COVID-19 Federal Benefits and Supports – Canada Emergency Wage Subsidy Update

November 19, 2020
By Nizam Shajani, CPA, CA, MBA

This subsidy is available to Canadian businesses, big or small, individuals, partnerships and corporations that are not publicly funded. This will also be available for not for profit organizations and charities.

Those organizations that do not qualify for the Canada Emergency Wage Subsidy may continue to qualify for the previously announced Temporary Wage Subsidy of 10% of remuneration paid from March 18 to before June 20, up to a maximum subsidy of $1,375 per employee and $25,000 per employer.

What businesses qualify?

The subsidy will be available for businesses where revenues have decreased substantially. Revenues will either be compared to the same month last year for March, April or May, to make this determination, or to the average of January and February of the current year. The application will need to be made each month. The decrease should be 15% or more for the month of March and 30% or more for the months of April and May.

The Canada Emergency Wage Subsidy (CEWS) is available for period starting March 15, 2020 and will run through June 2021. The calculations for periods 1 through 7 are different from subsequent period

Calculations

Calculation of the revenue can be based on accrual accounting (as the revenues are earned) or cash accounting (as revenues are received), and should be considered with members of a group via joint elections.

In addition, there are elections and attestations that should be filed with the application. These selections need to be considered concurrently with the calculations.

Periods 8 to 10 (September 27th onwards)

Revenue drop Base rate Top up rate Max per employee
70% or more 40% 25% 734
50% to 70% 40% 1.25 x (revenue drop – 50%) 734
Less than 50% 0.8 x revenue drop 0% 734

The revenue drop is calculated as the higher of the one-month revenue drop for the claim period used to calculate the base rate or the average revenue drop of the three months prior to the claim period month.

Periods 1 to 7 (March 15, 2020 to September 26, 2020)

The CEWS provides a 75% wage subsidy to eligible employers. The subsidy will be available at a rate of 75% of weekly remuneration paid to a maximum of $847 per employee. This could amount to a subsidy of up to $23,716 per employee over the seven – four week periods. Your business must have experienced a drop of at least 15% of revenue in March 2020 and 30% for April 2020 through September to qualify for this subsidy and is determined each month.

How do you get the subsidy?

You may now apply through the Canada Revenue Agency My Business account portal.

Warnings

Individuals who have the principal responsibility for the financial activities must attest that the application is complete and accurate. As such, the individual(s) that make the attestation can be held personally responsible for the application that is filed and will also be subject to penalties for incorrect and/or fraudulent claims.

Businesses not found to have met the CEWS eligibility after receiving the subsidy will be subject to fines of up to 25% of the amounts received and face up to five years in prison and/or a 200% penalty for fraudulent claims. The CRA may publish the name of any employer that makes an application for the CEWS.

We are here to help

This could become a complex application with high risk. Please contact our firm if you need assistance with the analysis of the legislation as it relates to your organization, the application process, qualifications, calculations and analysis. Note the application details and calculations from one period to the next differ.

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