Extension of the Canada Emergency Wage Subsidy and Introduction of the Canada Recovery Hiring Program – A Summer Refresher


Extension of the Canada Emergency Wage Subsidy and Introduction of the Canada Recovery Hiring Program – A Summer Refresher

Date: July 7, 2021

On June 29, 2021, Bill C-30, Budget Implementation Act, 2021, No. 1 (Bill C-30) received Royal Assent, giving effect to many of the initiatives found in the federal government’s 2021 Budget (see our FTR Now of April 23, 2021). Bill C-30 sets out the proposed amendments to the Income Tax Act (ITA) supporting the extension of the Canada Emergency Wage Subsidy (CEWS) and the introduction of the Canada Recovery Hiring Program (CRHP), both of which are now in force. The government also published two related backgrounders on June 2, 2021 (see “Extending Business Support Measures Through the Pandemic” and “Helping Hard-hit Businesses Hire More Workers with the Canada Recovery Hiring Program”).

In this FTR Now, we provide a refresher regarding the key details of the extended CEWS program and the new CRHP.

CEWS Extension

The federal government introduced CEWS in March 2020 to prevent job losses and encourage employers to quickly rehire workers previously laid off as a result of COVID-19. CEWS provides eligible employers that have experienced a decline in revenues with a wage subsidy for eligible remuneration paid to their employees.

Consistent with the Budget, Bill C-30 provides that CEWS, which would have otherwise expired in June 2021 (with the end of period 16 on June 5, 2021), will be extended until September 25, 2021 with the possibility of a further extension until November 20, 2021 (though the government has given itself authority to extend the program through to November 30, 2021, the end of period 22 would fall on November 20, 2021).

Beginning in period 18, which started on July 4, 2021, employers will need to have a decline in revenues of more than 10% to be eligible for CEWS. This change reimplements a minimum decline in order for an employer to be eligible for the subsidy. As well, the base and top-up rates for the subsidy applicable to active employees will gradually decrease. The result is that the maximum weekly benefit available per active employee, which was $847 in period 17 (June 6, 2021 – July 3, 2021), will be $677 in period 18 (July 4, 2021 – July 31, 2021), $452 in period 19 (August 1, 2021 – August 28, 2021), and $226 in period 20 (August 29, 2021 – September 25, 2021). A full description of the CEWS rates applicable through the extended periods is set out in our earlier FTR Now, “Key Highlights of Federal Budget 2021.”

For employees on leave with pay (“inactive” or “furloughed” employees), CEWS will be extended until August 28, 2021. The maximum benefit available per employee will continue to be $595 per week. The separate rate structure for furloughed employees is aligned with the benefits provided through Employment Insurance (EI), which is intended to provide equitable treatment of such employees between the two programs. Employers will also continue to be entitled to claim their portion of contributions in respect of the Canada Pension Plan, EI, the Quebec Pension Plan and the Quebec Parental Insurance Plan, as applicable, for furloughed employees for which the employer is claiming CEWS.

Applications can now be made on the Canada Revenue Agency (CRA) portal for CEWS period 17 (ending July 3, 2021) and the application window for period 18 will open on August 1, 2021. Employers are reminded that applications must be made within 180 days from the end of the period to which they relate.

One of the notable changes to the CEWS program is the introduction of an executive compensation clawback. Publicly listed corporations and entities controlled by a publicly listed corporation receiving CEWS and found to be paying certain specified executives more in 2021 than in 2019 will be required to repay the lesser of: (i) the total of all wage subsidy amounts received in respect of active employees for qualifying periods that begin after June 5, 2021; and (ii) the amount by which the corporation’s aggregate specified executives’ compensation for 2021 exceeds its aggregate specified executives’ compensation for 2019. The specified executives for this purpose will be the Named Executive Officers of the eligible entity, if National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) is applicable to the entity, or, if NI 51-102 is not applicable, the five most highly compensated individuals for whom the entity is required to report their compensation in another jurisdiction. If NI 51-102 does not apply and the entity is not required to report in another jurisdiction, the specified executives and their related compensation will be determined using the methodology applicable under NI 51-102.

For CEWS-related questions, please note that on July 2, 2021 the federal government updated its Frequently asked questions – Canada emergency wage subsidy (CEWS) page.

Introduction of the CRHP

The CRHP has been introduced to offset a portion of the extra costs employers take on as they reopen, either by increasing wages or hours worked or by hiring more staff. The federal government estimates that the CRHP will cost $595 million in 2021-2022 as the economy recovers.

As indicated in the Budget, Bill C-30 provides that the CRHP will be available in respect of active employees from June 6, 2021 (i.e. retroactively) to November 20, 2021 (for the same four-week qualifying periods that correspond with the CEWS periods). The CRHP will provide a benefit of up to 50% of eligible salary or wages and will be available to eligible employers who have experienced qualifying revenue declines. As with CEWS, the eligible employers will receive the benefit after each four week period of the program, in respect of salary or wages paid during the relevant period.

Eligible Employers and Employees

Employers eligible for CEWS will generally also be eligible for the CRHP. Eligible employers must fall within one of the following categories:

  • Canadian-controlled private corporations (including a cooperative corporation that is eligible for the small business deduction),
  • individuals,
  • non‑profit organizations,
  • registered charities, and
  • certain partnerships.

However, publicly traded corporations will not be eligible.

Similarly, employers that are ineligible for CEWS because they are public institutions (such as municipalities and local governments, Crown corporations, wholly owned municipal corporations, public universities, colleges, schools, and hospitals) will also be ineligible for the CRHP.

Like under the CEWS program, eligible employers, or their payroll service provider, will be required to have had a payroll account open with the CRA on March 15, 2020.

Eligible employees must be primarily employed in Canada (i.e. at least 50% of the qualifying period). The CRHP may be available in respect of employees who are on a period of paid absence such as vacation leave, sick leave, or sabbatical, but, unlike the CEWS program, will not be available for furloughed employees. The CRHP is available only in respect of remuneration paid to “active” employees.

Eligible Remuneration and Incremental Remuneration

The types of remuneration eligible for CEWS will also be eligible for the CRHP and will generally include salary, wages and other remuneration. Severance pay, stock option benefits, or the personal use of a corporate vehicle are likewise not eligible. The amount of remuneration for employees will be based solely on remuneration paid during the qualifying period.

The CRHP is available with respect to “incremental remuneration.” Incremental remuneration is the difference between the amount paid to employees in respect of each week during the qualifying period and the total remuneration paid to them during each week in the baseline period (March 14, 2021 to April 10, 2021). Both amounts are subject to a maximum of $1,129 per eligible employee per week.

Consistent with CEWS, the eligible remuneration claimed to be paid for a non-arm’s-length employee for a week cannot exceed their baseline remuneration determined for that week. This will prevent an employer from increasing a non-arm’s length employee’s remuneration and claiming the subsidy on the difference.

Revenue-Decline Threshold

To qualify for the CRHP, an eligible employer’s decline in revenues will have to be more than:

  • 0% between June 6, 2021 and July 3, 2021, and
  • 10% between July 4, 2021 and November 20, 2021.

As with CEWS, an employer’s decline in revenues may be determined by a general approach, which involves comparing the employer’s revenues in a current calendar month with its revenues in the same calendar month in 2019. An employer can also use an alternative approach, which compares the employer’s monthly revenues relative to the average of its January 2020 and February 2020 revenues.

Employers that had chosen to use the general approach for prior periods of the CEWS would be required to continue to use that approach for the CRHP as well. Similarly, employers that had chosen to use the alternative approach for CEWS would be required to continue to use the alternative approach for the CRHP.

CRHP Amount

The CRHP amount an employer is eligible to receive will be determined by multiplying the incremental remuneration by the applicable CRHP rate for the qualifying period. The CRHP rates applicable in each period are set out in the chart below that has been adapted from the federal Budget:

Qualifying PeriodPeriod 17
June 6 – July 3, 2021
Period 18
July 4 – July 31,

Period 19
August 1 – August 28, 2021
Period 20
August 29 – September 25, 2021
Period 21
September 26 – October 23,

Period 22
October 24 – November 20, 2021
CRHP rate50%50%50%40%30%20%
*Period 17 of the CEWS would be the first period of the CHRP

Like CEWS, the CRHP will be available through the CRA. The application portal has opened for period 17 (ending July 3, 2021).

Anti-Avoidance and Penalty

The ITA has also been amended to introduce an anti-avoidance rule similar to the CEWS rule that will prevent entities from artificially increasing the incremental remuneration claimed by an employer in order to increase the amount of the subsidy claimed. An employer found to have violated the anti-avoidance rule will have to repay the amount of the overpayment and would be liable for an amount equal to 25% of the amount of the overpayment.

For CRHP-related questions, please see the federal government’s Canada Recovery Hiring Program page.

Interaction between CEWS and the CRHP

The federal government states that the CRHP is designed to interact with CEWS. These programs overlap such that as CEWS declines, eligible employers will be able to receive the support under the CRHP as they hire more workers or increase workers’ hours or wages.

Employers will have the option to apply for either CEWS or the CRHP, but not both, for a given period and therefore should determine which subsidy will provide a greater amount for each period. If an employer will receive the same amount under both the CEWS and CRHP, the employer will be required to apply under the CEWS.

We continue to monitor developments regarding both CEWS and CRHP and other pandemic-related support programs. Should you have any questions or require further information, please contact any member of our Pension, Benefits and Executive Compensation Group.

The articles in this client update provide general information and should not be relied on as legal advice or opinion. This publication is copyrighted by Hicks Morley Hamilton Stewart Storie LLP and may not be photocopied or reproduced in any form, in whole or in part, without the express permission of Hicks Morley Hamilton Stewart Storie LLP. ©