Recent Updates on the COVID 19 Economic Measures
Category : blog
April 10, 2020
Dear Clients and Friends:
Wishing you all a Happy Easter long weekend! I hope you will take this opportunity to reflect and spend precious time with your families as we continue to fight the pandemic. In my latest email, I will be outlining and summarizing the most recent update by Prime Minister Trudeau that he outlined on Thursday. This is the latest update further to my email on April 2, 2020.
As a way of protecting jobs through the pandemic, Prime Minister Justin Trudeau, proposed the new Canada Emergency Wage Subsidy. This wage subsidy aims to prevent further job losses, encourage employers to re-hire workers previously laid off as a result of COVID-19, and help better position Canadian companies and other employers to more easily resume normal operations following the crisis. While the Government has designed the proposed wage subsidy to provide generous and timely financial support to employers, it was done with the expectation that employers will do their part by using the subsidy in a manner that supports the health and well-being of their employees. The application process will take up to 3 weeks (revised from the previously announced 3 to 6 weeks). They will be setting up a microsite to allow for applications.
Revisions & Updates to Previously Announced Economic Measures: For further details, please refer to the CRA website at https://www.canada.ca/en/department-finance/economic-response-plan/wage-subsidy.html
1. Canada Emergency Wage Subsidy (CEWS):
Change in the reference period and revenue reduction percentage for the 75% Wage Subsidy Eligibility (decrease of at least 15 per cent of their revenue in March 2020 and 30 per cent for the April & May (see Eligible Periods)).
A. Are You Eligible?
Eligible employers would include individuals, taxable corporations, partnerships, non‑profit organizations and registered charities. This subsidy would be available to eligible employers that have experienced at least decrease in their revenue (see Periods of Eligibility). In applying for the subsidy, employers would be required to attest to the decline in revenue. Note the revision to the eligibility (previously identified as a 30% decrease for all periods, but now revised to a 15% reduction in revenue in March and a 30% reduction in April and May; please see the revised the chart and revised reference periods)
|Reference period for eligibility
|Required Reduction in Revenue
|March 15 – April 11
|March 2020 over:
|April 12 – May 9
|April 2020 over:
|May 10 – June 6
|May 2020 over:
For eligible employers established after February 2019, eligibility would be determined by comparing monthly revenues to a reasonable benchmark.
B. Subsidy Calculation:
An employer’s revenue for eligibility would be based on revenue from business carried on in Canada earned from arm’s-length sources. Revenue would be calculated using the employer’s normal accounting method, and would exclude revenues from extraordinary items and amounts on account of capital.
The government subsidy for a given employee on eligible remuneration paid between March 15 and June 6, 2020 would be the greater of:
- 75% of remuneration paid, up to a maximum benefit of $847 per week or,
- The lesser of:
- the amount of remuneration paid, up to a maximum benefit of $847 per week or
- 75% of the employee’s pre-crisis weekly remuneration
The government has now stated that pre-crisis remuneration for a given employee will be based on the average weekly remuneration paid between January 1 and March 15, 2020 inclusively, excluding any seven-day periods that the employee did not receive remuneration.
Employers will also be eligible for a subsidy of up to 75 per cent of salaries and wages paid to new employees.
A special rule will apply to employees that do not deal at arm’s length with the employer. The subsidy amount for such employees will be limited to the eligible remuneration paid in any pay period between March 15 and June 6, 2020, up to a maximum benefit of $847 per week or 75 per cent of the employee’s pre-crisis weekly remuneration. There would be no overall limit on the subsidy amount that an eligible employer may claim. Employers must make their best effort to top-up employees’ salaries to bring them to pre-crisis levels.
C. Employers would be allowed to calculate their revenues under the accrual method or the cash method, but not a combination of both. Once the accounting method is chosen, it must be used throughout the program.
D. 100% Refund for certain employer paid contributions to EI and CPP Premiums. This refund would cover 100 per cent 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.
E. Eligible employees:
- An eligible employee is an individual who is employed in Canada.
- Eligibility for the CEWS of an employee’s remuneration, will be limited to employees that have not been without remuneration for more than 14 consecutive days in the eligibility period, i.e., from March 15 to April 11, from April 12 to May 9, and from May 10 to June 6.
- This rule replaces the previously announced restriction that an employer would not be eligible to claim the CEWS for remuneration paid to an employee in a week that falls within a 4-week period for which the employee is eligible for the Canadian Emergency Response Benefit.
F. Application Process:
Eligible employers would be able to apply for the Canada Emergency Wage Subsidy through the Canada Revenue Agency’s My Business Account portal as well as a web-based application. Employers would have to keep records demonstrating their reduction in arm’s-length revenues and remuneration paid to employees. More details about the application process will be made available shortly.
G. 10% Temporary Wage Subsidy:
The Temporary Wage Subsidy of $25,000 per employer and $1,375 per employee continues to be available. For employers that are eligible for both the Canada Emergency Wage Subsidy and the 10 per cent wage subsidy for a period, any benefit from the 10 per cent wage subsidy for remuneration paid in a specific period would generally reduce the amount available to be claimed under the Canada Emergency Wage Subsidy in that same period.
2. Support For Students
100% Wage subsidy to the Canada Summer Jobs Program for Employers providing up to 100% to small businesses. These subsidies are extended up until and end date of employment of February 28, 2021 and will apply to both part time and full time employees.
3. Special rules for charities
- The government also advised that registered charities and non-profit organizations will have additional flexibility for the revenue decrease calculation. Specifically, these employers will include most forms of revenue in the calculation, excluding revenues from non-arm’s length persons.
- These organizations would be allowed to choose whether or not to include revenue from government sources as part of the calculation. Once chosen, the same approach would have to apply throughout the program period
4. Work Sharing Program:
A program that helps employers and employees avoid layoffs when there is a temporary decrease in business activity beyond the control of the employer. The program provides Employment Insurance (EI) benefits to eligible employees who agree to reduce their normal working hours and share the available work while their employer recovers. Work-Sharing is an agreement between employers, employees and the Government of Canada.
- Extension of the maximum possible duration of an agreement from 38 weeks to 76 weeks
- EI benefits received by employees through the work sharing program will reduce the benefit that their employee is entitled to receive under the subsidy
5. Major Banks:
Are now accepting applications for the Canada Emergency Business Account. Please log in to your business bank account for further details. If you require assistance on T4 summaries or your Payroll account number, please contact our office.
6. Compliance Process & Penalties:
The government confirmed that employers that do not use the subsidy as intended would face “stiff and severe” penalties. In particular, the government advised that employers that engage in artificial transactions to reduce revenue to claim the subsidy would be subject to a penalty equal to 25% of the value of the subsidy claimed, and must also fully repay the subsidy that was improperly claimed. The Finance Minister also noted in his news conference on April 8, 2020, that employers who create artificial transactions would effectively be subject to a fine of up to 225% of the amount received under the subsidy. In addition to this fine, the Finance Minister also noted that such employers may be punished by up to five years in prison.
We are committed to serving our valued clients during this difficult time and our team is ready to assist you via phone email or video conferencing.