On July 27, The Federal Government passed Bill C-20, which provides significant changes to the CEWS for claim periods beginning July 5, 2020. The changes are aimed to support more businesses that have been negatively impacted by the COVID-19 pandemic.

The extended CEWS introduces changes to the base subsidy and provides for a top-up subsidy for certain employers.

CEWS: Base Subsidy

The updated CEWS applies a specified rate based on eligible remuneration of up to a maximum of $1,129 per week for each employee. The base rate will depend on the amount of the revenue drop.

As illustrated in Table 1, if an eligible employer experiences a revenue decline of more than 50%, the employer would be eligible to apply a maximum subsidy rate of 60% in Periods 5 and 6. This rate would gradually be reduced to 20% by claim Period 9.

Employers who experience a revenue drop of less than 50% will apply a multiplier of 1.2 in Periods 5 and 6. For claim Periods 7-9, multipliers of 1.0, 0.8, and 0.4, respectively, will be applied to the percentage of the revenue drop to determine the base CEWS rate.

This is outlined in Table 1 and will result in a reduced subsidy rate. It should be noted that the objective of the new rate structure is to allow all eligible employers with a revenue drop to qualify.

TABLE 1: Rate Structure of The Base CEWS

In Periods 5 and 6, employers who are better off in the CEWS design of Periods 1-4 will be eligible for a 75% wage subsidy if they have a revenue drop of 30% or more. Please refer to the Safe Harbour rules for Period 5 and 6 below.

As was done for Periods 1-4, eligible employers will be required to assess their revenues for each relevant reference period as it relates to the specified claim period. For example, for claim Period 5, an employer will compare its July 2020 revenues to its July 2019 revenues.

Also, employers will have the option to assess the revenue drop of the preceding month compared to the same month in the prior year. Eligible employers can then choose the higher the revenue drop of the two reference periods. For example, for claim Period 5, ABC Co. experienced a revenue drop of 30% in July 2020 as compared to July 2019. Furthermore, the business realized a revenue drop of 52% in June 2020 as compared to its revenues in June 2019.

Therefore, ABC Co. will have the option to choose 52% as its revenue drop and qualify for the maximum subsidy rate of 60%.

An alternative approach is also available, whereby the employer can assess the revenue drop of the relevant month or the preceding month and compare that to the average monthly revenues of January and February 2020. The employer can then choose the higher of the decrease.

Please refer to Table 2 for the reference periods as they pertain to their specified claim periods.

TABLE 2: Reference Periods For The Base CEWS

CEWS Top-Up Subsidy

For employers who have experienced a revenue drop of more than 50% on a 3-month average, the updated CEWS provides a “top-up” subsidy up to an additional 25%. The calculation of the top-up subsidy is outlined in Table 3.

Table 3: Calculation of The Top-Up Subsidy

To qualify for the top-up subsidy, eligible employers will be required to assess the average decline in revenues of the preceding 3 months and compare the results to the same 3 months of the prior year.

An alternative approach is available, where the eligible employer can compare the average decline in revenues of the preceding 3 months to the average monthly revenues of January and February 2020. The reference periods for the top-up CEWS is further outlined in Table 4 below.

Safe Harbour Rules for Periods 5 & 6

The updated CEWS includes “safe harbour” rules for claim Periods 5 and 6. The rules allow for eligible employers entitled to the 75% subsidy, previous to the update, to use the rules that were in place for Periods 1-4 (ie. the “old rules”).

In other words, for claim Periods 5 and 6, employers with a revenue drop of 30% or more can receive the higher of the “old rules” and the “new rules” outlined above.

Furloughed Employee

There is to be no changes in claim Periods 5 and 6 as it pertains to furloughed employees. The subsidy would be the greater of 75% of the amount of remuneration paid to a maximum of $847 per week or 75% of the pre-crisis weekly remuneration to a maximum benefit of $847 per week, whichever is less.

For claim Period 7-9, the CEWS for furloughed employees would be adjusted to align with the benefits provided through the Canada Emergency Response Benefit (CERB) and/or Employment Insurance (EI).

Other Changes

Eligible Employees

In claim Periods 1 – 4, employees who were without pay for 14 or more consecutive days were excluded from the calculation of the CEWS. However, effective July 5, 2020, the eligibility criteria will no longer exclude these employees in an eligibility period.

For more information regarding the definition of an eligible employee, click here.

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