Changes to the Canada Emergency Wage Subsidy and what they mean for employers

Earlier this summer, the government passed Bill C-20, legislation to enhance the CEWS by making the wage subsidy accessible to a broader range of employers and extending the program to Nov. 21, 2020. A top-up component was also introduced for employers most adversely affected by the pandemic.

Background on the CEWS

As part of the COVID-19 Economic Response Plan, the aim of the CEWS is to protect jobs by helping businesses keep employees on payroll and encouraging employers to re-hire workers that were previously laid off due to the pandemic. The program helps to better position Canadian employers to more easily resume business operations. The Government of Canada claims that since the CEWS launched, over 3 million Canadian employees have had their jobs supported by the wage subsidy.

The CEWS was launched for an initial 12-week period from Mar. 15 to Jun. 6, 2020, providing a 75% wage subsidy to eligible employers. In May, Minister Morneau announced that the Government of Canada would extend the CEWS by an additional 12 weeks up to Aug. 29, 2020. Now, the program has been extended further with the ability and intent to provide further support until the end of 2020.

The applicable formulas, claim periods, and limitations can be confusing for many Canadian employers. Here, seven frequently asked questions are answered about the changes to the CEWS and what it may mean for your business. It is, however, always recommended that employers refer to the CRA’s CEWS guidance for the most current information available and obtain advice as required.

1. What are the CEWS claim periods?

The government is extending the CEWS to Nov. 21, 2020 so employers have more time to access and claim this subsidy. There is also a mechanism to further extend CEWS by regulation before the end of the year. The government has provided details of the program up to Nov. 21, 2020. With the extension, there are a total of nine claim periods – each claim period with a duration of four weeks, starting Mar. 15, 2020 and ending Nov. 21, 2020. The claim period is the timeline in which an eligible employer can claim the wage subsidy for remuneration paid to eligible employees.

Here are the qualifying claim periods for your reference. An eligible employer may be able to claim the wage subsidy for one or more of the following claim periods:

• Period 1: Mar. 15, 2020 to Apr. 11, 2020
• Period 2: Apr. 12, 2020 to May 9, 2020
• Period 3: May 10, 2020 to Jun. 6, 2020
• Period 4: Jun. 7, 2020 to Jul. 4, 2020
• Period 5: Jul. 5, 2020 to Aug. 1, 2020
• Period 6: Aug. 2, 2020 to Aug. 29, 2020
• Period 7: Aug. 30, 2020 to Sept. 26, 2020
• Period 8: Sept. 27, 2020 to Oct. 24, 2020
• Period 9: Oct. 25, 2020 to Nov. 21, 2020

​2. Has eligibility for the CEWS changed?

Yes, the 30% revenue decline that employers were required to demonstrate for claim periods 1 to 4 and the employee remuneration that could be included for claim periods 1 to 4 have changed for claim periods 5 to 9.

Eligible employers

Bill C-20 makes the wage subsidy accessible to a broader range of businesses by including employers with a revenue decline of less than 30% and by providing a gradually decreasing base subsidy to all qualifying employers, with the subsidy amount varying depending on the scale of the revenue decline.

For claim periods 5 to 9, this will help employers with less than a 30% revenue loss get support to retain and bring back workers. Put simply, starting Jul. 5, 2020 all eligible employers who have experienced a revenue decline may benefit.

Eligible employees

An employee who is eligible for the wage subsidy is an individual employed in Canada by the eligible employer within the claim period.

• For claim periods 1 to 4, the subsidy excluded employees who did not have remuneration from the employer in 14 or more consecutive days in the claim period.
• For claim periods 5 to 9, individuals employed in Canada by the eligible employer in the claim period are no longer excluded if they are without remuneration in respect of 14 or more consecutive days in that claim period.

3. What is the sliding scale base wage subsidy?

For claim periods 1 to 4, the subsidy calculation was based on a fixed rate of 75%. However, for claim periods 5 and later, the CEWS rate is variable and depends on the amount an employer’s revenue dropped. Essentially, the 30% revenue decline requirement and corresponding 75% wage subsidy is replaced by a sliding-scale subsidy that consists of two parts:

• A “base subsidy” for an eligible employer that has experienced any level of revenue decline for a particular period, and
• An additional “top-up subsidy” for eligible employers that have experienced a revenue decline of greater than 50% for a particular period (explained in question 4)

For example, employers with a revenue drop of 50% or more will have a subsidy rate of 60% for claims that cover period 5 and 6. For claim period 7, the subsidy rate is 50%. For claim period 8, it reduces to 40% and for claim period 9, it reduces to 20%. For a revenue decline from 0 to 49%, a multiplier is applied to the revenue drop that ranges from 0.4 to 1.2 times, depending on the period.

Calculate your subsidy amount here.

4. What is the top-up subsidy?

The top-up subsidy is up to an additional 25% for employers that have been most adversely affected by the COVID-19 crisis. The top-up subsidy is available to employers who have experienced a three-month average decline in revenue of more than 50%. The top-up revenue drop is used to calculate the top-up rate. Employers can calculate the decline in eligible revenue they experienced when comparing the average monthly revenue of the three months prior to the claim period in one of two ways:

• General prior reference period (The same three months in 2019)
• Alternative prior reference period (Jan. and Feb. 2020)

For example, starting in claim period 5 (Jul. 5-Aug. 1) an employer can choose to compare revenues for Apr., May, and Jun. 2020 with Apr., May, and Jun. 2019, or the employer can compare Apr., May, and Jun. 2020 with Jan. and Feb. 2020. Whichever method is chosen for claim period 5 must be used for all the following claim periods. The rate is 1.25 times the average revenue decline in excess of 50%, to a maximum top-up rate of 25%. For more information, visit: How the revenue drop and subsidy rate are calculated.

5. What is the safe harbour?

The safe harbour is only for claims in periods 5 and 6. If you have an eligible revenue drop of at least 30% in the current or previous period, you are entitled to the higher CEWS rate between two calculations:

• The rate calculated using the rules for the current period (period 5 or 6), or
• The rate calculated using the rules that were in place for period 4

This is calculated under the safe harbour rules and means that in periods 5 and 6, if you had a revenue drop of 30% or more in the current or previous period, you would receive an overall CEWS rate of at least 75% and will not receive an amount less than what you would have under the claim period 1 to 4 rules.

6. How is the revenue decline calculated?

For claim periods 5 and later (claims that cover Jul. 5, 2020 and later), there is no minimum revenue drop required to qualify for the subsidy. The rate your revenue has dropped is only used to calculate how much subsidy you receive for these periods. Starting with claim period 5 (July 5-Aug. 1), an employer calculates their decline in revenue by choosing the current or previous month to compare with. For example, for claim period 5, employers can compare their revenue for Jul. 2020 to Jul. 2019, or compare Jun. 2020 to Jun. 2019, or the average of Jan. and Feb. 2020 with either Jun. or Jul. 2020. Whichever method is chosen for claim period 5 must be used for all the following claim periods.

You can use this online calculator or spreadsheet to find your revenue drop for claim periods 5 and later while calculating how much subsidy you may receive.

7. How do employers apply?

Most businesses can apply using their My Business Account with the CRA.

Watch the recording of our recent webinar What the changes to the Canada Emergency Wage Subsidy mean for employers to learn more.

Disclaimer: The information provided in this post is provided for informational purposes only and should not be relied upon or construed as legal advice and does not create an attorney-client relationship. You should review with your legal advisors how the laws identified in this post may apply to your specific situation.