In response to the Covid-19 crisis, the Canadian government introduced a wage subsidy to enable employers to keep employees working or incentive for employers to re-hire employees that were previous laid off. This program provided a subsidy of 75% of employee’s wages for the period from March 15 to July 4.
To qualify for this subsidy a business needed to determine if they are (1) an eligible employer (2) if their employees are eligible.
- An eligible employer is an individual, corporation, partnership, charities, and several other types of entities (not including public institutions) that had a payroll account with CRA on March 15, 2020 and that met the revenue reduction threshold:
- The revenue reduction threshold was 15% for March 2020 and 30% for April 11-July 4. There are two options for calculating the revenue reduction, however, once an option is selected it must be used for all future months:
- Compare the average of January and February 2020 revenue to the claim month
- Compare the claim month to the same month in 2019
- Eligible employees are individuals employed in Canada by the business, except if there was a period of 14 or more consecutive days in the claim period which they were not paid eligible remuneration
On July 27, 2020 changes to the CEWs program as part of Bill C-20 received Royal Assent. This bill provided an extension of the program until December 19, 2020. The updates to the CEWS program that this article will focus on are:
- Making the subsidy more accessible to employers with less than 30% decrease in revenue by adding a gradual decreasing base subsidy, and
- Introducing a top-up subsidy up to 25% for employers that are most adversely affected by the Covid-19 crisis
- More accessibility to the program
One of the more notable changes as a result of Bill C-20, is the removal of the 30% revenue reduction threshold for period 5 (July 7-Aug 1) onward. It is replaced with a two-part calculation for active employees and a separate CEWS calculation for inactive employees.
The two-part calculation for active employee is as follows:
- Employers that experienced a 50% or more decline in revenue as a result of the Covid-19 crisis will be eligible for the maximum wage subsidy percentage
- Employers that experienced less then 50% decline in revenue as a result of the Covid-19 crisis will still have access to the wage subsidy, however, the amount of the subsidy will depend on the employer’s actual revenue reduction
The following table illustrates the base CEWS rates and maximum weekly benefits per active employee
| Qualifying Period | July 5-Aug 1 | Aug 2-Aug 29 | Aug 30-Sept 26 | Sept 27-Oct 24 | Oct 25-Nov 21 |
| Max weekly benefit per employee | Up to $677 | Up to $677 | Up to $565 | Up to $452 | Up to $266 |
| Revenue reduction percentage – Base CEWS Rate | |||||
| 50% and over | 60% | 60% | 50% | 40% | 20% |
| 0% to 49% | 1.2 x revenue reduction percentage | 1.2 x revenue reduction percentage | 1.0 x revenue reduction percentage | 0.8 x revenue reduction percentage | 0.4 x revenue reduction percentage |
The calculation for non-active employees will remain the same as the period 1-4 (Mar 15-July 4) calculation:
- being 75% of their wages, up to $847 per week or
- 100% of their wages, up to $847 per week, if the employee’s wages has decreased by 25% or more from pre-Covid levels
- Top-up Subsidy
Employers considered to be most adversely affected by the Covid-19 crisis with more than 50% average monthly revenue reduction in the prior three-month period will be eligible for the top-up wage subsidy. The top up subsidy is calculated as 1.25 x the decline in revenue over 50% on the prior three-month period.
Employers that experienced a 70% or more decline in average monthly revenue in the prior three-month period will be eligible for the maximum top-up of 25%, for a maximum of $282 per employee.
The following table illustrates the top-up rates for selected revenue reductions
| Revenue reduction percentage | Top-Up CEWS Rate | Top-up calculation = 1.25 x (revenue reduction percentage – 50%) |
| 70% and over | 25% | 1.25 x (70%-50%) = 25% |
| 65% | 18.75% | 1.25 x (65%-50%) = 18.75% |
| 60% | 12.2% | 1.25 x (60%-50%) = 12.5% |
| 55% | 6.25% | 1.25 x (55%-50%) = 6.25% |
| 50% and under | 0.0% | 1.25 x (50%-50%) = 0.0% |
The following table illustrates the combined CEWS rates and maximum benefits per employee
| Qualifying Period | July 5-Aug 1 | Aug 2-Aug 29 | Aug 30-Sept 26 | Sept 27-Oct 24 | Oct 25-Nov 21 |
| Max weekly benefit per employee | Up to $960 85% | Up to $960 85% | Up to $847 75% | Up to $734 65% | Up to $508 45% |
| Combined Maximum CEWS rate | 60% base + 25% top-up | 60% base + 25% top-up | 50% base + 25% top-up | 40% base + 25% top-up | 20% base + 25% top-up |
Eligible employees
Also, of note is that Bill C-20 eliminates the requirement that an employee not be without remuneration for 14 or more consecutive days in the qualifying period for period 5 onwards.
Wait a minute, period 5 and 6 (July and August) may have negative consequences on the subsidy we were anticipating during these periods, since our revenue drop was just over 30%!
Do not worry, a “safe harbor” provision ensures that an employer will not receive less than the employer would have received if the 75% subsidy continued to apply as it did in Periods 1 – 4. This means eligible employers who have at least a 30% revenue decline in July and August will calculate the subsidy based on the greater of the rate applicable under the new rules and the “old” 75% rate.
Base Subsidy Calculation (Active Employees)
In Periods 5 and 6, the maximum base subsidy is 60% for eligible employers that have experienced a decline of 50% or greater in monthly revenues for the current period. This equates to a maximum weekly base subsidy of $677. The maximum base subsidy rate gradually declines to 20% in Period 9, equivalent to a maximum weekly base subsidy of $226 for that period. The subsidy rate will be lower for employers whose revenue drops by less than 50%. The rate for Period 10 (December) has not been specified and will be set by Regulation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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