Additional Details of Canada Emergency Wage Subsidy and Enhanced Summer Jobs Program Released
Date: April 9, 2020
After making its initial announcement about the significantly expanded Canada Emergency Wage Subsidy (CEWS) program, on April 8, 2020, the federal government announced that it is introducing additional flexibility to the CEWS and provided additional details about how the program will operate.
Highlights of this announcement include: shrinking the gross revenue reduction threshold for March 2020 to 15% instead of 30%; introducing a different comparator period option that will help new businesses meet the eligibility criteria; clarification of how “pre-crisis remuneration” will be determined; and, information about the interaction of CEWS with other financial incentives, such as the Employment Insurance (EI) Work-Sharing program and the new Canada Emergency Response Benefit (CERB).
The new details are set out below.
- Because most businesses were not affected by the impact of COVID-19 until mid-March, employers will only need to show that gross revenues for that month dropped by 15% instead of 30%.
- All employers will be able to compare earnings for March, April, and May 2020 either to the average revenue earned in January and February 2020, or to the same month in 2019 if the employer was established prior to March 2019. Once the comparator period is chosen, it will apply across all three periods.
- Employers are permitted to calculate revenues under either the accrual method (as they are earned), or under the cash method (as they are received). Once the method is chosen, that same method must be used for each monthly application.
- The calculation for registered charities and non-profit organizations will include most forms of revenue and these organizations can choose either to include revenue from government sources as part of the calculation or not, but the method chosen must be used across all three wage subsidy periods.
- Employers are entitled to a 100% refund of their contributions to EI, CPP/QPP and QPIP for each week that is eligible for CEWS during which employees are on leave with pay, provided the employee does not do any work that week. Employers will apply for the refund for the applicable period at the same time as applying for the CEWS for that period, and there is no limit on the amount that can be refunded.
- The CEWS applies to employees employed in Canada, and will include new hires.
- An employee’s “pre-crisis remuneration,” used in calculating the amount of the subsidy, will be based on the average weekly remuneration paid to the employee between January 1 and March 15 inclusively, excluding any seven-day periods in respect of which the employee did not receive remuneration.
- In order to encourage employers to bring employees back on to their payroll as quickly as possible and avoid duplication, the government is considering a process to allow individuals, who may have applied for the CERB but are brought back onto their employer’s payroll as a result of the CEWS, to cancel their CERB claim and repay any amount received.
- However, the government’s backgrounder also states, “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 softens the previously announced restriction, which would have prevented an employer from claiming the CEWS for remuneration paid to an employee during one of the four-week CERB periods. It is not clear whether this rule will be changed further if the government does proceed to permit repayment of the CERB as noted in the paragraph above.
- Employers who claim the subsidy but are not eligible to receive it will have to repay the subsidy. Penalties, including fines and imprisonment, could apply if the claim was submitted fraudulently. Employers who attempt to artificially reduce their gross revenues in order to claim the CEWS will have to repay 125% of the value of the improperly claimed subsidy.
- Employers who are eligible for both the CEWS and the 10% wage subsidy for a period may claim the 10% wage subsidy for remuneration paid during the period, and that will reduce the amount available to be claimed under the CEWS for that same period.
- EI benefits received by employees through the Work-Sharing program will reduce the amount of the subsidy the employer can claim under the CEWS.
Legislation giving effect to the CEWS has not yet been tabled and once it is, we will be providing further information. No date has been provided as to when Parliament will be recalled.
In addition to the CEWS, the government also announced temporary changes to the Canada Summer Jobs program, available to eligible not-for profit organizations, public sector employers, and small businesses in the private sector who hire youth. These changes will allow such organizations to receive a wage subsidy of up to 100% of the provincial or territorial minimum hourly wage for each youth employee. In the normal course, public and private sector employers are limited to receiving funding of up to 50% of the provincial or territorial minimum wage for each employee. The end date of employment will also be extended to February 28, 2021.
We will continue to monitor developments. If you have questions, please contact Stephanie Kalinowski at 416.864.7263.
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