Canada Emergency Wage Subsidy Helps Businesses Keep Their Employees
By Barry F. Travers, National Tax Leader – Public Sector Tax, KPMG in Canada
For weeks now, I’ve been working with employers hit hard by the COVID-19 pandemic. They are from businesses large and small, from public and private companies, and not-for-profits. Every one of them is concerned for the well-being of their employees. And they all have the same question: how can I help my employees get through this difficult time?
The Government of Canada has introduced a variety of fiscal and tax relief benefits to support Canadian businesses and their employees affected by this crisis. On April 11, 2020, the government passed into law its most significant business relief program yet: the 75% Canada Emergency Wage Subsidy (CEWS).
What it means for employers.
The CEWS is a temporary 12-week subsidy that will help employers whose businesses have been hard hit by the COVID-19 pandemic to retain and recall laid off employees.
The subsidy provides eligible employers with an amount equal to 75% of their employees’ baseline remuneration to a maximum of $847 per week per employee, from March 15 to June 6, 2020. Employers are encouraged to top up their employees to 100% of their wages where possible.
Employers can register for the subsidy on the CRA website effective April 27, 2020. A new CRA online calculator is also available to determine the subsidy amount businesses and organizations will be eligible to receive.
Here are some of the key points employers should keep in mind as they apply . . .
- To qualify for CEWS, a business must demonstrate that it has experienced a revenue drop of at least 15% in March 2020, and a drop of 30% in April and May, due to COVID-19. Once an employer is found eligible for the subsidy in March, they automatically qualify for April. However, the employer will need to re-qualify again for May.
- Eligible employers must pay their employees first, and then wait three to six weeks to get the 75% subsidy refund. With less revenue coming in, it’s important that employers review their operations and determine the most effective way to access the funds needed to pay employees’ wages in the interim.
- The baseline remuneration for an employee is calculated on the average weekly wage paid between January 1 and March 15, 2020, inclusive. This excludes any seven-day periods that the employee did not receive wages.
- Employers who don’t qualify for the CEWS may be able to claim the temporary three-month taxable subsidy that provides 10% of wages paid from March 18 to before June 20, up to a maximum subsidy of $1,375 per employee and $25,000 per employer. This is restricted to individuals, eligible Canadian controlled private corporations, certain partnerships, registered charities and not-for-profits.
- Eligible employers can apply for both the 10% temporary wage subsidy and the CEWS. The 10% wage subsidy provides a more immediate benefit since employers can reduce the amount of payroll reductions remitted to the CRA. However, if an employer claimed an amount under the 10% subsidy, they will need to reduce the CEWS subsidy by the same amount for that period.
- Employers who qualify for the CEWS may also receive a 100% refund for certain employer-paid contributions, such as Employment Insurance, Canada Pension Plan, the Quebec Pension Plan and the Quebec Parental Insurance Plan.
The CEWS also features special provisions for registered charities and non-for-profits, which have been given additional flexibility when calculating their revenue decrease for the CEWS.
For instance, they can choose whether or not to include funding from government sources as part of the calculation, but they must apply the same approach throughout the program period.
Careful planning is necessary
The CEWS offers some welcome relief for Canadian businesses. However, there are many complexities associated with the eligibility criteria, and calculating revenues and the recoveries available to employers.
As an example, a registered charity that qualifies for the CEWS may have already received a grant to fund wages under certain programs. In that case, it’s prudent to ensure that claiming the CEWS related to these wages does not result in a payback requirement based on grant funding conditions.
Before applying for the CEWS, all employers must undertake careful planning and modelling, and follow the necessary requirements to obtain the full benefit of the subsidy and avoid penalties in future.
Working together to help employees
Despite the unique challenges they face, employers are keen to maintain business continuity and help their employees manage through this difficult time.
I’m pleased that we are able to help our clients navigate the CEWS and other federal, provincial and municipal business relief programs available to them.
With these programs, and careful planning, employers are well positioned to give their employees an income – and some peace of mind – until we get back to business as usual.
If you or your business need help navigating through the disruption, please email: [email protected]
Barry F. Travers is a Partner, National Tax Leader – Public Sector Tax, KPMG in Canada working from the Toronto office. Barry has over 30 years’ experience in public sector organizations with a specific emphasis on higher education, health care, charities and NPO’s. You can see the full bio here.