Hi everyone, Brittany Taylor here with another Rudner Law vlog update.
Today I’m going to talk to you about the Canada Emergency Wage Subsidy. My goal today is to provide a brief summary of this very complicated program to try to assist employers to understand what their entitlements may be.
So essentially the Canadian Emergency Wage Subsidy provides employers with a wage subsidy of up to 75% of the first $58,700 earned by its employees, or in other words, a maximum benefit of $847 per week per employee. Now there’s no limit on the maximum amount of subsidy that can be provided to one employer, so as long as your employees are qualifying, then you can receive $847 per week per employee. The purpose of the subsidy is to help employers to keep employees on the payroll. So it’s designed to avoid layoffs, avoid the need for dismissal, or if these things have already occurred, to encourage employers to recall their employees or rehire them if that’s possible. So right now the program is in place for a period from March 15 to June 6, 2020. However, the government does leave open the possibility to extend the duration of the program if appropriate, so we may actually receive further qualifying periods as time goes on.
The legislation that formalizes the terms of the wage subsidy was only recently passed on April 11 2020, and it is very complex, but I’ll try to break down some of the key concepts here. So first of all, to receive the subsidy, an employer must be a ‘qualifying entity’. So that’s essentially any entity which is not tax exempt or a public institution and which experiences a reduction in revenue of at least 15% or 30% depending on the qualifying period that the employer is applying for. Whether or not an employer is going to meet the reduction in revenue criteria is determined in reference to the same month in the year prior, so to qualify for the qualifying period which runs from March 15 to April 11, employers must assess whether they have experienced a reduction in revenue of at least 15% in March 2020 as compared to March 2019. Alternatively, employers can elect to use their average revenues earned in January and February of this year as the reference period. However, keep in mind if you make this election, this reference period will apply going forward, so you can’t switch back and forth, once you’ve chosen the January February reference period, that’s going to apply with respect to your application in all further qualifying periods. The great news is that if you meet the revenue reduction criteria in one qualifying period, the legislation automatically deems you to have met it for the next qualifying period.
The wage subsidy only applies with respect to eligible remuneration that’s paid to eligible employees and both of these concepts are defined within the legislation. So eligible remuneration is going to include things like salary, wages, taxable benefits, fees, commissions, there’s a lot of things it doesn’t include – we know it doesn’t include severance pay or dividends. Eligible employees are individuals who are employed in Canada during the applicable qualifying period, and they must not have been without remuneration for 14 or more consecutive days within the applicable qualifying period. So let’s take an example. So an employee who was laid off from their job on March 31st 2020 may still be an eligible employee for purposes of the wage subsidy because they were not without income for 14 or more days within that qualifying period that runs from March 15 to April 11.
It’s really important to note that eligible employees do not have to actually be working. The only requirement is that they are getting paid. So it is possible that if you are in a situation where you cannot physically recall your employees to work, perhaps because your business has been ordered to remain closed or there’s simply no work available, it is possible for employees to remain at home, while being paid, and for you to still be eligible for the wage subsidy program. In that regard, an employer has to calculate the amount that they can claim for each individual employee on a separate basis. So not every employee is automatically entitled to this $847 per week maximum. It’s going to depend on a lot of different factors that are specific to that employee.
Helpfully, the CRA has actually developed a calculator which is available online on the Government of Canada’s website, which is designed to help employers assess the amount of the subsidy that they are eligible to claim. Applications for the subsidy opened on Monday April 27 and are available through the CRA’s My Business account or through a separate online application.
Employers may also be eligible to claim a 100% reimbursement of CPP and EI contributions for employees who are currently unable to work, so they might be on leave, but they are receiving pay. So that’s going to be factored in to the calculation in terms of what your overall wage subsidy entitlement is.
Now it’s really important to note that even though this isn’t included in the legislation, the government has repeatedly emphasized that employers are expected to make best efforts to top up an employee’s wages and compensation to pre-crisis levels. So if you’re getting the full 75% wage subsidy of that employee’s remuneration, the expectation is that you’re going to make best efforts to top up that remaining 25%. Now employers who are legitimately unable to provide this top up are still eligible to receive the subsidy, so it’s really important to understand that this does not automatically disqualify you from applying for the subsidy. However, we recommend that employers keep very very careful records documenting their efforts to review their availability, the possibility of providing a top up, and determining that such a top up is not possible, in the event that they are audited in the future.
Finally, penalties for abuse for the subsidy are very high. So an employer who receives the subsidy but ultimately is determined not to qualify will have to repay the subsidy in full. Employers who deliberately abuse the system, so for example by artificially engaging in transactions to adjust their revenue in a way that would enable them to qualify for the wage subsidy, when they would not normally qualify for it, is going to attract additional penalties, so not only will these employers have to repay the full amount of the subsidy, but they will also be subject to a penalty equal to 25% of the amount that’s claimed.
Now there has been some suggestion that further penalties may be announced down the road, so we’ll have to keep our eyes open for that.
So that’s a really quick, brief overview of the Canada Emergency Wage Subsidy, I hope this was helpful, of course if you have further questions or concerns, don’t hesitate to reach out to us.