The Canada Emergency Wage Subsidy, or CEWS, is not a loan. It is a COVID-19 federal Economic Response Plan wage subsidy intended to prevent further job losses. The goal is to enable Canadian employers of all sizes to rehire people they’ve laid off, which will quicken the process of returning to efficiency once we’re able to be up and running again.
Organizations will be able apply for CEWS via their Canada Revenue Agency My Business Account as of Monday, April 27, and to get ready, you should go ahead right now to determine your eligible employees and calculate your subsidy here.
In anticipation of the application’s opening, MCC staff participated in a Ceridian e2r HR Advisory Solutions webinar “What the Canada Emergency Wage Subsidy means for employers“, hosted by e2r founder Stuart Ducoffe, an employment lawyer and Certified Human Resources Professional. Here are 10 important facts about the CEWS that you should know:
- Essentially all taxable corporations are eligible to apply for CEWS, which means the government has cast a very wide net. There is no limit on the number of employees for consideration. You could be a one-person operation, a not-for-profit with a staff of 10, a company with 10,000 employees, or anything in between.
- In order to qualify, your company must show a reduction of 15% in qualifying revenues for March 2020, a 30% reduction for April, and 30% for May. When you apply, you will not need to submit any supporting paperwork, but you will need to keep records for future audit. (It’s important to note that you can apply retroactively up until October 2020 so if you’re not sure about revenue loss, you can wait until you have better clarity then apply later.)
- There are two ways to measure revenues: by comparing to the same months in 2019 (for instance, March 2020 vs March 2019) OR by taking an average of revenues earned in Jan/Feb 2020 and comparing. Whichever method you choose cannot be changed from one qualifying period to the next.
- You can use cash or accrual accounting to measure revenues, but whichever method you select cannot be changed from one qualifying period to the next.
- There are 3 qualifying periods established currently (March 15 to April 11, April 12 to May 9, and May 10 to June 6), but Bill C-14 allows for extension of the CEWS until September 30/2020 if needed. If your business qualifies in one period, you’re “deemed” to qualify automatically for the next. This will help create consistency and predictability for employers.
- If one of your employees went without remuneration for 14 days + due to a COVID-19 illness, self-quarantine, self-isolation or lay-off, that employee should have been eligible for the CERB. As an employer, you should therefore not be able to claim CEWS for that employee. For example, if an employee was eligible for CERB due to lay-off, and your company is approved for CEWS and you call that employee back retroactively, the CRA is suggesting that an overpayment will have occurred. “The employee should consider mailing back the CERB payment.”
- If your organization is approved for CEWS and you rehire laid-off employees, they do not have to perform any work. (For example, the airlines have already committed to re-hiring but there’s no clearly work to be done.) You can simply put employees back on the payroll and pay them. You will have to deduct and remit CPP/EI, QPP/QPIP, etc but since these employees are technically on a leave with pay (sometimes called “furloughed”), your organization can apply for CEWS with a reimbursement for these statutory deductions as well.
- The CEWS subsidy is up to 100% of the first 75% up to a max of $847 weekly, which includes salary/wages and taxable benefits for employees. These are the amounts from which employers are required to make payroll deductions, and remit to the CRA. The CRA will ask employers to make an attestation of “best efforts” to top up to 100% of pre-COVID wages. For the self-employed, this is typical fees, commissions, etc. (Note that items such as stock option benefits or the personal use of a corporate vehicle are not part of eligible remuneration. Also, if you made or make the decision to terminate employees, severance costs are NOT eligible for reimbursement under CEWS.)
- The 10% Temporary Wage Subsidy and the Temporary Extended Work-sharing Program are completely separate federal emergency response programs. The temporary subsidy enables businesses to calculate 10% and withhold it from remittances directly at the time of payroll (to help keep cash in the business). The Work-sharing Program can help you redistribute limited work among all members of a team to help prevent lay-offs. These programs will all work in tandem (you will see when you use the subsidy calculator that these other programs can be reflected in the calculations). As a result, if you are taking advantage of them, they will likely reduce your CEWS reimbursement.
- There are stiff penalties for fraudulent CEWS claims. If the CRA detects artificial transactions that helped a company qualify for CEWS, that company will be penalized the full amount subsidized under the CEWS plus an additional 25% of the value.
Make sure you’re ready to apply for CEWS on Monday, April 27. In the meantime, if you haven’t yet consulted with your accountant, we recommend you do.
The information above is provided as guidance only and is not to be deemed legal or financial advice.