In recent news, the Canada Emergency Wage Subsidy has been extended to December 2020. The Government has also however, released some additional criteria that affects the program until December 2020. Businesses previously not eligible to receive CEWS may now qualify to receive a subsidy. The Government has also added an additional Top-Up Subsidy for businesses with severely impacted revenues.

What are the changes?

• The enhancements to CEWS rules applies from the period starting July 5^th, to the period ending November 21^st
• Employers with less than 30% decline of revenue may also now qualify for CEWS starting July 5^th
• Financial support and wage subsidies will now be provided based on a sliding scale dependent on the extent of revenue decline
• An additional ‘Top-Up’ Subsidy has been announced and it has the potential to provide the highest amount of subsidy per employee per week of $960-$1129
• Applicants are now allowed to use prior moths revenue as a reference to their revenue decline
• The new rules also allow employers to receive the subsidy if they have been without remuneration for 14 or more consecutive days
• Should the new rules provide employers with a lower subsidy, a ‘Safe Harbour’ rule has been put in place that allows employers to receive their previous subsidy amounts for July and August (Period 5 & 6)

Sliding Scale

Due to the enhancements made to CEWS, the subsidy is now dependent on the extent of the employer’s revenue decline. The amount of subsidy then will be reduced gradually until December 2020.

Here is a guide for you:

Employers with revenue declines up to 49%, the employer will multiply the revenue decline with the factor listed to determine the percentage of employees’ salaries they will receive through CEWS.

Companies with revenue declines of 50% or greater will receive the maximum of 60% of their employees salaries as part of CEWS and may also be eligible for an additional ‘Top-Up’ Subsidy. This maximum percentage of the CEWS subsidy will then be gradually reduced.

Previous rules required the subsidy to be determined against numbers from the same months of the year 2019. In the enhancement, these reference period have also changed.

An employer can now choose between referencing numbers from the same month of prior year 2019 or the average between January and February of 2020.

For Period 5, an employer may choose either method regardless of how their eligibility was determined in the previous CEWS periods. The chosen method, however, must be followed throughout the extension of CEWS until December 2020.

Top-Up Subsidy

In the enhancements to CEWS, an additional Top-Up subsidy was also announced. This new subsidy will be available to employers who have experienced a three-month average decline greater than 50%. The Top-Up Subsidy rate is equal to 1.25x the average decline over 50% up to a maximum Top-Up rate of 25%.

Here is a table for your reference:

This Top-Up subsidy uses a three-month average to determine the revenue decline for an eligible employer. Since it is different from those of the CEWS subsidy, here are the following reference periods:

CEWS Employee Eligibility Changes

• Employees without remuneration for 14 or more consecutive days in a period are eligible for CEWS from July 5, 2020 onwards
• These changes do not apply to employees who have been furloughed for July and August
• The subsidy however will be adjusted for furloughed employees in September 2020
• The remuneration for arm’s length employees is based solely on remuneration paid for the eligibility period and reference to the ‘pre-crisis’ remuneration has been removed
• For non-arm’s length employees, the calculation for ‘pre-crisis’ remuneration has been increased to include March 1, 2019 to May 31, 2019 or from March 1, 2019 to June 30, 2019
• For the upcoming periods, average weekly remuneration from January 1, 2020 to March 15, 2020 or from July 1, 2019 to December 31, 2019 can be used as ‘pre-crisis’ remuneration
• It is only applicable however for non-arm’s length employees employed before March 16, 2020

More Information:

• There is no appeal process for the subsidy amount to the Tax Court of Canada
• Registered and eligible public institutions such as charities and non-profit organizations can choose to exclude government sourced revenue and not in revenue reduction calculations
• Eligible employers applying for subsidies that use a cash method of accounting may use accrual-based accounting
• Amalgamated corporations may use combined revenues to calculate their benchmark revenues
• Specific tax-exempt trusts may qualify for the subsidies as well

Please click here for more information regarding the new CEWS guidelines from CRA.