On October 21, 2021, the Government of Canada (the "Government") announced new proposed COVID-19 recovery programs and changes to certain existing programs.  

Given the number of programs introduced throughout the pandemic and the changes made to those programs from time to time, readers may be uncertain as to which programs are available currently and what those programs provide. In this article, we provide an overview of the October 21, 2021 announcements and a high level summary of the employer support programs applicable to Period 22 (i.e., October 24, 2021 to November 20, 2021) and onwards.

The Government's news release and backgrounders relating to the October 21, 2021 announcements can be found here, here and here. Our past commentary on: (i) the Canada Emergency Wage Subsidy ("CEWS") can be found here, here, here, here, here, here, here, here, here, here, here, here, here, here, here and here, (ii) the Canada Emergency Rent Subsidy ("CERS") can be found here, here, here, and here, and (iii) the Canada Recovery Hiring Program ("CRHP") can be found here.

Background and Overview of October 21, 2021 Announcements

The CEWS and CRHP are programs that provide employer wage subsidies, while the CERS provides direct rent and mortgage support on a sliding scale, with an additional 25% "lockdown support" top-up potentially available where public health restrictions apply. Although the legislation uses defined terms such as "qualifying rent expense", "qualifying renter", "rent subsidy percentage" and "rent top-up percentage", the CERS is not limited to renters and property owners may also qualify. In this article, we adopt the Government's chosen terminology and references to "rent subsidy" should be read as including the support extended to property owners under the CERS.

On July 30, 2021, the Government:

  • announced its intention to extend the CEWS, as it related to "active employees", and the CERS for an additional period (i.e., Period 21, being September 26 to October 23, 2021); and
  • confirmed that the CEWS, as it related to "furloughed employees", would not be available beyond Period 19 (i.e., August 1 to August 28, 2021).

On October 21, 2021, the Government announced that the CEWS and CERS, as they then existed, would not be extended beyond October 23, 2021 (i.e., beyond Period 21). Instead, the Government announced that it proposes to create two new programs under which wage and rent subsidies are to be available:

  • a "Tourism and Hospitality Recovery Program" intended to support organizations in selected sectors of the tourism and hospitality industry; and
  • a "Hardest-Hit Business Recovery Program" intended to support other businesses that have been deeply affected since the outset of the pandemic.

The Government also announced that organizations that do not otherwise qualify for the Tourism and Hospitality Recovery Program may be eligible for support at rates equal to the subsidy rates calculated under that program if: (i) they are subject to a qualifying public health restriction lasting for at least seven days, and (ii) the restriction requires them to cease activities that accounted for at least approximately 25% of total revenues during the prior reference period.

Details of the new programs are still forthcoming; however, as described more particularly below, it appears that each program will contain a CEWS and CERS component. To this end, the Government stated that it will:

  • rely on its existing authority to extend (by regulation and subject to certain modifications) the CEWS and CERS to November 20, 2021 in order to make these new programs available for Period 22 (i.e., October 24, 2021 to November 20, 2021);
  • introduce legislation as soon as possible to extend the programs until May 7, 2022, with authority for further extension through regulation until July 2, 2022; and
  • increase the aggregate monthly cap on eligible expenses that can be claimed under the CERS (as continued under the new programs) from $300,000 to $1 million starting on October 24, 2021.

In addition, the Government announced that it proposes to:

  • extend the CRHP to May 7, 2022 with authority for further extension through regulation to July 2, 2022, and increase the CRHP subsidy rate to 50% for Period 22 (i.e., October 24, 2021 to November 20, 2021) and onwards;
  • establish a new "Canada Worker Lockdown Benefit", which will provide $300 per week in income support to eligible workers should they be unable to work due to a local lockdown between October 24, 2021 and May 7, 2022; and
  • extend the Canada Recovery Caregiving Benefit and the Canada Recovery Sickness Benefit until May 7, 2022, and an increase in the maximum duration of benefits by two weeks.

Tourism and Hospitality Recovery Program

According to the Government, the Tourism and Hospitality Recovery Program is intended to provide support to eligible organizations in the tourism and hospitality industry, such as hotels, restaurants, bars, festivals, travel agencies, tour operators, convention centres, and convention and trade show organizers, that have been deeply impacted since the outset of the pandemic and that are still struggling. While further details on what constitutes a "qualifying business" for purposes of this program are still forthcoming, organizations would need to have the following in order to qualify:

  • an average monthly revenue reduction of at least 40% over the first 13 qualifying periods of CEWS (i.e., a 12-month revenue decline); and
  • a current-month revenue loss of at least 40%.

The calculation of the 12-month revenue decline would take the average of all revenue decline percentages for eligible organizations from Periods 1 through 13 (i.e., March 2020 to February 2021), excluding Period 10 or 11. Periods in which an organization was not carrying on its ordinary operations for reasons other than a public health restriction (e.g., a seasonal shutdown) would be excluded from the calculation. The 12-month revenue decline would be calculated using the CEWS rules.

Subsidy Rate Structure

The following table provided by the Government details the proposed rate structure for the Tourism and Hospitality Recovery Program wage and rent subsidies.

 

Periods 22-26

October 24, 2021 - March 12, 2022

Periods 27-28

March 13 - May 7, 2022

Current-month revenue decline

 

 

75% and over

75%

37.5%

40-74%

Revenue decline

e.g. 60% revenue decline= 60% subsidy rate

Revenue ÷ 2

e.g., 60% revenue decline ÷ 2 = 30% subsidy rate

0-39%

0%

0%



As detailed in the table, the program has a maximum subsidy rate of 75% for Periods 22 to 26 (i.e., October 24, 2021 to March 12, 2022). The wage and rent subsidy rates are to be calculated by comparing current-month revenue losses to those of a prior reference period. The starting subsidy rate is 40% applicable to eligible organizations with a 40% current-month revenue decline, with the subsidy rate increasing on a sliding scale to 75% for eligible organizations with revenue declines of 75% or greater. For Periods 27 and 28 (i.e., March 13, 2022 until May 7, 2022), the wage and rent subsidy rates are to be reduced by half.

In addition, as under the CERS rules applicable in respect of Period 21 (i.e., September 26, 2021 to October 23, 2021), additional lockdown support for qualifying rent expenses is to be available at the fixed rate of 25%, pro-rated based on the number of days a particular location is affected by a lockdown.

Hardest-Hit Business Recovery Program

Organizations that do not qualify for the Tourism and Hospitality Recovery Program but that have been deeply affected since the outset of the pandemic may qualify for the Hardest-Hit Business Recovery Program if they meet the following requirements:

  • an average monthly revenue reduction of at least 50% over the first 13 qualifying periods of CEWS (i.e., a 12-month revenue decline); and
  • a current-month revenue loss of at least 50%.

The rules for calculating the 12-month revenue decline outlined under the Tourism and Hospitality Recovery Program section also apply to this program.

Subsidy Rate Structure

The following table provided by the Government details the proposed rate structure for the Hardest-Hit Business Recovery Program wage and rent subsidies.

 

Periods 22-26

October 24, 2021 - March 12, 2022

Periods 27-28

March 13 - May 7, 2022

Current-month revenue decline

 

 

75% and over

50%

25%

50-74%

10% + (revenue decline - 50%) x 1.6

e.g., 10% + (60% revenue decline - 50%) x 1.6 = 26% subsidy rate

5% + (revenue decline - 50%) x 0.8

e.g., 5% + (60% revenue decline - 50%) x 0.8 = 13% subsidy rate

0-49%

0%

0%



As detailed in the table, the program has a maximum subsidy rate of 50% for Periods 22 to 26 (i.e., October 24, 2021 to March 12, 2022). The wage and rent subsidy rates are to be calculated by comparing current-month revenue losses to those of a prior reference period, as is the case with the Tourism and Hospitality Recovery Program; however, the rate subsidy percentage is calculated differently. Here, the starting subsidy rate is 10%, applicable to eligible organizations with a 50% current-month revenue decline, with the subsidy rate increasing on a sliding scale to 50% for eligible organizations with revenue declines of 75% or greater. For Periods 27 and 28 (i.e., March 13, 2022 to May 7, 2022), the wage and rent subsidy rates are to be reduced by half.

In addition, lockdown support for qualifying rent expenses is to be available at the fixed rate of 25%, pro-rated based on the number of days a particular location is affected by a lockdown. This is the same as the Tourism and Hospitality Recovery Program and CERS applicable to Period 21.

General Lockdown Support

As noted above, the Hardest-Hit Business Recovery Program: (i) requires, inter alia, that an organization demonstrate a 12-month revenue decline, and (ii) provides lower subsidy rates than the Tourism and Hospitality Recovery Program, which is restricted to certain organizations in the tourism and hospitality industry.

In order to recognize the challenges that may arise from resurgences of the pandemic, the Government also announced that organizations that do not otherwise qualify for the Tourism and Hospitality Recovery Program may be eligible for support at rates equal to the subsidy rates calculated under that program if: (i) they are subject to a qualifying public health restriction lasting for at least seven days, and (ii) the restriction requires them to cease activities that accounted for at least approximately 25% of total revenues during the prior reference period. Only a current-month decline need be demonstrated, not a 12-month revenue decline. While the backgrounder is not entirely clear and while details have yet to be released, it appears to be the intention that both wage and rent subsidies would be available.

Increasing Monthly Cap on Eligible Expenses under CERS

CERS rules applicable to periods ending prior to October 24, 2021 implement a monthly cap on eligible expenses of $75,000 per business location and $300,000 in total for all locations, including any amounts claimed by affiliated entities. The Government proposes to amend the legislation to increase the aggregate monthly cap from $300,000 to $1 million (including amounts claimed by affiliated entities) starting on October 24, 2021. The new cap would be available to all organizations eligible under the Tourism and Hospitality Recovery Program and the Hardest-Hit Business Recovery Program.

Extension of CRHP

Enacted on June 29, 2021, the CRHP is aimed at providing eligible employers with relief for increased salary and wage expenses incurred as businesses reopen and recover from the pandemic. The CRHP was meant to encourage eligible employers to hire additional employees or increase the number of hours worked by their employees. The CRHP is set to expire on November 20, 2021. The Government has proposed to introduce legislation to extend the CRHP until May 7, 2022, with authority for a further extension by regulation until July 2, 2022. The Government also proposes to use its authority to amend the CRHP by regulation to increase the subsidy rate to 50% for Period 22 (i.e., October 24, 2021 to November 20, 2021) and onwards.

The proposed extension would continue to use the existing baseline period of March 14 to April 10, 2021 to calculate incremental remuneration, and would continue to use the existing eligibility rules requiring a revenue decline of more than 10%.

High Level Summary of Employer Support Programs applicable to Period 22 (i.e., October 24, 2021 to November 20, 2021) and Onwards

Having regard to the foregoing, the following is a high level summary of employer supports applicable to Period 22 (i.e., October 24, 2021 to November 20, 2021) and onwards:

 

CRHP

Tourism and Hospitality Recovery Program

Hardest-Hit Business Recovery Program

General Lockdown Support

Summary

The CRHP is aimed at providing eligible employers with relief for increased salary and wage expenses incurred as businesses reopen and recover from the pandemic by encouraging eligible employers to hire additional employees or increase the number of hours worked by their employees.

The Tourism and Hospitality Recovery Program is intended to provide support to eligible organizations in certain sectors of the tourism and hospitality industry that have been deeply impacted since the outset of the pandemic and that are still struggling.

 

The Hardest-Hit Business Recovery Program is aimed at organizations that do not qualify for the Tourism and Hospitality Recovery Program but that have been deeply affected since the outset of the pandemic.

General Lockdown Support provides support to organizations, regardless of sector, at the subsidy rates as calculated in the Tourism and Hospitality Recovery Program, in order to recognize the challenges that may arise from resurgences of the pandemic.

 

Type of Support

Wage

 

Wage and Rent

Wage and Rent

Assumed to be Wage and Rent

Eligibility (i.e., targeted or not targeted)

Not targeted to specific sectors.

The CRHP is available to a "qualifying recovery entity", which is an "eligible entity" that meets certain conditions. Those conditions include, but are not limited to, the following:

- if the eligible entity is a corporation (other than a corporation exempt from Part I tax), it must be a Canadian-controlled private corporation ("CCPC") or a co-operative corporation that is eligible for the small business deduction; and

- if the eligible entity is a partnership, no greater than 50% of the interests in the partnership (based on fair market value) may be held by (i) one or more persons or partnerships other than an eligible entity, or (ii) a corporation (other than a corporation exempt from Part I tax, a CCPC or cooperative corporation that is eligible for the small business deduction).

As well, the eligible entity must meet a revenue decline requirement (currently, a decline of greater than 10%).

Targeted to selected sectors of the tourism and hospitality industry.

Details as to eligibility are still forthcoming.

Eligibility conditions will include:

1.  an average monthly revenue reduction of at least 40% over the first 13 qualifying periods for the CEWS (i.e., a 12-month revenue decline); and

2.  a current-month revenue loss of at least 40%.

Not targeted to specific sectors.

Details as to eligibility are still forthcoming.

Eligibility conditions will include:

1.  an average monthly revenue reduction of at least 50% over the first 13 qualifying periods for the CEWS (i.e., a 12-month revenue decline); and

2.  a current-month revenue loss of at least 50%.

Not targeted to specific sectors.

Details as to eligibility are still forthcoming.

Eligibility conditions will include:

1.  the occurrence of a public health restriction lasting for at least seven days in the current claim period that requires the organization to cease activities that accounted for at least approximately 25% of total revenues of the employer during the prior reference period; and

2.  a current-month revenue decline.

No need to demonstrate a 12-month revenue decline.

Level of Support

Generally, the CRHP provides a subsidy of up to 50% on the "incremental remuneration" paid to eligible employees.

NB: cannot be claimed at the same time as CEWS.

Wage and rent subsidies (subject to caps) at a sliding scale from 40% (20% for Periods 27 and 28) for organizations with a 40% current-month revenue decline, to 75% (37.5% for Periods 27 and 28) for eligible organizations with revenue declines of 75% or greater.

Additional lockdown support for qualifying rent expenses at the fixed rate of 25%, pro-rated based on the number of days a particular location is affected by a lockdown.

Wage and rent subsidies (subject to caps) at a sliding scale from 10% (5% for Periods 27 and 28) for organizations with a 50% current-month revenue decline, to 50% (25% for Periods 27 and 28) for eligible organizations with revenue declines of 75% or greater.

Additional lockdown support for qualifying rent expenses at the fixed rate of 25%, pro-rated based on the number of days a particular location is affected by a lockdown.

Subsidy rates as calculated in the Tourism and Hospitality Recovery Program.



Canada Worker Lockdown Benefit

For workers, the Government proposes to introduce legislation to create a new Canada Worker Lockdown Benefit. With the fourth wave of the pandemic still severely impacting parts of the country, the Canada Worker Lockdown Benefit is intended to provide income support to workers unable to work due to specific government-imposed public health lockdown scenarios.

The Canada Worker Lockdown Benefit would provide $300 a week to workers whose work interruption is a direct result of a government-imposed public health lockdown. It would be available until May 7, 2022, with retroactive effect to October 24, 2021. It would be accessible for the entire duration of a government-imposed public health lockdown (until May 7, 2022), and would be available to workers ineligible or eligible for EI, as long as EI benefits are not paid for the same period. However, individuals who lose income or employment due to a refusal to adhere to a vaccine mandate would not be able to access the benefit. The Government stated that further details on this program will be released in the coming weeks.

Canada Recovery Caregiving Benefit and Canada Recovery Sickness Benefit

The Government proposes to extend the Canada Recovery Caregiving Benefit and the Canada Recovery Sickness Benefit until May 7, 2022, and an increase in the maximum duration of benefits by two weeks. The increase of two weeks would increase the maximum duration of the Canada Recovery Caregiving Benefit from 42 to 44 weeks and the Canada Recovery Sickness Benefit from 4 to 6 weeks.

For assistance, please contact any member of our National Tax, Labour & Employment or Real Property & Planning teams.

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