Wage Subsidy Update – At first there’s more for everyone, but the phase-out is underway.
The federal government announced proposed changes to its Canada Emergency Wage Subsidy(CEWS) program that will take effect as of July 5, 2020. To summarize, there are three principal impacts of these changes:
- For the near term, companies that have experienced a revenue drop of greater than 50% will receive an even larger subsidy than the current 75%. (up to 85% of the maximum weekly remuneration of $1,129).
- The program has a gradual reduction in subsidies with an end to the program on Nov 21 2020.
- More companies can qualify for the CEWS! Starting July 5 all employers with a revenue drop of any size, when compared to the reference period*, can qualify for a proportional subsidy.
Here are the details (and there are lots!):
There are now two components to the CEWS:
- A “base” subsidy for firms with any amount of revenue decline compared to the reference period*
- A “top-up” subsidy for firms with greater than 50% decline in revenue
The maximum base-subsidy is lower than the former 75% CEWS. The formula for calculating the base subsidy is:
- 1.2 X %revenue drop X maximum weekly remuneration.
- Ex. For a firm with a 15% wage drop: 1.2 X 15% X $1,129= $203 per employee
- The maximum base subsidy starts at 60% in July and August and decreases to 50% in September, 40% in October, 20% in November.
If your company has a revenue drop of 50% or more, you are entitled to a Top-Up subsidy of an additional 25% of the maximum weekly remuneration. For example:
- An employer with a drop in revenue of 60% for July compared to the reference period* will receive:
60% Base subsidy($678) plus 25%($282) = $960/employee or 85%.
- With each passing month, after August, the maximum base subsidy declines as described above, but the top-up remains at 25%.
*Reference Period – The government has established 5 periods to which the revised CEWS will apply. For each period, if the revenue for the calendar month prior was lower than the same calendar month from 2019, the base CEWS will be payable for the period below. (Alternatively companies can elect to use an average of Jan & Feb 2020 revenue as the comparison period)- Period 5: July 2 – Aug 1
- Period 6: Aug 2 – Aug 29
- Period 7: Aug 30 – Sep 26
- Period 8: Sep 27 – Oct 24
- Period 9: Oct 25 – Nov 21
For the top-up subsidy there are more choices for the reference period.
For furloughed employees the old rules still apply to Periods 5 and 6.
There is also a “Safe-Harbour” rule for period 5 and 6: There is a provision in the new rules for Periods 5 and 6 that will ensure an employer receives the CEWS amount based on the old rules if it would lead to a greater amount than the new rules.
The new rules can definitely be more confusing. Once the proposed amendments are passed into law, we expect the CEWS calculator found here will be updated: https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-wage-subsidy/cews-calculate-subsidy-amount.html
For more information and how you can apply visit: https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-wage-subsidy.html
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