COVID-19, CRA & Revenu Québec, Employment & Employees, Tax News

Canada Emergency Wage Subsidy (CEWS) Updates for Businesses in Canada

Since the original announcement of the Canada Emergency Wage Subsidy (CEWS) there have been some updates to the process, and the ability to apply for the subsidy will now be available on Monday April 27, 2020.

On April 3, we wrote about the initial details of the CEWS, and you can find that information HERE for reference.  Effective April 21, 2020, these are the most up-to-date details we have from the CRA and the federal government regarding this subsidy and how to now be eligible and apply.

Let’s refresh briefly, and then get into all the new details as there are many things to consider now that the time to apply is upon us.

What is the Canada Emergency Wage Subsidy?

The Canada Emergency Wage Subsidy (CEWS), will provide financial support to businesses that have been impacted by COVID-19, and aims to assist those businesses in retaining their employees, or even re-hiring those they’ve laid off.

This subsidy amount will be, up to, 75% of the remuneration (salary and wages) paid between the period of March 15 and June 6, to a maximum of $847 per week, for up to 12 weeks.

What Businesses will be eligible? Updated from first announcement

CEWS will benefit many Canadian businesses who:

  • Demonstrate that they have sustained an eligible reduction in revenue,
  • Had an active CRA RP (payroll) account on March 15, 2020, and
  • Are eligible employers
    • self-employed individuals,
    • taxable corporations,
    • partnerships,
    • those exempt from corporate tax (not public institutions) such as non-profits, boards of trade, agricultural organizations, chambers of commerce, labour organization or societies, and
    • registered charities

What is meant by “eligible revenue reduction”? Updated from first announcement

The determination of the business’ eligibility in terms of revenue reduction is calculated by “comparing your eligible revenue for the starting month of the claim period with your baseline revenue”.  There are two ways to determine your baseline revenue, and this baseline must be used for each claim period.  As per the CRA, your businesses baseline revenue is either:

  1. the revenue you earned in the corresponding month in 2019, or
  2. the average of the revenue you earned in January and February, 2020

The CRA chart below outlines for each period date for the CEWS subsidy.

To calculate your revenue, use your current accounting method (how you are managing and reporting your financial records now for your business); revenue that is to be included is what you’ve earned in Canada from selling your goods or services.

Not only does your revenue and your business need to be eligible but so do your employees and their earnings (salaries, wages, and other taxable benefits).

What does this mean to you?

  • Employees employed in Canada, during the claim period, except if there was a period of 14 days or more, consecutively within the period that they did not get any pay from you
  • Laid off employees, rehired, can be eligible retroactively provided that their retro pay and status meet the claim period requirements; they need to be rehired and paid before you can include them in the subsidy
  • Severance pay, other benefits like stock options, personal use of corporate vehicle are not eligible.
  • Baseline remuneration, which is what you need to determine the wage subsidy; this is the average weekly eligible remuneration paid during the period of January 1, 2020 and March 15, 2020.

Subsidy Calculation and Upcoming Application Portal

The process for applying for this subsidy takes time and requires a lot of information from you as the employer and applicant.

The CRA has created a calculator, and working spreadsheet, to help you determine your potential subsidy, and at the same time, help you figure out the information you need.  To access the calculator, and begin working through the process, click HERE, but before you do, you need a few things:

  1. Total number of eligible employees
  2. Total eligible remuneration paid to those employees during the claim period
  3. Average bi-weekly gross pay Jan 1 to March 15
  4. Employer EI and CPP contribution amounts
  5. Eligible amount to claim under TWS
  6. Amounts received under Work-Sharing benefit program

The best thing is to go through the process now to prepare, so you are ready to apply on Monday.  For details on applying and a walk through, click for our article HERE on April 27.

Eligible businesses interested in applying for the CEWS will apply through their CRA My Business Account or by using a Web Access Code.  If you don’t have a CRA My Business Account, now is the time to get that set up.

Impact with Other Benefits and Emergency Measures

This program is separate from the Temporary Wage Subsidy previously created.  The benefits, eligibility, and processes differ.  For more information on if you are affected by the Temporary Wage Subsidy, click HERE.  The CEWS will be reduced by the amount previously claimed under the TWS.

For more details on income support and other benefits as part of the Federal Government’s Economic Response Plan for COVID-19, click here.

See also our COVID-19: Tax Info Centre, from our TurboTax Support team, answering many FAQs on this topic and more.