Important Updates Regarding Employment Insurance Regular Benefits, Recovery Benefits, and Upcoming CEWS Claim Periods
Date: March 12, 2021
In the latest evolution of the federal government’s response to the ongoing global COVID-19 pandemic, on February 19, 2021, the government announced that it would be introducing regulatory and legislative amendments to increase the number of weeks of benefits available for Employment Insurance (EI) regular benefits, as well as the Canada Recovery Benefit (CRB), the Canada Recovery Sickness Benefit (CRSB), and the Canada Recovery Caregiving Benefit (CRCB) (collectively, the Recovery Benefits). In a separate backgrounder published on March 3, 2021, the government also announced the details for the Canada Emergency Wage Subsidy (CEWS) for upcoming claim Periods 14 to 16 (March 14, 2021 to June 5, 2021).
In this FTR Now, we highlight the key details of the amendments and announced intended measures.
Increase to Number of Weeks for EI Regular Benefits and Recovery Benefits
In its February 19, 2021 news release, the government announced the following proposed changes to EI regular benefits and to the Recovery Benefits that were introduced by the government in conjunction with the end of the Canada Emergency Response Benefit (CERB) in September 2020:
- temporarily increase the number of weeks of EI regular benefits available by up to 24 weeks to a maximum of 50 weeks;
- increase the number of weeks available under the CRB and CRCB by 12 weeks, extending the maximum duration of the benefits from 26 weeks to up to 38 weeks; and
- increase the number of weeks available under the CRSB from 2 weeks to 4 weeks.
Bill C-24, An Act to amend the Employment Insurance Act (additional regular benefits), the Canada Recovery Benefits Act (restriction on eligibility) and another Act in response to COVID-19 (Bill C-24) was subsequently introduced for first reading on February 25, 2021. Among other changes, Bill C-24 would amend the Employment Insurance Act to increase the number of weeks of EI regular benefits as described above to a maximum of 50 weeks for claims that are established between September 27, 2020 and September 25, 2021. The proposed changes to the Recovery Benefits will be enacted through regulations, but no such amending regulations have been published as of yet.
International Travellers Ineligible for Recovery Benefits, With Limited Exceptions
Further to an earlier announcement that we reported on in a previous Human Resources Legislative Update, Bill C-24 also amends the Canada Recovery Benefits Act to provide that international travellers are ineligible to receive any of the Recovery Benefits during their mandatory 14-day quarantine or self-isolation period. Individuals who are exempt from the mandatory quarantine requirements under the Quarantine Act, and individuals who travelled outside of Canada to receive necessary medical treatment or to accompany a person who travelled for such treatment and required assistance, will continue to be eligible to apply for Recovery Benefits upon their return to Canada. If passed in their current form, these changes will be retroactive to October 2, 2020 (rather than January 3, 2021 as originally announced), though claimants will not be required to attest that they meet these eligibility criteria in respect of applications made prior to January 11, 2021.
Proposed Details for Upcoming CEWS Claim Periods
On March 3, 2021, the Department of Finance Canada released its latest backgrounder regarding the CEWS program (Backgrounder). The Backgrounder summarizes a number of proposed changes to CEWS for upcoming claim Periods 14 to 16. Those changes and updates of interest to employers applying for CEWS (or considering applying for the CEWS in the future) are summarized below. Our previous communication on CEWS summarizes the details associated with Periods 11 to 13 (December 20, 2020 to March 13, 2021), and can be found in our FTR Now of December 3, 2020.
Maintaining CEWS Rates Structures
The Backgrounder confirms that the government intends to extend the existing maximum level of subsidy available under CEWS in respect of active employees and employees on paid leave (or “furloughed” employees) for Periods 14 to 16 (March 14, 2021 to June 5, 2021). According to the Backgrounder, for Periods 14 to 16:
- Active Employees: The maximum CEWS base rate in respect of active employees would remain at 40%, and the maximum top-up wage subsidy for employers experiencing a revenue decline of 70% or greater would remain at 35% (for a maximum combined CEWS rate of 75%).
- Inactive Employees: The wage subsidy under the CEWS in respect of employees on “leave with pay” would continue to be the lesser of:
- The amount of eligible remuneration paid in respect of the week; and
- The greater of:
- $500, and
- 55% of pre-crisis or “baseline” remuneration for the employee, up to a maximum subsidy amount of $595 (which is the maximum weekly EI benefit available to claimants in 2021).
The employer portion of contributions in respect of the Canada Pension Plan/Quebec Pension Plan, EI, and the Quebec Parental Insurance Plan, as applicable, in respect of employees on leave with pay would continue to be refunded to employers.
These proposed changes need to be implemented through amendments to the Income Tax Regulations, which have not yet been published.
Revenue Decline Reference Periods
The Backgrounder also indicates that the decline in revenue test will be changed to ensure that the general approach continues to calculate an employer’s decline in revenues relevant to a pre-pandemic month, rather than in comparison to a month during the pandemic. Specifically, effective as of Period 14 (March 14 – April 10), the prior reference period used to determine an eligible employer’s decline in revenues would be based on calendar months from 2019.
The proposed reference periods for Periods 14 to 16 are summarized in the following table that has been adapted from the Backgrounder:
|Timing||Period 14 March 14 – April 10||Period 15 April 11 – May 8||Period 16 May 9 – June 5|
|General Approach||March 2021 over March 2019 or February 2021 over February 2020||April 2021 over April 2019 or March 2021 over March 2019||May 2021 over May 2019 or April 2021 over April 2019|
|Alternative Approach||March 2021 or February 2021 over average of January and February 2020||April 2021 or March 2021 over average of January and February 2020||May 2021 or April 2021 over average of January and February 2020|
Once again, employers that had elected the general approach for prior periods would continue to use that approach and employers that had elected the alternative approach would continue to use the alternative approach. There is no fresh opportunity to change that election.
These proposed changes also need to be implemented through yet to be published amendments to the Income Tax Regulations.
Additional Alternative Baseline Remuneration Period
The wage subsidy calculation in respect of employees on leave with pay or active non-arm’s length employees continues to take into account both the employee’s current and baseline remuneration. By default, baseline remuneration is determined by averaging the weekly eligible remuneration paid to an eligible employee during the period beginning January 1, 2020 and ending March 15, 2020. Alternative baseline periods were introduced to address employees who did not work during the 2020 period specified above (for example, since CEWS Period 5, the alternative period for calculating baseline remuneration has been July 1, 2019 to December 31, 2019), and to address employees who were on leave and did not have baseline remuneration even during the alternative periods.
The Backgrounder indicates that, for Periods 14 to 16, an eligible employer would be able to elect to use the period of March 1, 2019 to June 30, 2019 or July 1, 2019 to December 31, 2019, to calculate baseline remuneration. In all cases, the calculation of baseline remuneration excludes any period of 7 or more consecutive days for which the employee was not paid. The Backgrounder indicates that the Canada Revenue Agency will administer this measure on the basis of draft legislative proposals released on March 3, 2021.
We continue to monitor all developments regarding the government programs relating to the COVID-19 pandemic and will provide further updates as they become available.
Should you have any questions or require further information, please contact a member of our Pension, Benefits and Executive Compensation Group.
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