The following is a summary of the details released, to date, on the federal government’s proposed Canada Emergency Wage Subsidy (the “Wage Subsidy”). This program has not yet been finalized and we will update this page with new information as it is released. 

Note: further details on the CEWS have been released, and some of the criteria below has been changed: please see our second blog post on the CEWS published April 9 blog

Who is Eligible?

  • Eligible entities include employers that are corporations, individuals (such as sole proprietors), partnerships, non-profit organizations, and registered charities, who had an existing business number and payroll program account with the Canada Revenue Agency (“CRA”) on March 15, 2020.
    • Public sector entities are not eligible (e.g. municipalities and local governments, Crown corporations, public universities, colleges, schools and hospitals).
  • To be eligible, an employer must suffer a drop in “gross revenues” of at least 30% in March, April or May, 2020 when compared to the same month in 2019. The following are the periods in which employers can claim wage subsidies:


Decline in monthly revenue

Period can claim subsidy

Period 1

March 2020 vs. March 2019

March 15 – April 11

Period 2

April 2020 vs. April 2019

April 12 – May 9

Period 3

May 2020 vs. May 2019

May 10 – June 6

  • For example, if an employer’s revenues in April 2020 were down 50% compared to April 2019, the employer would be eligible to claim the Wage Subsidy on remuneration paid between April 12 and May 9, 2020.
  • An employer’s “gross revenues” for the purposes of the Wage Subsidy will be the revenues from the employer’s business carried on in Canada that are earned from arm’s-length sources.
    • Revenues will be calculated using the employer’s normal accounting method, and will exclude revenues from extraordinary items and amounts on account of capital.
  • Eligibility for the Wage Subsidy for employers established after February 2019 will be determined by comparing monthly revenues to a reasonable industry benchmark.
  • The government is continuing to work with non-profit organizations and registered charities to ensure the definition of “gross revenues” is appropriate for their circumstances.
  • Employers are required to keep records demonstrating the reduction in revenues and the remuneration paid to employees. However, it is unclear at this point what information, if any, employers are required to retain to prove reductions in revenue were related to COVID-19. 

What is the Amount of the Wage Subsidy?

  • The Wage Subsidy will subsidize salaries, wages, or other remuneration paid by an eligible employer to an employee between March 15 and June 6, 2020 in an amount equal to the greater of:
    • 75% of the amount of remuneration paid, up to a maximum benefit of $847 per week; or
    • the amount of remuneration paid, up to a maximum benefit of $847 per week or 75% of the employee’s “pre-crisis weekly remuneration”, whichever is less.
  • Further guidance with respect to the definition of “pre-crisis weekly remuneration” will be provided in the following days.
  • There is no limit on the total Wage Subsidy amount that an eligible employer can claim. However, the Wage Subsidy will only apply to salary, wages, or other remuneration paid to employees employed in Canada.
  • The Wage Subsidy does not apply to severance pay or benefits provided to employees such as stock options or the personal use of a corporate vehicle.
  • If an employer recalls a previously laid off employee, the wages paid to them between March 15 and June 6, 2020 will count for the purposes of the Wage Subsidy.
  • A special rule will apply to the calculation of the Wage Subsidy amount for employees that do not deal at arm’s length with their employer. We are awaiting further details on this.

How do Employers Apply?

  • Employers will be able to apply for the Wage Subsidy through the CRA’s My Business Account portal as well as through a web-based application.
  • The payments will come through the CRA; the exact mechanism is not currently known but Minister Morneau stated in a press conference that businesses should ensure they have direct deposit with CRA to facilitate timely payment.

Additional Issues to Consider

  • The government has stated that employers are expected to “at least make best efforts” to top up salaries to pre-crisis levels.
    • At this time, it is not clear what is required to meet the “best efforts requirement.”
    • Note that if an employer unilaterally decreases an employee’s pay by, for example, 25%, this is likely a constructive dismissal. However, in these circumstances we expect many employees would consent to that reduction in pay in order to keep their job.
  • The funds received by an employer from the Wage Subsidy will count as “income” for tax purposes.
  • Employers will be required to repay amounts received under the Wage Subsidy if it is determined that they do not meet the eligibility requirements. Penalties, including fines or imprisonment, may apply in the case of fraudulent claims.
  • Those employers that do not qualify for the Wage Subsidy may continue to qualify for the previously announced wage subsidy of 10% 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, provided the employer meets the eligibility requirements for that subsidy.

We will provide further updates and details once they are provide by the federal government, for instance when the draft Income Tax Regulations are released.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.