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Canada Emergency Wage Subsidy

September 25, 2020

 

On July 27, 2020 the following changes passed into law through Bill C-20, to broaden the reach of the Canada Emergency Wage Subsidy (CEWS) program:

The Federal Speech from the Throne on September 23rd indicated the intent to extend this program until Spring 2021.   

 

Revenue Decline Thresholds & Subsidies

To date, we have seen legislation for a total of nine periods, with each period being four weeks. 

  • Phase 1: March 15 to July 4 i.e. Periods 1, 2, 3 & 4
  • Phase 2: July 5 to August 29 i.e. Periods 5 & 6
  • Phase 3: August 30 to November 21 i.e. Periods 7, 8 & 9
  • Phase 4: November 22 to December 19 i.e. Period 10*

Further Details

*  There are no rules published (or yet determined) for this phase, falling between November 22 and December 19.

 

Ward & Uptigrove has a team focused on helping our clients with their CEWS applications. For inquiries, please contact COVID-19@w-u.on.ca.

 

 

Revenue Decline Thresholds & Corresponding Subsidies

 

Phase 1: March 15 to July 4 i.e. Periods 1, 2, 3 & 4

 

Phase 1 provided for a fixed subsidy of 75%. To obtain this subsidy the employer was required to shows declines in revenue as follows:

  1. A decline of 15% in the Revenues for the month of March 2020 compared to either March 2019 or the average of January and February 2020, in order to qualify for Period 1 (March 15 to April 11)
  2. A decline of 30% in the Revenues for the months of April, May, June 2020 compared to either the same month in 2019 or the average of January and February 2020, in order to qualify for Period 2, 3 and 4 respectively.

Employers would select a comparison approach and accounting method when first applying for CEWS.  These must be used for the entire duration of the program.  Comparison can be made on a) current monthly revenues compared to the same months' revenues in the prior year, or b) current monthly revenues compared to the average of January and February 2020 revenues.

 

For employers eligible for both CEWS and the 10% Temporary Wage Subsidy, the CEWS benefit should be reduced by the 10% subsidy amount in that period.  If an employer chooses to not deduct the TWS off the CEWS, CRA will require the employer to indicate the 0% election on the self-identification form under the 10% Temporary Wage Subsidy program.

 

Revenue can be measured on either the accrual basis or cash basis for the purpose of determining eligibility. The revenue excludes non-arm’s length sources and excludes extraordinary items and amounts on account of capital. 

Phase 1 included a deeming rule that said that if you qualify for CEWS in any one claim period that you automatically qualify for the subsequent Claim Period.

 

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Phase 2: July 5 to August 29 i.e. Periods 5 & 6

 

During this phase employers have a choice around the calculation of the subsidy, in which companies will receive the better outcome between the a) Phase 1  rules or b) new rules that apply for Periods 5 and 6 (July 5 through to August 29) which provide for two levels of support.

  1. A base subsidy of up to 60% for companies who have seen a revenue decline of any level in the Claim Period, with the subsidy proportional – on a straight-line basis – to the revenue reductions between 1% and 50%. 

    The wage support percentages will be 1.2x the percentage of revenue decline experienced by the employer so, for example, companies that have seen a 10% revenue decline can get a wage subsidy of 12%, and companies that have seen a 30% decline can get a wage subsidy of 36% and so on.

    This base subsidy reaches its maximum 60% level at a revenue decline of 50%.  This is a major change intended to provide some wage support as recovering businesses begin to approach prior revenue levels.
     
  2. A Top Up Subsidy of up to 25%, for employers that have sustained revenue reductions of greater than 50%, providing a maximum subsidy of up to 85% (see Details on the Top up Subsidy below).

Based on these rules an employer with revenue declines between 30% and 61% during the Claim Period would receive somewhere between 36% and 73.75% wage support rather than the 75% wage support they had received when eligible during Phase 1. 

 

To address this, the government has adopted a “safe harbour” rule for Phase 2 whereby those who see a revenue decline of greater than 30% during the Claim Period will still get the 75% subsidy in each of Claim Periods 5 & 6.

 

The results of these rules for Phase 2 (July 5 through August 29 claim period) are as follows:

  1. A sliding scale of support for those who have seen a revenue decline of between 1% and 29% during a Claim Period (at 1.2 times the revenue decline for subsidies ranging from 1.2% to 34.8%).
  2. A guaranteed 75% subsidy for those who have seen a revenue decline of at least 30% during a Claim Period.
  3. An enhanced wage support level above 75% for those who have seen a revenue decline higher than 62% during a Claim Period, with the maximum subsidy of 85% being reached for revenues declines of 70% or more.

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Phase 3: August 30 to November 21 i.e. Periods 7, 8 & 9

 

During Phase 3 the “safe harbour” rule from Phase 2 no longer applies and only the new rules apply. The base CEWS (before top-up for employers with revenue declines over 50%) falls from 60% to 0% based on the chart below:

Rate Structure of the CEWS base subsidy

 

Rate structure of the CEWS for Periods 5-9:

Rate Structure of the CEWS Periods 5-9

 

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Phase 4: November 22 to December 19 i.e. Period 10

 

There are no rules published (or yet determined) for this phase, falling between November 22 and December 19. A second wave of COVID-19 could lead to a re-visitation of the rules and program duration yet again.

 

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Details on the Top Up Subsidy

 

Unlike the base subsidy, the top-up subsidy refers to revenues over a three month period under either of the following methods:

  1. Comparing the cumulative revenues over the preceding three months to the same three months in 2019.
    • For example, for the Top up for Period 5 you would look to the total revenues for April to June 2020 over the total revenues for April through June 2019.
  2. Comparing the average monthly revenues over the preceding three months to its average monthly revenues in January and February 2020.
    • For example, for the Top up for Period 5 you would look to the average revenues for April to June 2020 over the average revenue for January and February 2020.

The additional Top up subsidy is equal to 1.25x the percentage of revenue decline in excess of 50% experienced by the employer. For example, companies that have seen a 60% revenue decline can get a top-up subsidy of 12.5% for a total subsidy of 72.5%  (i.e., 60% base subsidy for Periods 5 and 6 + 12.5% top-up subsidy).  However, during Phase 2, the “safe-harbour” rule would raise that subsidy to 75%.

 

Companies that have seen a 70% (or greater) revenue decline can get a top-up subsidy of 25%, for a total subsidy of 85% (i.e., 60% base subsidy for Periods 5 and 6 + 25% top-up subsidy), that being the maximum subsidy level in total.

 

Since the base subsidy in periods 7, 8 and 9 declines, the maximum subsidies for these periods is reduced as follows:

  1. Period 7 maximum of 75% (50% base + 25% Top up for employers with a revenue reduction of 70% or higher)
  2. Period 8 maximum of 65% (40% base + 25% Top up for employers with a revenue reduction of 70% or higher)
  3. Period 9 maximum of 45% (20% base + 25% Top up for employers with a revenue reduction of 70% or higher)

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Furloughed Employees

 

For Periods 5 through 7, i.e., until September 27, the support for furloughed employees will be at the same level as during periods 1-4.  This is proposed to also apply to Period 8, i.e. until October 24, 2020. 

 

That support is for 75% of wages actually paid up to a maximum subsidy of $847/wk. available to any employer who qualifies for the base rate for active employees, i.e., has experienced a revenue decline.    

 

Employer contributions for EI, CPP, QPP and QPIP on behalf of furloughed employees will continue to be recoverable by the employer.

 

In an important change and in order to make the return to work easier, as of July 5, CEWS will also be available for employees that are without remuneration in respect of 14 or more consecutive days in an eligibility period.

 

In order to avoid furloughed employees’ wages varying with their employers’ CEWS changing subsidy levels, the support will be adjusted in Periods 8-9 to align with the benefits provided under CERB and/or EI benefits.

 

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Reference Periods

 

In a similar vein to the two-month deeming rule that existed during Phase 1, an employer will have the option to choose the greater of the percentage revenue decline in the current period and that in the previous period for the purpose of determining its eligibility for base CEWS and its base CEWS rate in the current period.

 

This essentially means automatic qualification at the same revenue decline level for two periods in a row. It also means that you would get one last month of CEWS support even if your revenues show no decline in the current month as long as your previous month did have a revenue decline.

 

Those who happen to experience deeper relative revenue drops after July 5 would of course be free to use the revenue decline of the current month if that would deliver a better CEWS outcome.

 

Additionally, for Period 5 and onward, employers who chose to use a January and February 2020 monthly average for revenue decline calculations during Phase 1 will be able to choose to make a one-time switch to using the same month revenues in 2019 as the basis of their calculations – and vice versa.  This decision would apply both to the base subsidy and to the top-up subsidy.

CEWS Timing & Approach

 

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Other Changes

Other changes:

Other details maintained:

Applications are open through CRA My Business Account or Represent a Client.

 

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Canada Emergency Wage Subsidy

September 25, 2020

 

On July 27, 2020 the following changes passed into law through Bill C-20, to broaden the reach of the Canada Emergency Wage Subsidy (CEWS) program:

  • Allow the extension of the CEWS until December 19, 2020, including redesigned program details until November 21, 2020.
  • Make the subsidy accessible to a broader range of employers by including employers with a revenue decline of less than 30% and providing a gradually decreasing base subsidy to all qualifying employers.
  • Introduce a top-up subsidy of up to an additional 25% for employers that have been most adversely affected by the pandemic. This would be particularly helpful to employers in industries that are recovering more slowly.
  • Provide certainty to employers that have already made business decisions for July and August by ensuring they would not receive a subsidy rate lower than they would have had under the previous rules.

The Federal Speech from the Throne on September 23rd indicated the intent to extend this program until Spring 2021.   

 

Revenue Decline Thresholds & Subsidies

To date, we have seen legislation for a total of nine periods, with each period being four weeks. 

  • Phase 1: March 15 to July 4 i.e. Periods 1, 2, 3 & 4
  • Phase 2: July 5 to August 29 i.e. Periods 5 & 6
  • Phase 3: August 30 to November 21 i.e. Periods 7, 8 & 9
  • Phase 4: November 22 to December 19 i.e. Period 10*

Further Details

*  There are no rules published (or yet determined) for this phase, falling between November 22 and December 19.

 

Ward & Uptigrove has a team focused on helping our clients with their CEWS applications. For inquiries, please contact COVID-19@w-u.on.ca.

 

 

Revenue Decline Thresholds & Corresponding Subsidies

 

Phase 1: March 15 to July 4 i.e. Periods 1, 2, 3 & 4

 

Phase 1 provided for a fixed subsidy of 75%. To obtain this subsidy the employer was required to shows declines in revenue as follows:

  1. A decline of 15% in the Revenues for the month of March 2020 compared to either March 2019 or the average of January and February 2020, in order to qualify for Period 1 (March 15 to April 11)
  2. A decline of 30% in the Revenues for the months of April, May, June 2020 compared to either the same month in 2019 or the average of January and February 2020, in order to qualify for Period 2, 3 and 4 respectively.

Employers would select a comparison approach and accounting method when first applying for CEWS.  These must be used for the entire duration of the program.  Comparison can be made on a) current monthly revenues compared to the same months' revenues in the prior year, or b) current monthly revenues compared to the average of January and February 2020 revenues.

 

For employers eligible for both CEWS and the 10% Temporary Wage Subsidy, the CEWS benefit should be reduced by the 10% subsidy amount in that period.  If an employer chooses to not deduct the TWS off the CEWS, CRA will require the employer to indicate the 0% election on the self-identification form under the 10% Temporary Wage Subsidy program.

 

Revenue can be measured on either the accrual basis or cash basis for the purpose of determining eligibility. The revenue excludes non-arm’s length sources and excludes extraordinary items and amounts on account of capital. 

Phase 1 included a deeming rule that said that if you qualify for CEWS in any one claim period that you automatically qualify for the subsequent Claim Period.

 

Top of Page

 

Phase 2: July 5 to August 29 i.e. Periods 5 & 6

 

During this phase employers have a choice around the calculation of the subsidy, in which companies will receive the better outcome between the a) Phase 1  rules or b) new rules that apply for Periods 5 and 6 (July 5 through to August 29) which provide for two levels of support.

  1. A base subsidy of up to 60% for companies who have seen a revenue decline of any level in the Claim Period, with the subsidy proportional – on a straight-line basis – to the revenue reductions between 1% and 50%. 

    The wage support percentages will be 1.2x the percentage of revenue decline experienced by the employer so, for example, companies that have seen a 10% revenue decline can get a wage subsidy of 12%, and companies that have seen a 30% decline can get a wage subsidy of 36% and so on.

    This base subsidy reaches its maximum 60% level at a revenue decline of 50%.  This is a major change intended to provide some wage support as recovering businesses begin to approach prior revenue levels.
     
  2. A Top Up Subsidy of up to 25%, for employers that have sustained revenue reductions of greater than 50%, providing a maximum subsidy of up to 85% (see Details on the Top up Subsidy below).

Based on these rules an employer with revenue declines between 30% and 61% during the Claim Period would receive somewhere between 36% and 73.75% wage support rather than the 75% wage support they had received when eligible during Phase 1. 

 

To address this, the government has adopted a “safe harbour” rule for Phase 2 whereby those who see a revenue decline of greater than 30% during the Claim Period will still get the 75% subsidy in each of Claim Periods 5 & 6.

 

The results of these rules for Phase 2 (July 5 through August 29 claim period) are as follows:

  1. A sliding scale of support for those who have seen a revenue decline of between 1% and 29% during a Claim Period (at 1.2 times the revenue decline for subsidies ranging from 1.2% to 34.8%).
  2. A guaranteed 75% subsidy for those who have seen a revenue decline of at least 30% during a Claim Period.
  3. An enhanced wage support level above 75% for those who have seen a revenue decline higher than 62% during a Claim Period, with the maximum subsidy of 85% being reached for revenues declines of 70% or more.

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Phase 3: August 30 to November 21 i.e. Periods 7, 8 & 9

 

During Phase 3 the “safe harbour” rule from Phase 2 no longer applies and only the new rules apply. The base CEWS (before top-up for employers with revenue declines over 50%) falls from 60% to 0% based on the chart below:

Rate Structure of the CEWS base subsidy

 

Rate structure of the CEWS for Periods 5-9:

Rate Structure of the CEWS Periods 5-9

 

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Phase 4: November 22 to December 19 i.e. Period 10

 

There are no rules published (or yet determined) for this phase, falling between November 22 and December 19. A second wave of COVID-19 could lead to a re-visitation of the rules and program duration yet again.

 

Top of Page

 

Details on the Top Up Subsidy

 

Unlike the base subsidy, the top-up subsidy refers to revenues over a three month period under either of the following methods:

  1. Comparing the cumulative revenues over the preceding three months to the same three months in 2019.
    • For example, for the Top up for Period 5 you would look to the total revenues for April to June 2020 over the total revenues for April through June 2019.
  2. Comparing the average monthly revenues over the preceding three months to its average monthly revenues in January and February 2020.
    • For example, for the Top up for Period 5 you would look to the average revenues for April to June 2020 over the average revenue for January and February 2020.

The additional Top up subsidy is equal to 1.25x the percentage of revenue decline in excess of 50% experienced by the employer. For example, companies that have seen a 60% revenue decline can get a top-up subsidy of 12.5% for a total subsidy of 72.5%  (i.e., 60% base subsidy for Periods 5 and 6 + 12.5% top-up subsidy).  However, during Phase 2, the “safe-harbour” rule would raise that subsidy to 75%.

 

Companies that have seen a 70% (or greater) revenue decline can get a top-up subsidy of 25%, for a total subsidy of 85% (i.e., 60% base subsidy for Periods 5 and 6 + 25% top-up subsidy), that being the maximum subsidy level in total.

 

Since the base subsidy in periods 7, 8 and 9 declines, the maximum subsidies for these periods is reduced as follows:

  1. Period 7 maximum of 75% (50% base + 25% Top up for employers with a revenue reduction of 70% or higher)
  2. Period 8 maximum of 65% (40% base + 25% Top up for employers with a revenue reduction of 70% or higher)
  3. Period 9 maximum of 45% (20% base + 25% Top up for employers with a revenue reduction of 70% or higher)

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Furloughed Employees

 

For Periods 5 through 7, i.e., until September 27, the support for furloughed employees will be at the same level as during periods 1-4.  This is proposed to also apply to Period 8, i.e. until October 24, 2020. 

 

That support is for 75% of wages actually paid up to a maximum subsidy of $847/wk. available to any employer who qualifies for the base rate for active employees, i.e., has experienced a revenue decline.    

 

Employer contributions for EI, CPP, QPP and QPIP on behalf of furloughed employees will continue to be recoverable by the employer.

 

In an important change and in order to make the return to work easier, as of July 5, CEWS will also be available for employees that are without remuneration in respect of 14 or more consecutive days in an eligibility period.

 

In order to avoid furloughed employees’ wages varying with their employers’ CEWS changing subsidy levels, the support will be adjusted in Periods 8-9 to align with the benefits provided under CERB and/or EI benefits.

 

Top of Page

 

Reference Periods

 

In a similar vein to the two-month deeming rule that existed during Phase 1, an employer will have the option to choose the greater of the percentage revenue decline in the current period and that in the previous period for the purpose of determining its eligibility for base CEWS and its base CEWS rate in the current period.

 

This essentially means automatic qualification at the same revenue decline level for two periods in a row. It also means that you would get one last month of CEWS support even if your revenues show no decline in the current month as long as your previous month did have a revenue decline.

 

Those who happen to experience deeper relative revenue drops after July 5 would of course be free to use the revenue decline of the current month if that would deliver a better CEWS outcome.

 

Additionally, for Period 5 and onward, employers who chose to use a January and February 2020 monthly average for revenue decline calculations during Phase 1 will be able to choose to make a one-time switch to using the same month revenues in 2019 as the basis of their calculations – and vice versa.  This decision would apply both to the base subsidy and to the top-up subsidy.

CEWS Timing & Approach

 

Top of Page

 

Other Changes

Other changes:

  • Amalgamated corporations will be deemed the same corporation for CEWS purposes.
  • New baseline periods have been announced for each qualifying period, where employers so elect. This change appears to be aimed at seasonal workers.
  • Eligible employees for qualifying periods from July to December appear to no longer be subject to a requirement that they must not be without pay for 14 days or more during any given qualifying period.
  • Eligible entities now include trusts.
  • The deadline for applications has been extended to January 31, 2021.
  • All entities (regardless of what they ordinarily used) may elect to use the cash method or accrual method

Other details maintained:

  • All businesses are eligible, with the exception of public sector entities.

  • Eligible business must be registered for payroll on March 15 with CRA in order to qualify.

  • For employers eligible for both CEWS and the 10% Temporary Wage Subsidy, the CEWS benefit should be reduced by the 10% subsidy amount in that period.  If an employer chooses to not deduct the TWS off the CEWS, CRA will require the employer to indicate the 0% election on the self-identification form under the 10% Temporary Wage Subsidy program.

  • Not for profits and charities will be able to choose to include or exclude government funding in their revenue reduction test.

Applications are open through CRA My Business Account or Represent a Client.

 

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