July 25, 2020
CEWS has been updated to CEWS 2.0 effective for periods 5 and on. Stay tuned for the updated analysis that will be posted as a separate post.
Below is updated based on information available on April 21, 2020.
How it works:
- 75 percent of the first $58,700 normally earned by employees — representing a benefit of up to $847 per week will be covered. ($58,700 X 75% / 52 weeks = $847 per week)
• The program would be in place for a 12-week period, from March 15 to June 6, 2020. The maximum an employer will receive is $847 X 12 weeks = $10,164 per employee, assuming the employee was paid at least $58,700.
• The government will reimburse wages paid as this is NOT a reduction of remittances.
• The amount of the subsidy received under this program will be included in the employer’s taxable income and will reduce the amount of “wages” for the purposes of computing other federal tax credits calculated on the same remuneration.
Who is Eligible:
- Employers of all sizes and across all sectors of the economy including non-profit organizations and registered charities but excluding public bodies. Includes:
- A corporation that is neither tax-exempt nor a public institution;
- An individual;
- A registered charity that is not a public institution;
- An agricultural organization, a board of trade or chamber of commerce, a scientific research corporation, a labour organization or a not-for-profit organization, other than a public institution.
- Businesses must have had a drop in revenue of 15% for Qualifying Period 1, and 30% for Qualifying Periods 2 and 3, as compared to the Reference Periods:
Reference period for eligibility
March 15 – April 11
March 2020 over:
April 12 – May 9
April 2020 over:
May 10 – June 6
May 2020 over:
- The average of January and February 2020 may be used as a Reference Period if the employer was not carrying on a business or its 'ordinary activities' on March 1, 2019, or, if the employer elects to use this average for all of the Qualifying Periods. Employers cannot change the method once it is chosen and applied to the first period.
- Employer’s revenue would be its revenue in Canada from arm’s length sources and calculated using its normal accounting method. Employers can calculate revenues under the accrual or the cash method. Whatever method is used when first applying would be required to be used for the duration of the wage subsidy program.
- The subsidy is only available to non-arm’s length employees employed before March 15, 2020 (non-arm’s length employees hired afterward do not qualify). Dividends do not count.
- Employees cannot received CERB while employer is claiming CEWS for the same period
- Separate applications must be made for each Qualifying Period.
- Once an employer qualifies for a specific period, they automatically qualify for the next period.
- Eligible employers can apply for both this subsidy as well as the previously enacted 10% subsidy. Any benefit from the 10% wage subsidy for remuneration paid in a specific period would generally reduce the amount available to be claimed under this subsidy.
- Employers are also entitled to receive a 100% refund for employer contributions to Employment Insurance and Canada Pension Plan for eligible employees for each week throughout which those employees are on leave with pay and for which the employer is eligible to claim the CEWS for those employees.
How to Apply:
- April 21 update: CRA has announced that the portal will be available April 27 to accept applications. Businesses will be able to apply using My Business Account as well as their accountants through Represent a Client
- April 21 update: CRA has provided a spreadsheet to assist with the calculation of the subsidy. Pivotal LLP can assist to see if you qualify first.
- You should register for a My Business Account through this link https://www.canada.ca/en/revenue-agency/services/e-services/e-services-businesses/business-account.html?utm_campaign=not-applicable&utm_medium=vanity-url&utm_source=canada-ca_my-cra-business-account CRA has posted this video to assist you with the process: https://www.youtube.com/watch?v=6o6w4yUZnNs
- Employers, and not the employees, will need to apply for the wage subsidy.
- Businesses should be prepared to wait another 2 weeks to see first payment after the application, then amounts will be backdated to March. Employers have until October 2020 to apply.
- It will be funded via direct deposit, click here to sign your business up for a direct deposit. https://www.canada.ca/en/revenue-agency/services/about-canada-revenue-agency-cra/direct-deposit.html
- Applications will have to be filed on a monthly basis. The intention is that employers should re-hire employees now, pay their wages and expect payment of the subsidy to follow. Indeed, in order to benefit from the full three-month period, employees would have already had to be on the payroll on March 15th, 2020.
- The employer will have to demonstrate three things in order to claim the wage subsidy with respect to an employee: (i) that the amount being paid to the employee matches their past salary, (ii) that it has paid the employee that salary in the relevant period, and (iii) that it has made best efforts to pay the remaining 25% of the employee’s salary. The last criterion is subject to flexibility.
What if you don’t qualify:
• You may continue to qualify for the Temporary Wage Subsidy of 10 percent of remuneration paid from March 18 to before June 20, up to a maximum subsidy of $1,375 per employee and $25,000 per employer.
Recommendations on getting ready to apply:
• Catch up your bookkeeping and prepare monthly financial statements for submission under the program – we can help!
• Get set up with the CRA My Account to apply on-line and sign up for direct deposits.
• Different businesses will be impacted in different ways and we can assist in advising how your situation fits the eligibility criteria. We can help you get your financial and other information in order before the application process begins.