Additional Details about Canadian Emergency Wage Subsidies | Instant News


From: Canadian Department of Finance

Backgrounder

What it means for Canadian entrepreneurs

To help employers retain and return workers to their payroll through challenges posed by the COVID-19 pandemic, the Prime Minister, Justin Trudeau, announced a new Canadian Emergency Wage Subsidy on March 27, 2020. This will provide 75 percent percent of wage subsidies to entrepreneurs who meet the requirements for up to 12 weeks, apply retroactively until March 15, 2020.

This wage subsidy aims to prevent further job losses, encourage employers to re-recruit workers who were previously laid off as a result of COVID-19, and help better position Canadian companies and other employers to resume normal operations after the crisis. While the Government has designed proposed wage subsidies to provide generous and timely financial support to employers, it does so in the hope that employers will do their part by using subsidies in a way that supports the health and well-being of their employees. .

Decent Entrepreneur

Eligible entrepreneurs will include individuals, taxable companies, partnerships consisting of eligible entrepreneurs, non-profit organizations, and registered charities.

Public bodies will not be eligible for this subsidy. Public bodies will generally include city and local governments, Crown corporations, wholly owned city companies, state universities, colleges, schools and hospitals.

This subsidy will be available to eligible entrepreneurs who see a decrease of at least 15 percent of their income in March 2020 and 30 percent for the following months (see Eligible Period). In applying for subsidies, entrepreneurs will be asked to prove a decrease in income.

We encourage all eligible employers to re-employ employees as quickly as possible and to apply for Canadian Emergency Salary Subsidies if they are eligible. To ensure that the Canadian Emergency Response Benefit (CERB) applies as intended, the Government will consider applying an approach to limit duplication. This can include a process to allow individuals who are re-employed by their employers during the same eligibility period to cancel their CERB claim and pay back the amount.

Calculate Income

The employer’s income for this purpose will be his income in Canada from reasonable sources. Income will be calculated using the employer’s normal accounting method, and will exclude income from extraordinary goods and the amount on the capital account.

On April 8, 2020, the government clarified that employers would be allowed to calculate their income based on the accrual method or the cash method, but not the combination of the two. Employers will choose the accounting method when first applying for CEWS and will be asked to use the method for the entire duration of the program.

For registered charities and non-profit organizations, the calculation will cover most forms of income, not including income from unarmed people. These organizations will be allowed to choose whether or not to include revenue from government sources as part of the calculation. Once selected, the same approach must be applied throughout the program period.

Specific rules for calculating income will be given to account for certain non-arm length transactions, such as where the employer sells all proceeds to the related company which in turn gets long arm income. In addition, the affiliate group will be able to calculate income based on consolidation.

Amount of Subsidies

The amount of subsidies for certain employees on remuneration that meets the requirements paid for the period between March 15 and June 6, 2020 will be greater than:

  • 75 percent of the amount of remuneration paid, up to a maximum benefit of $ 847 per week; and
  • the amount of remuneration paid, up to a maximum benefit of $ 847 per week or 75 percent of the employee’s pre-crisis weekly remuneration, whichever is lower.

As a result, employers can qualify for subsidies of up to 100 percent of the first 75 percent of pre-crisis wages or salaries of existing employees. These employers will be expected if possible to maintain pre-crisis job income from existing employees.

Pre-crisis remuneration for certain employees will be based on an average weekly remuneration paid between January 1 and March 15 on an inclusive basis, excluding the seven-day period in respect of which the employee did not receive remuneration.

Employers will also be eligible for subsidies of up to 75 percent of salaries and wages paid to new employees.

Remuneration that meets the requirements can include salary, wages, and other remuneration such as taxable benefits. This is the amount that is usually required by the employer to withhold or reduce the amount to be sent to the General Recipient due to employee income tax obligations. However, it does not include severance pay, or items such as stock option benefits or personal use of company vehicles.

Special rules will apply to employees who do not want to deal with employers. The amount of subsidies for these employees will be limited to remuneration that meets the requirements paid in any payment period between March 15 and June 6, 2020, up to a maximum benefit of a lower $ 847 per week and 75 percent of the weekly pre-crisis employee remuneration. Subsidies will only be available in connection with unemployed employees employed before 15 March 2020.

There will be no overall limit on the amount of subsidies that can be claimed by eligible employers.

Employers are expected to make their best efforts to increase employee salaries to bring them to pre-crisis levels.

Refunds for Specific Payroll Contributions

On April 8, 2020, the Government proposed to expand CEWS by introducing a new 100 percent refund for certain contributions paid by employers to Employment Insurance, the Canadian Pension Plan, the Quebec Pension Program, and the Quebec Parent Insurance Plan. This refund will cover 100 percent of the contributions paid by the employer to the eligible employee for each week during the employee’s paid leave and where the employer has the right to claim CEWS for the employee.

In general, an employee will be considered on leave with a salary throughout the week if the employee is paid by the employer during the week but does not do any work for the employer that week. This refund will not be available to qualified employees who are on leave with a salary of only part of the week.

This refund will not be subject to a maximum weekly benefit per employee of $ 847 that can be claimed by an eligible employer in connection with CEWS. There will be no overall limit on the amount of refunds that can be claimed by eligible employers.

For greater certainty, employers will be asked to continue to collect and send employer and employee contributions to each program as usual. Eligible entrepreneurs will apply for a refund, as described above, at the same time they apply for CEWS.

Decent Period

Eligibility will generally be determined by changes in the employer’s monthly income that qualifies, year-to-year, for the calendar month in which the period begins.

On April 8, 2020, the Government announced that all entrepreneurs would be allowed to calculate changes in their income using alternative benchmarks to determine their eligibility. This will provide more flexibility for entrepreneurs who might not fit into the general approach, including companies with high growth, sectors facing difficulties in 2019, non-profits and charities, and entrepreneurs established after February 2019. Under this alternative approach, entrepreneurs will be allowed to compare their income using the average income they obtained in January and February 2020. Employers will choose the general year-on-year approach or this alternative approach when first applying for CEWS and will be asked to use the same approach for the entire duration of the program.

The government also announced that, to provide certainty to employers, after the employer was declared eligible for a certain period, the employer would automatically fulfill the requirements for the next period.

  • ABC Inc. is a new company that started operations last September. It reports earnings of $ 100,000 in January and $ 140,000 in February, with a monthly average of $ 120,000. In March, his income dropped to $ 90,000. Because revenue in March was 25 percent lower than $ 120,000, ABC Inc. will be eligible for CEWS for the first and second claim periods. To be eligible for the third claim period, ABC Inc.’s earnings will be $ 84,000 or less for April or May (that is, 30 percent lower than $ 120,000).

Total wage subsidy (given based on COVID-19 Economic Response Plan) received by the employer in a particular month will be ignored with the aim of measuring year-to-year changes in monthly income.

  • For example, if income in March 2020 drops by 20 percent compared to March 2019, employers will be allowed to claim CEWS (as calculated above) for remuneration paid between 15 March and 11 April 2020, and between 12 April to 9 May.
  • Or, the employer can use the average income from January and February 2020, not March 2019, to determine whether the company is eligible for CEWS.
  • After the approach is chosen, the employer must apply it during the program period.

The table below outlines each claim period, the deduction needed in revenue and the reference period for eligibility.

Decent Period

Claim period

Revenue reduction is required

Reference period for eligibility

Period 1

March 15

for

April 11th

15%

March 2020 ends:

  • March 2019 or
  • January and February 2020 average

Period 2

April 12th

for

May 9th

30%

Eligible for Period 1

OR

April 2020 more than:

  • April 2019 or
  • January and February 2020 average

Period 3

May 10th

for

June 6

30%

Eligible for Period 2

OR

May 2020 ends:

  • May 2019 or
  • January and February 2020 average

Qualified employees

Eligible employees are individuals employed in Canada.

Eligibility for CEWS from employee remuneration will be available to employees other than those who did not receive remuneration for 14 or more consecutive days in the eligibility period, ie, from March 15 to April 11, from April 12 to May 9, or from May 10 to May June 6.

This regulation supersedes the previously announced limitation that the employer will not be eligible to claim CEWS for remuneration paid to an employee in one week which is included in the 4 week period in which the employee qualifies for Canadian Emergency Response Benefits.

How to apply

Eligible entrepreneurs will be able to apply for CEWS through the Canadian Revenue Agency Business Account portal and web-based application. Employers must keep records showing reductions in commensurate income and remuneration paid to employees. More details about the application process will be available soon.

Ensuring Compliance

To maintain the integrity of the program and to ensure that it helps Canadians keep their jobs, employers will be required to pay the amount paid under CEWS if they do not meet the eligibility requirements. Sanctions can apply in case of fraudulent claims. Penalties can include fines or even imprisonment. In addition, anti-abuse rules will be put in place to ensure that subsidies are not received incorrectly and to help ensure that employees are paid the amount they are owed.

Entrepreneurs involved in artificial transactions to reduce income with the aim of claiming CEWS will be subject to a penalty of 25 percent of the value of the subsidies claimed, in addition to the requirement to pay in full the subsidies that were claimed improperly. .

Interaction with 10% Wage Subsidies

On March 25, 2020, the COVID-19 Emergency Response Act, which includes the application of a temporary 10 percent wage subsidy, received Royal Approval. For employers who qualify for CEWS and a 10 percent wage subsidy for a period, each benefit from a 10 percent wage subsidy for remuneration paid in a certain period will generally reduce the amount available to claim under CEWS in the same period.

Interaction with Work Sharing Programs

On March 18, 2020, the Prime Minister announced the extension of the maximum duration of the Work Sharing program from 38 weeks to 76 weeks for employers affected by COVID-19. This step will provide income support to employees who qualify for Employment Insurance who agree to reduce their normal work hours due to developments outside the control of their employer.

For employers and employees participating in the Work Sharing program, the EI benefits received by employees through the Work Sharing program will reduce the benefits that their employers are entitled to under CEWS.

Government Assistance

The treatment of tax credits and other benefits normally provided by the government will apply. As a result, wage subsidies received by employers will be considered government assistance and included in the employer’s taxable income.

Assistance received under wage subsidies will reduce the amount of remuneration costs that qualify for other federal tax credits calculated on the same remuneration.

How employers will benefit from CEWS

Maude and Stéphane have a company that operates a car repair shop in Saint Boniface, Manitoba. They work full time, each with a salary of $ 1,300 per week, and have three part-time employees, each generating $ 800 per week, for a total weekly salary of $ 5,000. Maude and Stéphane have reduced their opening hours due to decreased demand for their services. They initially laid off their employees, but they have now decided to reinstate them after the announcement of the Canadian Emergency Wage Subsidy. Their employees are not asked to report to the workplace during this challenging period.

Maude and Stéphane now keep their employees on their payroll, paying them 75 percent of their pre-crisis salary ($ 600 per week). Maude and Stéphane will be eligible for a weekly subsidy of $ 3,494 ($ 847 for themselves and $ 600 for each of their employees). Maude and Stéphane will also be eligible for a 100 percent refund of the contributions paid by employers to the Employment Insurance and Pension Plan of Canada in connection with their employees, providing additional benefits of up to $ 124 per week.

At the end of each claim period, Maude and Stéphane will submit applications through the Canadian Revenue Agency portal, proving that decreasing their income every month is sufficient to qualify, compared to January and February averages. They will also report the total remuneration paid to themselves and their leave employees during the month. Because Maude and Stéphane have access to direct deposits with the Canadian Revenue Agency, they will receive their subsidies immediately after each application.

Canada’s COVID-19 Economic Response Plan- Costs and Implementation

These steps are part of the Government of Canada COVID-19 Economic Response Plan – a comprehensive plan to help ensure that Canadians pay for important matters such as mortgages, rent and groceries, and to help employers continue to pay their employees and bills during this uncertain period.

Protect Health and Safety

Impact of 2020-2021

COVID-19 Response Fund (including $ 500 million in support for Provinces and Regions (2019-2020))

$ 1.1 billion

Funding Personal Protective Equipment and Equipment ($ 200 million in 2019-20)

$ 2 billion

Total – Protect Health and Safety

$ 3 billion

Direct Support Actions

Benefits of Canadian Emergency Response

$ 24 billion

GST Credit Increase

$ 5.5 billion

Enhanced Benefits of Canadian Children

$ 1.9 billion

Temporary Business Wage Subsidies

$ 975 million

Canadian Emergency Wage Subsidies

$ 73 billion

Canadian Student Loan Payments

$ 190 million

Support for Indigenous Peoples

$ 305 million

Support for homeless people (through Reaching Home)

$ 157.5 million

Support for women’s shelters and centers for sexual violence, including for facilities in indigenous communities

$ 50 million

Support for Seniors (among them, $ 9 million in 2019-20), Children and Youth

$ 16.5 million

Support for Food Banks and Local Food Organizations (among them, $ 25 million in 2019-20)

$ 100 million

Reduce Minimum RRIF Withdrawal

$ 495 million

Support for the Air Transportation Sector

$ 331.4 million

Total – Direct Support Actions

$ 107 billion

Liquidity Support

CRA / CBSA liquidity support for businesses and individuals

Deferral of Income Tax Payment until September

$ 55 billion

Sales Tax Shipments and Customs Payment Deferred

$ 30 billion

Total – CRA / CBSA liquidity support

$ 85 billion

Business Credit Availability Program (BCAP) (through BDC and EDC)

Small and Medium Enterprises Loans and Guarantee Program

$ 40 billion

Canadian Emergency Business Account

$ 25 billion

Credit and liquidity support for the Agriculture Sector

$ 5.2 billion

Credit and liquidity support through the Bank of Canada, OSFI, CMHC and commercial lenders

$ 500 billion +

Total – BCAP, credit support and other liquidity

$ 570 billion +

/ Public release. See fully here.

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