The Canada Emergency Wage Subsidy (“CEWS”) has been extended until December 19, 2020. Over the next few months, the subsidy will also be available to a broader group of employers and benefits will be provided on a sliding scale based on the degree of lost revenue. The subsidy will decrease over time as the Government attempts to “wean” businesses off of the program.
The Department of Finance has released a backgrounder, detailing the various new changes made to the CEWS. Due to the complexity of these changes, we have summarized some of the key takeaways from the updates below:
- CEWS has been extended until December 19, 2020. At this point, however, information is only known about Periods 5 through 9 (July 5 – Nov. 21).
- Starting July 5, the required 30% reduction in revenue qualification has been eliminated. All employers who have experienced a decline in revenue are now eligible for CEWS to help with their payroll costs.
- There is a new “sliding scale” for eligible employee remuneration, which depends on the actual revenue decline and the period in which the decline occurs. These are divided further between “base CEWS” and “top-up CEWS”.
- The base CEWS rate is designed for most employers and is calculated as follows:
- For employers who have experienced more than 50% revenue decline in Period 5 (July 5 – Aug. 1), the base CEWS rate is 60% of an employee’s eligible remuneration (up to a maximum of $677 per week)
- The base CEWS will reduce every 4-week period after Period 6. Period 7 (Aug. 30 – Sept. 26) provides 50% of an employee’s eligible remuneration (up to a maximum of $565). Period 8 reduces remuneration to 40% and the maximum amount to $452. In Period 9 (October 25 to November 21), the base CEWS will be 20% of an employee’s eligible remuneration (up to a maximum of $226 per week).
- For employers who have experienced between 0 and 49% revenue decline in Period 5, their base CEWS rate is based on a calculation of 1.2 times the revenue decline. This rate also gradually reduces, landing at 0.4 times the revenue decline by Period 9.
- The top-up CEWS is available to employers who were most severely impacted by COVID-19. It provides an additional 25%, determined based on the revenue decline of the employer in question.
- Employers who have experienced an average revenue decline of 70% or more will receive a 25% top-up of an employee’s eligible remuneration
- Employers with a 50% revenue decline will be eligible for a 6.25% top-up
- In Period 5, this will result in an overall CEWS rate of up to 85% of an employee’s remuneration. However, this will decrease to 45% by Period 9 due to the declining base rate
- Under the “safe harbour” rule, an eligible employer who would have benefited from the original CEWS rate will still be eligible for the 75% rate that was in place for Periods 1 to 4. This could potentially be even higher if the new calculations are used (up to 85%).
- The rate for furloughed or temporarily laid-off employees will remain the same during Periods 5 and 6. After this, they will be adjusted to align with the benefits provided under the Canada Emergency Response Benefit and Employment Insurance.
- The method of calculating revenue and revenue decline for base CEWS remains the same for employers during Period 5. However, once a method of calculation is chosen for Period 5, that approach must remain consistent through to Period 9.
Who is eligible and to what?
Eligible employers include individuals, taxable corporations and trust, partnerships, non-profit organizations and registered charities. Public institutions are largely not covered under CEWS. As of March 15, 2020, the following groups are also included:
- Partnerships up to 50% owned by non-eligible members,
- Indigenous government-owned corporations carrying on a business, and partnerships consisting of Indigenous governments and eligible employers,
- Registered Canadian Amateur Athletic Associations,
- Registered Journalism Organization, and
- Non-public colleges and schools
Eligible employees are individuals employed in Canada. As of the most recent changes, employees without pay for 14 or more consecutive days in an eligibility period are no longer excluded.
The definition of employee’s eligible remuneration remains the same, in that salary, wages and other remunerations are still included. The maximum eligible weekly remuneration is still $1,129.
These updates make it clear that the Government is hoping to gradually ease employers off the wage subsidy as economic conditions under COVID-19 slowly begin to improve. Although the Government has extended the CEWS until December, we can now expect the payouts to steadily decrease as businesses reopen to the public and activities in Canada return to normal.
We know how complicated all these rules can be for employees and employers struggling to recover as pandemic conditions improve. If you have any concerns about calculating the benefits you are eligible for, it is always beneficial to contact an employment lawyer to help guide you through the process and ensure that you are aware of all of your rights and obligations.