Current and accurate as of July 22, 2020
On July 13, 2020, Prime Minister Trudeau announced an extension to the Canada Emergency Wage Subsidy Program. On July 21, 2020, the Government passed the extension legislation as well as changes to the criteria for qualifying businesses. This update addresses these changes related to the ongoing Coronavirus pandemic and its effects on businesses and their workforces.
We encourage you to reach out to discuss how these changes will impact your business operations.
Q: How long is the Canada Emergency Wage Subsidy (CEWS) extended for?
The CEWS program is administered based on four-week periods, which are called Qualifying Periods. The new changes extend the program to December 19, 2020 for a 10th Qualifying Period.
The extended Qualifying Periods are:
- Qualifying Period 5: July 5 to August 1;
- Qualifying Period 6: August 2 to August 29;
- Qualifying Period 7: August 30 to September 26;
- Qualifying Period 8: September 27 to October 24;
- Qualifying Period 9: October 25 to November 21; and
- Qualifying Period 10: November 22 to December 29.
Q: What are the revised eligibility criteria with respect to revenue losses? Is it still 30%?
Previously, the program was available to businesses who could demonstrate a drop in qualifying revenue of 15% or more in March 2020, and 30% or more in April, May, and June 2020. That is no longer the case. Now businesses that have experienced any revenue drop are eligible for the subsidy, although the subsidy varies based on the amount of their decrease in revenue.
Q: How is the new CEWS calculated?
The new CEWS allows businesses to qualify on a sliding scale depending on their losses. The calculation of eligible amounts is based on two amounts and only apply to active employees:
- Base Subsidy:The Base Subsidy amount is a specific amount paid to the employee for the Qualifying Period on compensation of up to $1,129 per week. The maximum Base Subsidy available for businesses with qualifying revenue drops of 50% or more and will decline over time at the following rates and amounts:
- 60% (or $677) for Qualifying Periods 5 and 6;
- 50% (or $565) for Qualifying Period 7;
- 40% (or $452) for Qualifying Period 8;
- 20% (or $226) for Qualifying Period 9; and
- The amount has not been released for Qualifying Period 10.
For businesses with less than a 50% revenue drop, the Base Subsidy will be calculated using the percentage of their revenue drop, as follows:
- Qualifying Periods 5 and 6 = 1.2 times revenue drop;
- Qualifying Period 7 = 1.0 times the revenue drop;
- Qualifying Period 8 = 0.8 times the revenue drop; and
- Qualifying Period 9 = 0.4 times revenue drop.
- Top-Up Subsidy:
In addition to the Base Subsidy, the government has implemented a Top-Up Subsidy of up to 25% for those businesses that have been most adversely affected by the COVID-19 crisis.For the Top Up Subsidy, the revenue drop for business is calculated comparing the three proceeding months to either the same months in 2019 OR by comparing to January 1 to February 29, 2020.
If businesses have experienced a three-month average revenue drop of 50% or more, the Top-Up Subsidy will be equal to 1.25 times the average revenue drop over 50% up to a maximum of 25% (which is equal to a 70% three-month average revenue drop) calculated as follows:
3-month average revenue drop Top Up Rate Top Up Calculation =
1.25 x (3-month revenue drop less 50%)
70% or more 25% 1.25 x (70% - 50%) = 25% 65% 18.75% 1.25 x (65% - 50%) = 18.75% 60% 12.5% 1.25 x (60% - 50%) = 12.5% 55% 6.25% 1.25 x (55% - 50%) = 6.25% 50% or less 0.0% 1.25 x (50% - 50%) = 0%
Q: What if my businesses would be eligible for a higher amount for Qualifying Periods 5 and 6 under the old CEWS than it will now under the new CEWS Program?
The government has included a “Safe Harbour Rule” to address the above situation. The Rule means that for Qualifying Periods 5 and 6, a business will be eligible for the higher of the amount under the old program rules or the new program rules. In other words, businesses are eligible for a CEWS rate that is not lower than the rate that they would have received if the rules had not changed.
Q: If these new rules only apply to active employees, what about non-active or furloughed employees?
For Qualifying Periods 5 and 6, non-active or furloughed employees would be subject to the same subsidy calculation as under the old rules or in Qualifying Periods 1 to 4. However, starting in Qualifying Period 7, the CEWS support will be brought in line with the benefits provided through the Canada Emergency Response Benefit (CERB) and Employment Insurance (EI) programs. The terms of the applicable regulations have yet to be released.
Q: What is the expanded list of eligible employers, which are referred to as “eligible entities”?
The definition of eligible entities has been expanded to include:
- Partnerships that are up to 50% owned by non-eligible members;
- Indigenous government-owned corporations that are carrying on a business, as well as partnerships where the partners are Indigenous governments and eligible employers;
- Registered Canadian Amateur Athletic Associations;
- Registered Journalism Organizations; and
- Non-public colleges and schools, including institutions that offer specialized services, such as arts schools, driving schools, language schools or flight schools.
Please note that this is a rapidly changing and evolving situation, and that this information is based on our best knowledge at the current time.
Due to the unique circumstances of every business, not all information is applicable to all employers, so please feel free to contact us with any questions or if we can be of assistance in any way.
Also, we note that this information is current as of July 22, 2020 and will be subject to change following this date.