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CEWS 2.0

CEWS 2.0

CEWS 2.0

by Eeva Harrop, CPA, CA, MSc, TEP and Nizam Shajani, CPA, CA, MBA

Goal of CEWS is to provide a wage subsidy to employers so they keep employees on the payroll

  • CEWS 1.0 – Initially to provide a subsidy up to 75% of employee wages for up to 24 weeks (when specific criteria was met)
  • CEWS 2.0 – As of July 17, 2020 this program is redesigned and extended until December 19, 2020 (now there is other criteria). Final deadline is January 31, 2021.

 

Claim Period Dates in 2019 Base Subsidy Top-up Max weekly benefit / (with 25% top up)
Period 1 Mar 15 – April 11 75%   $847
Period 2 April 12 – May 9 75%   $847
Period 3 May 10 – June 6 75%   $847
Period 4 June 7 – July 4 75%   $847
Period 5 July 5 – Aug 1 75% (or new 60%) Up to 25% **$847/ ($960)
Period 6 Aug 2 – Aug 29 75% (or new 60%) Up to 25% **$847/ ($960)
Period 7 Aug 30 – Sept 26 50% Up to 25% $565 / ($847)
Period 8 Sept 27 – Oct 24 40% Up to 25% $452/ ($734)
Period 9 Oct 25 – Nov 21 20% Up to 25% $226/ ($508)
Period 10 Nov 22 – Dec 19 TBD    

 

** the max with CEWS 2.0 is $677, but because an employer will use the method that results in the highest subsidy amount, CEWS 1.0 would be used which has a maximum of $847

 

For periods 1 to 4 (ending July 4, 2020)

CRA has calculator on line for CEWS 1.0

Step 1 – 30% reduction in qualifying revenue compared to revenue average Jan and Feb 2020, or revenue from the prior year

  • If not met, then not eligible for CEWS
  • If met, then calculate subsidy amount for eligible employees

 

Step 2 – calculate wage subsidy – 75% of employee’s wage

  • max is $847 per week (which is 75% of 1,129)
    • Calculation different for non-arm’s length and arm’s length

 

For periods 5 and 6 (July 5 – August 29, 2020)

  • Calculate subsidy using both methods – CEWS 1.0 and CEWS 2.0
  • Subsidy allowed is whichever gives the higher subsidy amount
New Method – CEWS 2.0

·        Now has 2 parts – the based subsidy (when an employer has a decrease in revenues) and a top up subsidy (an additional 25% when employers have a 50% or more decrease in revenues)

·        For periods 5 onward, the 30% revenue reduction requirement is removed (but this method can be used for periods 5 and 6 if it results in the higher subsidy amount)

·        Calculated CEWS entitlement based on the revenue decline of the current month and either a “general approach” or an “alternative approach”

·        All business can now qualify if they have revenue declines

·        Other employees may now be eligible

 

For periods 7 to 10 (August 30 – December 19, 2020)

  • Use CEWS 2.0

The subsidy rate is the factor for the claim period times the revenue reduction %.

Step 1 – Base subsidy – revenue reduction comparison

Revenue reduction % = 1 – A/B

A= the revenue drop for the current claim period

B = comparable revenues calculated either by the general or alternative approach

Revenue Drop

  • Are now measured against one of two methods:
    • General approach – using the same month as last year, or
    • Alternative approach – the monthly average in the period January 1 to February 28, 2020.

Step 2 – determine if company is eligible for top-up.

Top–up percentage

Top-up % = 1 – A/B

A= the revenue drop for the current claim period

B = comparable revenues calculated either by the general or alternative approach

Then multiply by the factor 1.25 ( top up % less 50%)

  • A top-up of 25% is available for employers who have a reduction in revenue of more than 50% in the three-month period ending before the current period as compared to:
    • General approach – the average of 3 months prior to claim period; or
    • Alternative approach – the average 3 months prior to the claim period for the prior year (or if elected, the average from January and February 2020)
  • NOTE whichever method is chosen, this method must be used for the remaining periods.
  • The top-up percentage is 125% of the reduction in revenue in excess of 50%.

Step 3 – determine eligible employees

Eligible employees   Includes the eligible active employees (under CEWS 1.0) plus new hires and furloughed employees

  • If an employee is an active employee for the claim period being applied for, then the aggregate wage subsidy percentage (base subsidy plus top-up subsidy) would be applied to the least of the following amounts:
  1. Eligible remuneration of the active employee
  2. $1,129, and
  3. If a non-arm’s length employee, the baseline remuneration
  • If an employee is a furloughed employee (an employee on leave with pay), the eligible employer must meet additional criteria: the eligible employer must have a decrease in the revenue percentage of more than zero per cent for either base wage subsidy percentage or top-up wage subsidy percentage.

This information is for discussion purposes only and should not be considered professional advice. There is no guarantee or warrant of information on this site and it should be noted that rules and laws change regularly. You should consult a professional before considering implementing or taking any action based on information on this site. Call our team for a consultation before taking any action. © 2020 Shajani LLP