Canada: Federal Government Extends Wage Subsidy And Rent Subsidy Programs Until October 2021

On July 30, 2021, the Government of Canada (the "Government"):

• announced its intention to extend the Canada Emergency Wage Subsidy (the "CEWS"), as it relates to "active employees", and the Canada Emergency Rent Subsidy (the "CERS") for an additional period (i.e., Period 21, being September 26 to October 23, 2021), and to increase certain rates applicable in respect of Period 20 (i.e., August 29 to September 25, 2021);
• confirmed that the CEWS, as it relates to "furloughed employees", would not be available beyond Period 19 (i.e., August 1 to August 28, 2021); and
• announced proposals to address a technical issue for certain employers who opted to use the general approach for Period 5 (or subsequent) for determining revenue decline.

This article highlights the particulars announced on July 30, 2021. Additional commentary from our firm on the CEWS can be found here, here, here, here, here, here, here, here, here, here, here, here, here and here, and commentary on the CERS can be found here, here, here, here and here.

Rate Structures

Prior to the Government's July 30, 2021 announcement, the maximum recovery rates for the CEWS and the CERS were set to decline from Period 19 to Period 20, and both programs were set to expire at the end of Period 20 (i.e., August 25, 2021).

On July 30, 2021, the Government announced that the maximum rate of 40% for the CEWS (with respect to active employees) and the CERS (excluding the Lockdown Support subsidy) would be extended from Period 19 to Period 20 (i.e., no rate reduction), and set the maximum rate for new Period 21 at 20%.

The following table summarizes the updated base percentage and top-up percentage rate structure with respect to the CEWS:

* The maximum weekly benefit per employee is equal to the maximum combined base subsidy and top-up wage subsidy for the qualifying period applied to the amount of eligible remuneration paid to the employee for the qualifying period, on remuneration of up to $1,129 per week.

The following table summarizes the updated base percentage rate structure with respect to the CERS:

* Expenses for each qualifying period are capped at $75,000 per location and are subject to an overall cap of $300,000 that is shared among affiliated entities.

** Period 19 of the CEWS would be the twelfth period of the CERS. Period identifiers have been aligned for ease of reference.

Lockdown Support

The Government announced that it will extend the Lockdown Support subsidy (i.e., the 25% top-up subsidy available under the CERS where public health restrictions apply) until the end of Period 21 at its current rate of 25%.

Revenue Decline Calculation

An eligible entity must use the same approach (i.e., general approach or alternative approach) to determine its revenue decline calculation for all qualifying periods with respect to Period 5 and onwards (i.e., periods beginning on or after July 5, 2020). The general approach compares the qualifying revenue between a current reference period and a prior reference month. The alternative approach compares the qualifying revenue of a current reference period and the average revenues for the months of January and February 2020.

The prior reference periods used under the general approach for Periods 14 to 20 (i.e., March 14, 2021 to September 25, 2021) reverted to calendar months from 2019, such that a decline in revenues was computed with reference to a pre-pandemic month. Under the pre-July 30, 2021 announcement rules, an eligible entity that was not carrying on a business or ordinary activities on March 1, 2019 was required to use the alternative approach for Periods 1 to 4 (i.e., March 15, 2020 to July 4, 2020), but was permitted to switch to the general approach for Period 5 and onwards, provided that the same approach was used for all such periods. As a result, such entity may not have been eligible for the CEWS, CERS and the Canada Recovery Hiring Program (the "CRHP"), as the case may be, if it was unable to demonstrate a sufficient decline in revenues for Periods 14 to 17 (i.e., March 14, 2021 to July 3, 2021) under the general approach and it would have been unable to switch to the alternative approach despite having used such approach to determine its revenue decline for those corresponding periods in 2020 (i.e., Periods 1 to 4). The lack of flexibility was particularly problematic where use of the general approach would require a comparison of revenues to a period during which the entity was not carrying on business or ordinary activities.

For purposes of the CEWS, CERS and the CRHP, the Government has proposed that an eligible entity can elect to use the alternative approach to calculate its decline in revenues for Periods 14 to 17 (i.e., March 14, 2021 to July 3, 2021) if it was not carrying on business or ordinary activities on March 1, 2019. As such, the qualifying revenues of such eligible entity for each of those periods would be compared to the average of its January and February 2020 revenues. This amendment is designed to provide "greater flexibility" to such eligible entities.

For example, an eligible entity that began its business or ordinary activities on May 1, 2019 and used the general approach to determine its revenue decline calculation for Periods 5 and onwards would, but for this change, not qualify for the CEWS, CERS and the CRHP, as the case may be, in respect of Period 15 because it would not have a comparative figure to calculate its revenue decline in respect of such period. That is, under the general approach, to determine its revenue decline for Period 15, such eligible entity is required to compare either (i) April 2021 revenues over April 2019 revenues, or (ii) March 2021 revenues over March 2019 revenues. However, the eligible entity may qualify under the alternative approach, the use of which is now permitted pursuant to this change.

Significantly, this change was approved by the Governor in Council and registered on August 11, 2021, which is timely given that the filing deadline with respect to Period 14 is October 7, 2021.

Furloughed Employees

Notwithstanding the proposal to extend the CEWS in respect of "active employees" to October 23, 2021, the Government confirmed that, in order to ensure alignment with benefits available under the Employment Insurance program, the CEWS in respect of "furloughed employees" (including the subsidy for the employer's portion of contributions under the Canada Pension Plan, EI, the Quebec Pension Plan and the Quebec Parental Insurance Plan) will not be available after Period 19 (i.e., August 28, 2021). To this end, the Government also released draft legislative proposals to clarify that the CEWS in respect of such employees ends in Period 19.

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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.