Federal Government Announces Further Extension of and Changes to the Canada Emergency Wage Subsidy
Date: August 3, 2021
On July 30, 2021, the federal government proposed to further extend the Canada Emergency Wage Subsidy (CEWS) until October 23, 2021 and to hold the maximum subsidy rate at 40% during the period between August 29, 2021 and September 25, 2021. The federal government also confirmed the end of CEWS support for payments made to furloughed employees and proposed to alter the calculation of revenue declines.
In this FTR Now, we summarize the further extension of CEWS and the details of the changes to CEWS.
Further CEWS Extension and Change in Maximum Subsidy Rate
As we previously reported in our FTR Nows of April 23, 2021 and July 7, 2021, the federal government extended CEWS until September 25, 2021 and provided the legislative authority to further extend CEWS until November 20, 2021 if necessary. Consistent with that, the federal government has proposed to use its authority to further extend CEWS until October 23, 2021.
The federal government is also proposing to increase the maximum CEWS subsidy rate to 40% in Period 20 (August 29, 2021 to September 25, 2021) instead of reducing it to 20% as previously announced. As a result, the maximum weekly subsidy per active employee for this period will be $452 instead of $226. For newly announced Period 21 (September 26, 2021 to October 23, 2021), the federal government proposes a maximum CEWS subsidy rate of 20% and a maximum weekly benefit of $226. Eligible employers will still be able to apply for the Canada Recovery Hiring Program (CRHP) instead of CEWS if the CRHP provides greater support than CEWS in a qualifying period.
End of Support to Furloughed Employees
When the federal government first extended CEWS in Budget 2021, the subsidy applicable to payments made to furloughed employees (i.e., employees on leave with pay) was continued only through to August 28, 2021. The federal government has confirmed that CEWS will no longer be available for payments made to furloughed employees after August 28, 2021. This includes both the subsidy in respect of the remuneration paid to such employees, as well as the subsidy for the employer’s portion of contributions under the Canada Pension Plan/the Quebec Pension Plan, Employment Insurance and the Quebec Parental Insurance Plan in respect of furloughed employees. The government has released draft legislative proposals to this effect.
Change in Calculation of Revenue Decline
For the purposes of both CEWS and CRHP, an employer may elect to calculate its revenue decline using either the general approach, which compares the employer’s revenues in a current calendar month with the same calendar month, pre-pandemic, or the alternative approach, which compares the employer’s monthly revenues with the average of its January and February 2020 revenues. Once an approach is chosen, the employer is required to use the same approach for all qualifying periods.
However, the federal government has proposed to allow an eligible organization to use the alternative approach to calculate its revenue decline for Periods 14 to 17 (March 14, 2021 to July 3, 2021) if it was not carrying on a business or otherwise carrying on ordinary activities on March 1, 2019. This proposed change addresses circumstances where an employer elected to use the general approach to calculate its revenue decline but was not yet operating in early 2019 and therefore would have no revenue during the prior reference period required to be used under the general approach.
We continue to monitor developments regarding CEWS 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. ©