Canada Emergency Wage Subsidy (CEWS)- 75% Subsidy Update
This document discusses the updates to the CEWS program that were announced on July 17, 2020. Please refer to the attached document for the program details, which had previously been released. The government has now extended the CEWS program until at least November 21, 2020.
Who qualifies?
There are no significant changes announced to the definitions of eligible employers or eligible remuneration. There are a few adjustments to existing definitions as follows:
- for periods 5 and onwards, the definition of an eligible employee no longer excludes employees who were without remuneration in respect of 14 or more consecutive days in an eligibility period; and
- the amount of remuneration for active, arm’s-length employees will be based solely on actual remuneration paid for the eligible period, without reference to the pre-crises remuneration concept used for earlier CEWS periods.
Qualifying periods
The extension includes the following additional qualifying periods:
· Period 5 – July 5 – August 1, 2020; |
· Period 6 – August 2 – August 29, 2020; |
· Period 7 – August 30 – September 26, 2020; |
· Period 8 – September 27 – October 24, 2020; and |
· Period 9 – October 25 – November 21, 2020. |
Enhanced Eligibility
As part of the extension, the enhanced eligibility is effective as at July 5, 2020 and the new rules will be applicable to periods 5 through to period 9 (summarized above) ending November 21, 2020. The government has made the subsidy accessible to a broader range of employers by eliminating the requirement for a minimum of 30% revenue decline. Instead, the CEWS program will consist of two components:
- A base subsidy – which is available to all eligible employers who have experienced a decline in revenue, with no minimum decline required (i.e. even 1% revenue decline will qualify). However, the subsidy amount will vary as the percentage of revenue decline is multiplied by a factor determined by the government for each period; and
- A top-up subsidy – which is an additional 25% for those employers who have experienced more than a 50% decline in revenue. As with the base subsidy, the amount of the top-up will vary based on the revenue decline with the maximum 25% subsidy becoming available once the revenue decline exceeds 69%.
This table summarizes the CEWS base subsidy rate based on revenue decline:
Timing | Period 5*: July 5 – August 1 | Period 6*: August 2 – August 29 | Period 7: August 30 – September 26 | Period 8: September 27 – October 24 | Period 9: October 25 – November 21 |
Maximum weekly benefit per employee | Up to $677 | Up to $677 | Up to $565 | Up to $452 | Up to $226 |
Revenue drop: | |||||
>50% | 60% | 60% | 50% | 40% | 20% |
0% – 49% | 1.2 x revenue drop (e.g., 1.2 x 20% revenue drop = 24% base CEWS rate) | 1.2 x revenue drop (e.g., 1.2 x 20% revenue drop = 24% base CEWS rate) | 1.0 x revenue drop (e.g., 1.0 x 20% revenue drop = 20% base CEWS rate) | 0.8 x revenue drop (e.g., 0.8 x 20% revenue drop = 16% base CEWS rate) | 0.4 x revenue drop (e.g., 0.4 x 20% revenue drop = 8% base CEWS rate |
Safe Harbour rule (*)
For periods 5 and 6 (effectively July 5 – August 1; and August 2 – August 29), employers have the option to use CEWS eligibility as determined in periods 2 to 4 under the revenue decline of 30% threshold if it is a better option for them. Therefore, employers will have to consider both options before filing a claim for either period 5 or 6.
Top-up Subsidy
In order to calculate the top-up subsidy, employers will need to compare the revenues in the preceding three months to the three months making up the prior reference period (i.e, the same three months in the prior year or January and February 2020, depending on the selections made in previous claims). The top-up amount will equal to 1.25 times the average revenue drop that exceeds 50%. The following chart illustrates the calculation of the top-up:
3-month average revenue drop | Top-up CEWS rate | Top-up calculation = 1.25 x (3-month revenue drop – 50%) |
70% and over | 25% | 1.25 x (70%-50%) = 25% |
65% | 18.75% | 1.25 x (65%-50%) = 18.75% |
60% | 12.5% | 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 overall CEWS subsidy rate would be: base CEWS subsidy rate + top-up CEWS subsidy rate. The following table summarizes the combined results for those employers that experienced an average revenue decline in the prior three month period of at least 70% (this being the maximum benefit available):
Timing | Period 5*: July 5 – August 1 | Period 6*: August 2 – August 29 | Period 7: August 30 – September 26 | Period 8: September 27 – October 24 | Period 9: |
Maximum weekly benefit per employee | Up to $960 | Up to $960 | Up to $847 | Up to $734 | Up to $508 |
Revenue drop in the current 1-month reference period | |||||
50% or more | 60 – 85% | 60 – 85% | 50 – 75% | 40 – 65% | 20 -45% |
0% to 49% | 1.2 x revenue drop + 25% (e.g., 1.2 x 20% revenue drop + 25% = 49% CEWS rate) | 1.2 x revenue drop + 25% (e.g., 1.2 x 20% revenue drop + 25% = 49% CEWS rate) | 1 x revenue drop + 25% (e.g., 1 x 20% revenue drop + 25% = 45% CEWS rate) | 0.8 x revenue drop + 25% (e.g., 0.8 x 20% revenue drop + 25% = 41% CEWS rate) | 0.4 x revenue drop + 25% (e.g., 0.4 x 20% revenue drop + 25% = 33% CEWS rate) |
CEWS for Furloughed Employees
The subsidy calculation for a furloughed employee will remain the same for Periods 5 and 6 as it was for Periods 1 to 4.
Beginning in Period 5 and for subsequent periods, eligible employers who qualify for either the base subsidy or the top-up subsidy for active employees in the relevant period will also be eligible for CEWS for furloughed employees. The employer portion of contributions in respect of the Canada Pension Plan and Employment Insurance in respect of furloughed employees will continue to be refunded to the employer through CEWS.
Beginning in Period 7, CEWS support for furloughed employees will be adjusted to align with the benefits provided through the Canada Emergency Response Benefit (CERB) and/or Employment Insurance (EI). This will ensure equitable treatment of employees on furlough between both programs.
Additional measures
For the purpose of the base CEWS subsidy calculation, employers that have elected to use the alternative approach for the first four periods would be able to make a one-time adjustment to either maintain that election for Period 5 and onward or revert to the general approach.
What does this mean for employers?
The proposed amendments add significant complexity to the CEWS program and require additional calculations to determine eligibility for claims going forward. Daye and Partners would be pleased to be of assistance to our clients in determining their eligibility claim.
For additional information or if you have questions related to this subsidy, please contact your Daye & Partners representative.