On April 11, 2020, the federal government passed Bill C-14, which brought the Canada Emergency Wage Subsidy (CEWS) into law. They also announced changes to the eligibility criteria required to receive the CEWS support. These new changes have been introduced to provide more flexibility, particularly for companies that are not-for-profit, high-growth companies, and new businesses, all of which may not have the history, operational stability and structure that other established companies have. In this article, we explain the new changes to the CEWS and provide answers to some other key questions that employers have asked about the subsidy.
What was not changed in the CEWS program?
The amount of the subsidy and the period covered remains the same from the last government update. The subsidy amount for a given employee on eligible remuneration will still be paid for the period between March 15 and June 6, 2020, and will still be the greater of:
- 75 per cent of the amount of remuneration paid, up to a maximum benefit of $847 per week; and
- the amount of remuneration paid, up to a maximum benefit of $847 per week or 75 per cent of the employee's pre-crisis weekly remuneration, whichever is less.
What has changed in the CEWS program?
- For the month of March 2020, the government has opted to reduce its previous 30 per cent revenue loss benchmark to 15 per cent, in recognition of the fact that many businesses did not begin to be affected by the crisis until partway through the month of March.
- Because some companies did not pay wages or maybe even exist before May 2019, the government will now allow companies to use the average of their revenue earned in January and February 2020 as the measurement reference to show that they have suffered losses. The table below outlines what the eligibility criteria looks like today:
Note: if an employer qualifies for one period, they will automatically qualify for the next period. For example, if a company is approved for the period March 15 to April 11, then they automatically qualify for the April 12 to May 9 period, and consequently, they will also qualify for the May 10 to June 6 period.
- Finally, to recognize that different types of organizations are experiencing different types of funding pressures, the government has also announced that charities and non-profit organizations be allowed to choose to include or exclude government funding in their revenues for the purpose of applying the revenue reduction test.
How can companies apply for the CEWS?
- The government has stated that eligible employers will be able to apply for the CEWS through the Canada Revenue Agency's "My Business Account" portal as well as a web-based application.
When will the application process open and funds be available?
- The government is still expected to release more information about the application process. However, they have indicated that the online application process is expected to be open within two to five weeks from April 11, when the legislation was passed and that employers looking to take advantage of the program must submit their application before October 2020. The government has also suggested that funds will be available in approximately six weeks.
How will the fact that employees have been laid-off affect a company's CEWS application? Should laid-off employees be called back?
- The government is also encouraging employers to recall furloughed or laid-off employees, although recalling employees is not a requirement for qualifying for CEWS. Nonetheless, with CEWS, employers will be in a better position to retain workers even if they do not perform any work during the covered period. Such workers will be classified as being on a paid leave of absence, and their wages will be subsidized in part by the government.
- However, employers must bear in mind that CEWS payments will not be available if employees have been without remuneration from their employer for 14 or more consecutive days during a qualifying period. This means that if employers want to qualify for the subsidy, the employees, on which their CEWS application is based on, must not have been without employment for 14 consecutive days or more leading up to the period for which the subsidy is being claimed.
- This condition could impact an employer's decisions around the timing of bringing back employees from layoff. As an example, if employees have been off as of March, if you were to recall them before April 24, the employer could qualify for the subsidy in the April 12 – May 9 period, as the employee would not have been off for up to 14 days in that second period, that is, they would have only been off for 12 days which is under the threshold.
- Alternatively, employees who have been laid off or furloughed can become eligible retroactively, as long as they are rehired and their retroactive pay and status meets the eligibility criteria for the claim period. Hence, rehired employees must be paid before they can be added to the CEWS calculations. If such rehired employees have received or are receiving the Canada Emergency Response Benefit (CERB), depending on the situation, the government may require them to repay such CERB payments.
Does the government require employers to top up employee wages if they are receiving the CEWS?
- No. However, the government does expect employers to "at least make best efforts to bring employees' wages to their pre-crisis levels." If, for example, some employers with large workforces might only be able to top up some employees, but not all, such a scenario can qualify as "best effort" since there is no requirement for symmetry or equality.
What about part-time employees who may have other part-time jobs. Does that make a difference?
- No. The CEWS is available for all types of employees. Also, unrelated, arms-length employers can get the subsidy for the same employees if they are all paying that employee. However, consultants are not eligible (the employee needs to be T4 eligible).
Will an employer be required to pay employee benefits if participating in the wage subsidy program?
- No, but reducing employee benefits could lead to a constructive dismissal claim, so speak to your employment lawyer
What if employers can't pay wages without subsidy? Can they apply for it THEN pay wages?
- No. Employers have to pay their employees, then apply for reimbursement. Employers are encouraged to apply for the small business loan and use that money to pay wages, then get the reimbursement.
Canada Emergency Response Benefit (CERB) Update:
New changes to the CERB have also been introduced, affecting and expanding eligibility for the benefit (on April 15), giving employers more options on retention and potential top-up payments.
Among the key changes and expansion is that an individual can now earn up to $1,000 per month while still collecting the CERB. This could help businesses retain staff or adjust staffing on a rotating shift basis (every two weeks), depending on existing compensation levels (in addition to work sharing or SUB benefit options).
Canada Summer Job Program
On April 8, the government also announced temporary changes to the Canada Summer Jobs Program that will help employers hire summer staff during this unprecedented time. These temporary changes include:
- an increase to the wage subsidy so that private and public sector employers can also receive up to 100 per cent of the provincial or territorial minimum hourly wage for each employee
- an extension to the end date for employment to February 28, 2021
- allowing employers to adapt their projects and job activities to support essential services
- allowing employers to hire staff on a part-time basis
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.