to 5 years in prison.
  • The program has been expanded to refund 100% of the employer-paid contributions to EI, CPP and QPP on wages paid to employees who are not working.  There is no limit per employee for this part of the subsidy.

Emergency Wage Subsidy FAQ

1. What is the Canada Emergency Wage Subsidy?

The Canada Emergency Wage Subsidy is a three-month measure that will provide a subsidy of up to 75% of the first $58,700 of normal earnings paid in remuneration per employee. This equates to a maximum payment of $847 weekly to the employer (equates to a total maximum eligible wage paid of $1,129 per week paid to the employee). The measure will be retroactive to March 15, 2020, end date of June 6, 2020.  Also, the program includes a subsidy of 100% of the employer-paid portion of EI, CPP and QPP on wages paid to employees not reporting to work.

Eligible employers would first be required to pay the wages to the employees and report back to CRA on a monthly basis.  Currently, the Minister has announced that the first payments will be expected in 6 weeks.  No announcement yet on a payment timeline for subsequent submissions.

2. What should I do if I previously reduced my payroll remittances under the former Temporary Wage Subsidy program?

For employers that are eligible for both the Canada Emergency Wage Subsidy and the Temporary Wage Subsidy, they may continue to access both programs. However, any benefit eligible from the Temporary Wage Subsidy would reduce the amount available to be claimed under the Canada Emergency Wage Subsidy in the same period. The benefit calculation spreadsheet provided on the CRA website includes a deduction for any benefits eligible under the Temporary Wage Subsidy.

Any amounts received by employees through ESDC’s work-Sharing program for the same period, reduces the Canada Emergency Wage Subsidy.

3. Which employers are eligible?

At this time the eligibility criteria appears to include all Canadian businesses both small and large, non-profit organizations and registered charities, individuals and partnerships who have experienced a loss in revenues of at least 15% of their revenue in March 2020 and 30% for the following months.  For all periods, the employer may compare against the same month on the prior year or an average of the revenues earned in January and February of 2020.

If the January and February average is used, this average must be the basis for all application periods. The determination of the revenue amount may be done on a cash or accrual basis, but must be applied consistently across all periods. Publicly funded businesses are not eligible. Revenues do not include non-arm’s length revenues, extraordinary revenues or revenues on account of capital.

4. What if my revenue losses are less than 15%/30% and I receive the subsidy?

Employers who participate in the subsidy and who are determined not to be eligible will be required to pay the subsidy back to CRA.  Any applicants determined to be knowingly abusing the subsidy system will be subject to a penalty of 225% of the subsidy and up to 5 years in prison.

5. What if I can’t pay the other 25% or the full regular salary amount?

If the business is experiencing limited cash flow, it appears that the business can apply for the subsidy without having to pay the employee the 25% not covered by the subsidy.

An attestation at a minimum will be required from the employer to evidence that the employer is doing everything they can to pay their employees. Further requirements to evidence this have not been provided.

6. What if my business is closed?

It appears that any employees previously let go or laid off due to COVID-19 may be re-hired and eligible for the subsidy on wages paid in the future.

7. How do I apply for the benefit?

The employer will be able to apply on the Canada Revenue Agency website by accessing their business account on-line beginning on April 27, 2020.  The benefit is applied for under the payroll program account (RP) of the business and each account require a separate application and benefit calculation. Applicants must assign an individual as representative, for CRA to contact, who is in control of business finances.

The employer will be obligated to re-apply each month in March, April and May.

8. How do I calculate the benefit?

Download the calculation spreadsheet from the CRA website. The calculation is A-B-C+D for the application period where:

A is the total of all amounts, each of which is for an eligible employee in respect of a week in the qualifying period, equal to the greater of

a) the least of

i. 75% of eligible remuneration paid to the eligible employee in respect of that week,
ii. $847, and
iii. if the eligible employee does not deal at arm’s length with the qualifying entity in the qualifying period, nil, and

b) the least of

i. the amount of eligible remuneration paid to the eligible employee in respect of that week,
ii. 75% of baseline remuneration in respect of the eligible employee determined for that week, and
iii. $847;

B is the total amounts received under the 10% Temporary Wage Subsidy

C is the total amounts received by employees under the Work-Sharing Program

D is the total employers premium for EI, CPP, QPP or QPIP for employees on leave with pay

The first subsidy is believed to take an estimated 3 to 6 weeks.

Please contact any Millards location if you have questions regarding Canada’s COVID-19 Economic Response Plan. Like so many of the client businesses we serve, Millards Chartered Professional Accountants has adopted COVID-19 procedures and protocols to guide safe interaction with others. In an effort to maintain social distancing, please contact us via phone or email only. Please continue to visit this website for ongoing information about COVID-19 as it pertains to your accounting and financial concerns.