COVID-19: 75% Canada Emergency Wage Subsidy
On March 27, 2020, the government announced a 75% wage subsidy program for eligible employers for up to 12 weeks retroactive to March 15, 2020. This program was enacted into law on Saturday, April 11, 2020.
Unlike the 10% wage subsidy, the 75% wage subsidy is not limited to smaller businesses. However, a decline in revenue is generally required to be eligible. Also, the 75% subsidy differs from the 10% subsidy in that it will be paid in cash to the employer.
Eligible Employers
Eligible employers include:
- Individuals
- Taxable Corporations (large and small)
- Partnerships (consisting of eligible individual and corporate employers)
- Non-Profit Organizations and Registered Charities
Eligible Periods and 30% Revenue Decline
The 75% wage subsidy will be available for March, April, May and June 2020, where eligible employers see a drop of at least 30% in their revenue (only a 15% drop is required for March).
An employer’s revenue for this purpose is its inflow of cash, receivables or other consideration from business carried on in Canada earned from arm’s length sources, and excludes “extraordinary items” and amounts from persons or partnerships not dealing at arm’s length with the employer. Revenue must be measured either on the accrual accounting basis (as income is earned) or cash accounting (when received), and the selected method must be used consistently for the entire program.
Non-profit entities and charities have the option to include or exclude government funding in calculating revenue (provided that the selected method is used for all applicable months).
The employer has two options for computing the drop in revenue (“revenue decline test”):
Option 1: compare the 2019 to 2020 revenue for the same calendar month.
Option 2: compare the applicable month’s revenue to the average revenue earned in January and February 2020.
The selected option is required to be used for the entire duration of the program. Also, the wage subsidy received by the employer in a given month will not be considered revenue for purposes of these calculations.
Also, if the eligible employer meets the revenue decline test in one period, they are “deemed” to meet the declining test for the immediately subsequent period. For example, if the employer meets the 15% revenue decline test for Claim Period 1, the employer automatically qualifies for Claim Period 2. The rule does not extend beyond the first immediately proceeding claim period.
Subsidy Amount
The subsidy amount on eligible remuneration paid to employees between March 15 and July 4, 2020, would be the greater of:
- 75% of remuneration paid, up to a maximum of $847 per week; and
- The full remuneration paid, up to a maximum of $847 per week or 75% of the employee’s pre-crisis weekly remuneration, whichever is lower.
“Pre-crisis remuneration” is the average weekly remuneration paid to the employee between January 1 and March 15, excluding any seven-day periods in respect of which the employee received no remuneration (so if an employee was hired on February 1, the lack of any remuneration in January would not impact their pre-crisis remuneration).
Eligible remuneration includes salaries, wages, taxable benefits and other remuneration for which employers would generally be required to withhold or deduct amounts. However, it does not include severance pay, or items such as stock options benefits or the personal use of a company vehicle. There is no overall limit on the subsidy amount that an eligible employer may claim.
Other notable matters:
New employees
For new employees, the subsidy is 75% of salaries and wages paid, not exceeding $847 per week.
Business Owners and their Family
The subsidy amount for these and other non-arm’s length employees is limited to the eligible remuneration paid up to a maximum benefit of $847 per week or 75% of the employee’s pre-crisis weekly remuneration. Therefore, if there was no pre-crisis weekly remuneration, no 75% subsidy would be available, regardless of whether wages were paid after March 15, 2020.
Interaction with the 10% Wage Subsidy
Any benefits received for the 10% Wage Subsidy will generally reduce the amount available to be claimed under the 75% Wage Subsidy in that same period.
Interaction with a Work-Share Program
For employers and employees that are participating in a government Work-Share Program, EI benefits received by employees through the program will reduce the 75% Wage Subsidy that their employer is entitled to receive.
Interaction with the Canada Emergency Response Benefit (CERB)
The 75% wage subsidy is not intended to be available for periods when the employee has also collected the Canada Emergency Response Benefit (CERB). The employer cannot claim the 75% wage subsidy for an employee who is without remuneration for 14 or more consecutive days in the particular claim period.
How To Apply
Applications will soon be available through CRA’s My Business Account portal. CRA recommends that businesses that haven’t already registered for My Business Account should do so as soon as possible.
Employers are required to keep records demonstrating their reduction in arm’s length revenues and remuneration paid to employees.
Repayments And Penalties
Repayments will be required where the employer does not meet the eligibility requirements and they do not pay their employees accordingly. Penalties may apply in cases of abusive or fraudulent claims.
More Information
For more information from the Government of Canada on the CEWS, click here.
Please contact us if you wish to discuss how the 75% Wage Subsidy may apply to your situation.
Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.
Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.
