*This blog was updated on May 26, 2021.
To support Canadian businesses affected by the pandemic, the federal government introduced the COVID-19 Economic Response Plan in March. Under this plan, it announced the Canada Emergency Wage Subsidy (CEWS) to help businesses retain employees. This wage subsidy helps cover a part of employee wages to prevent workers from being laid off work.
The 2021 federal budget extended the wage subsidy until September 25, 2021. The government will also slowly decrease the subsidy rate, starting July 4, 2021, to ensure an orderly phase-out of the program.
The budget also announced that any publicly listed corporation getting the wage subsidy and found to be paying its top executives more in 2021 than in 2019 will have to repay the equivalent in wage subsidy amounts received for any qualifying period starting after June 5, 2021 and until the end of the program.
How does the Canada Emergency Wage Subsidy work?
CEWS is divided into four-week claim periods. Applicants must confirm their eligibility as per the rules of each period before applying to it.
The program has undergone several modifications since it was first introduced in April 2020.
Initially, businesses that experienced a drop of 15% (claim period 1) in their revenue for March 2020 and a loss of 30% (period 2 to 4), thereafter, qualified for the subsidy. The subsidy rate was 75% of eligible employees' wages.
However, this only applied to the first $58,700 worth of salary. This meant businesses received a maximum of $847 per week. Employees who were unpaid for 14 or more consecutive days in the claim period could not be included in the employer's calculation.
In July 2020, Bill C-20 made the following changes to the subsidy:
- The subsidy rate varied according to the decline in revenues. If the revenue drop was at least 30%, the subsidy rate would be at least 75% (up to a maximum of $847 per week per eligible employee).
- Businesses that saw a revenue drop of less than 30% could still qualify for the subsidy.
- Employers hit hardest could qualify for a higher amount.
- Employees who were unpaid for 14 or more consecutive days in the claim period could be included in the calculation.
- Employers had the option to either use the current period's revenue drop or that of the previous period to calculate the subsidy rate.
On November 19, 2020, the wage subsidy was extended to June 5, 2021. The following changes came into effect (Bill C-9):
- The maximum subsidy rate for periods 8 to 10 is 65% (40% base rate + 25% top-up). Starting period 8 (September 27 to October 24, 2020), the top-up rate and base rate is calculated using the same one-month revenue drop.
- Employers have the option to use either the new top-up calculation or the previous 3-month average drop for periods 8 to 10.
- The application deadline is January 31, 2021, or 180 days after the end of the claim period (whichever comes later)
- Beginning period 9 (October 25 to November 21, 2020), the calculation for employees on leave with pay now aligns better with EI benefits
- Employers can calculate pre-crisis pay (baseline payment) for employees who were on certain kinds of leave, retroactive to period 5
How do I know which employees qualify for CEWS?
Eligible employees include:
- Active employees and employees on leave with pay
- Arm’s-length and non-arm's-length eligible employees
- Employees participating in a Work-Sharing benefit program
- Employees who have been laid off can be eligible retroactively, if rehired and paid so they meet the eligibility criteria for a particular claim period.
Eligible payment includes amounts such as salary, wages, certain taxable benefits and fees and commissions.
How to apply?
Employers must submit a separate application for each claim period, and for each payroll (RP) account they have.
Most businesses can apply using My Business Account. Business representatives may apply using Represent a Client. Employers can also use the Web Forms application using their web access code (WAC). Further details on applying to the CEWS program are available in the application guide.
How soon would I receive the payment?
The CEWS is paid by direct deposit or by cheque. Employers registered for direct deposit on their payroll account can expect to receive funds within three to eight days. Payments may be delayed in cases where additional review of the claim is needed.
Do you need help understanding the new rules around CEWS?
To get advice on how to maintain your business during the pandemic, call an expert today: 1 (833) 247-3652.
