On April 1, 2020, as part of the COVID-19 Economic Response Plan, the Federal Government revealed additional details about the Canada Emergency Wage Subsidy. The following is a summary of the key things we know about the program as of April 1, 2020. A link to the government's backgrounder document on the wage subsidy program can be found here. We are continuing to monitor updates on this program and will provide further information as it becomes available.
What is the Goal of the Program?
- The goal of the program is to provide a wage subsidy to allow eligible Canadian employers to keep Canadian employees on the payroll (i.e. avoid layoffs and terminations) and to bring employees who are already on layoff back onto the payroll.
What will the Canada Emergency Wage Subsidy Provide?
- The Federal Government will provide eligible employers with a subsidy equivalent to the greater of:
- 75% of the amount of remuneration paid, up to a maximum benefit of $847 per week per employee; and
- 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.
- Employers are expected to make best efforts to top-up employee wages to pre-crisis levels.
- Further information is to come with respect to calculating pre-crisis weekly remuneration.
- There is no limit on the total aggregate subsidy amount an eligible employer may claim.
What Businesses are Eligible to Receive the Subsidy?
- The subsidy will apply to individuals, taxable corporations, partnerships, non-profit organizations and registered charities, regardless of the number of employees.
- The subsidy program will not apply to public bodies including municipalities, local governments, Crown corporations, public universities, colleges, schools and hospitals.
What is the Eligibility Threshold?
- A business will be eligible for subsidy if the business can demonstrate a year-over-year drop in gross revenue of 30% or more compared to the same month last year (i.e. comparing March 2020 to March 2019, April 2020 to April 2019, and May 2020 to May 2019).
- An employer's revenue for this purpose would be its revenue from its business carried on in Canada earned from arm's-length sources. Revenue would be calculated using the employer's normal accounting method, and would exclude revenues from extraordinary items and amounts on account of capital.
- Businesses will need to re-apply monthly and will need to demonstrate the gross revenue loss each month.
How Long will the Canada Emergency Wage Subsidy Remain in Place?
- Currently, the program will be available for 12 weeks from March 15 to June 6, 2020.
How can Employers Apply for the Subsidy?
- Businesses will be able to access the application through a Canada Revenue Agency online portal which will become available in the coming weeks.
- Although specifics were not released about the exact timing, the Government's message to Canadian employers was to "get ready to hire back workers".
When will funds become available?
- The Government anticipates that funds will be available in approximately 6 weeks.
Is the Canada Emergency Wage Subsidy Retroactive?
- Yes, payments will be backdated to March 15, 2020.
How Does the Canada Emergency Wage Subsidy Interact with Other COVID-19 Government Response Programs?
- Employers will not be eligible to claim the wage subsidy for remuneration paid to an employee in a week that falls within a 4-week period for which the employee is eligible for the Canadian Emergency Response Benefit.
- Any wage subsidies received by employers will be considered government assistance and included in the employer's taxable income. Assistance received this or the 10% wage subsidy available to eligible small business will reduce the amount of remuneration expenses eligible for other federal tax credits calculated on the same remuneration.
Are There Penalties for Misuse of the Subsidy?
- The Government noted that this is a high-trust system, but that it is prepared to and will take decisive action against anyone who manipulates this wage subsidy program.
- The Government is in the process of developing its compliance and penalty framework.
Our group will continue to monitor these developments and provide updates as information becomes available.
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.