The Canada Emergency Wage Subsidy (CEWS) was put in place for eligible wages paid from March 15, 2020. Initially, there were only 3 periods (March 15 to June 6, 2020). On May 15, the tax authorities added 3 periods, from June 7 to August 28. On June 10, it was announced that the conditions applied to Periods 1 to 3 would fully apply to Period 4. For Periods 5 and 6, the conditions were to be announced later. On July 17, the Government of Canada announced that this program will be extended until the end of 2020.
Effective July 5, 2020, the CEWS would consist of two parts:
- A base subsidy available to all eligible employers;
- A top-up subsidy for those employers that have been most adversely affected by the COVID-19 crisis.
Effective July 5, 2020, employers that have been affected by the COVID-19 crisis would be eligible for a base CEWS. The maximum amount of paid remuneration, on which the CEWS will be calculated, will always be $1,129 per week.
The rate of the base CEWS will vary depending on the level of revenue decline during each period, and its application will be extended to employers with a revenue decline of less than 30%.
Rate structure of the base CEWS
* In Periods 5 and 6, employers who would have been better off in the CEWS design in Periods 1 to 4 would be eligible for a 75% wage subsidy if they have a revenue decline of 30% or more.
Top-up subsidy for the most adversely affected employers
A top-up CEWS of up to 25% would be available to employers that were the most adversely impacted by the pandemic. Generally, an eligible employer’s top-up CEWS would be determined based on the revenue drop experienced when comparing revenues in the preceding 3 months to the same months in the prior year. It will also be possible to compare average monthly revenue in the preceding 3 months to the average monthly revenue in January and February 2020.
To be eligible for this additional subsidy, employers must have experienced a revenue drop of more than 50%.
Safe Harbor Rule for Periods 5 and 6
For Periods 5 and 6, an eligible employer would be entitled to a CEWS rate not lower than the rate that they would be entitled to if their entitlement were calculated under the CEWS rules that were in place for Periods 1 to 4.
An eligible employer with a revenue decline of 30% or more in the relevant reference period would receive a CEWS rate of at least 75%.
For Period 4, the pre-crisis remuneration of an employee would be based on the average weekly remuneration paid to the employee:
- From January 1 to March 15, 2020;
- From March 1, 2019 to May 31, 2019; or
- From March 1, 2019 to June 30, 2019.
For Period 5 and subsequent periods, the pre-crisis remuneration of an employee would be based on the average weekly remuneration paid to the employee:
- From January 1 to March 15, 2020; or
- From July 1, 2019 to December 31, 2019.
Employers will be able to choose which period to use on an employee-by-employee basis.
Eligible employers include: individuals, taxable corporations and trusts, partnerships consisting of eligible employers, non‑profit organizations and registered charities. Public institutions are generally not eligible for the subsidy. As announced on May 15, 2020, eligible employers also include the following groups:
- Partnerships that are up to 50-per-cent owned by non-eligible members;
- Indigenous government-owned corporations that are carrying on a business, as well as partnerships where the partners are Indigenous governments and eligible employers;
- Registered Canadian Amateur Athletic Associations;
- Registered Journalism Organizations; and
- Non-public colleges and schools, including institutions that offer specialized services, such as arts schools, driving schools, language schools or flight schools.
An eligible employee is an individual who is employed in Canada. Effective July 5, 2020, the eligibility criteria would no longer exclude employees that are without remuneration in respect of 14 or more consecutive days in an eligibility period.
Reference Periods for the Drop-in-Revenues Test
For the purpose of the base CEWS, eligibility would generally be determined by the change in an eligible employer's monthly revenues, year-over-year, for the applicable calendar month. This would provide certainty and be a continuation of the rules that allows an employer that met the revenue test in one period to automatically qualify for the following period.
Employers that have elected to use the alternative approach (average of January and February 2020) for the first 4 periods would be able to either maintain that election for Period 5 and onward or revert to the general approach. Similarly, employers that have used the general approach for the first 4 periods would be able to either continue with the general approach or elect to use the alternative approach for Period 5 and onward.
Whichever approach they choose would apply for Period 5 and onward and would apply to the calculation of the base CEWS and the top-up CEWS. This would provide flexibility for employers to adjust their approach in light of new circumstances they may be experiencing as the CEWS is extended.
For the purpose of the top-up CEWS, eligibility would generally be determined by the change in an eligible employer's revenues for a 3-month period.
* The calculation would equal the average monthly revenue over the 3 months of the reference period divided by the average revenue for the months of January and February 2020.
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