THE EMPLOYERS GUIDE TO COVID-19 : FEDERAL WAGE SUBSIDIES AND WORK-SHARING PROGRAMS.
This post is the first in a five part series detailing the programs made available to employers by the Canadian Federal Government in response to the COVID-19 crisis. These programs are organized in the following categories:
Avoiding Layoffs and Rehiring Employees
Deferred Payments
Access to Credit
Supporting Financial Stability
Support for Self-Employed Individuals
In this post, we will be explaining what you need to know about the key programs offered under the Avoiding Layoffs and Rehiring Employees category.
This category has three key programs:
Canada Emergency Wage Subsidy (CEWS)
Temporary 10% Wage Subsidy
Extending the Work-Sharing program
1. Canada Emergency Wage Subsidy (CEWS):
On April 11, 2020 the Income Tax Act (Canada) (the “Tax Act”) which establishes the legal foundation for the Canada Emergency Wage Subsidy (“CEWS”) was amended through Bill C-14, the COVID-19 Emergency Response Act, No. 2 (“Bill C-14”).
The legislation may be found in full online here, and the corresponding press release(s) here.
In this post we summarize the most important details of the CEWS program as of the date of posting. As the COVID-19 crisis rapidly evolves, so does the Government of Canada’s response. We will make every effort to update this post with information on any changes to CEWS and how to apply for it.
What is the Canada Emergency Wage Subsidy (CEWS)?
The CEWS is a program designed to incentivise employers to retain their employees throughout the COVID-19 crisis by subsidizing employee wages. It will be in place for a 12-week period, from March 15 to June 6, 2020.
The CEWS is applied to 75% of the first $58,700 of an employee’s annual salary, resulting in a maximum benefit of $847 a week, per employee. Employers of all sizes and across all sectors may apply for this benefit if they have suffered a drop in gross revenues of at least 15% in March 2020, and 30% in April and May, 2020.
The reduction in qualifying revenue may be examined in one of the two following periods:
Year-over-year comparison. For example, comparing March 2020 to March 2019, April 2020 to April 2019, and May 2020 to May 2019); or
An average of revenue earned in January and February 2020.
Additionally, employers eligible for the CEWS are entitled to receive a 100% refund for certain employer contributions to Employment Insurance, the Canada Pension Plan, the Quebec Pension Plan, and the Quebec Parental Insurance Plan paid in respect of employees who are on leave with pay.
There is no limit on the total aggregate subsidy amount an eligible employer may claim and it is retroactive to March 15, 2020.
Which Employers are Eligible to Receive the CEWS??
Individuals (including trusts, which the Tax Act typically considers to be individuals);
Corporations (other than those exempt from tax under Part I of the Tax Act)
Registered charities,
Partnerships (which consist of eligible employers) and;
Certain organizations exempt from tax (i.e., certain non-profit organizations, certain agricultural organizations, labour organizations, and others).
2. Temporary 10% Wage Subsidy:
The Temporary 10% Wage Subsidy for Employers is a three-month measure allowing eligible employers to reduce the amount of certain payroll deductions required to be remitted to the Canada Revenue Agency (CRA) by 10% - up to an amount of $1,375 per eligible employee, to a maximum of $25,000 total per employer. The subsidy is retroactive beginning with remuneration paid from March 18th, 2020 and continuing until June 19th, 2020.
It does not supplement the payment of employee’s wages with government funding like the Canada Emergency Wage Subsidy (CEWS). Qualifying employers may benefit from both the CEWS and the Temporary 10% Wage Subsidy at the same time. However, if both benefits are applied at the same time, the amount available to be claimed under the CEWS is reduced.
Employers who meet the eligibility requirements do not need to apply for the subsidy, they may automatically begin adjusting their payroll to reflect the subsidy benefits. It is the employer’s responsibility to do so - the CRA will not do this adjustment for them.
Eligible employers are those who are a(n):
Individual (excluding trusts),
Partnership (if their members consist exclusively of individuals [excluding trusts], registered charities, or Canadian-controlled private corporations eligible for the small business deduction.)
non-profit organization,
registered charity, or
Canadian-controlled private corporation (including a cooperative corporation) eligible for the small business deduction;
And who:
has an existing business number and payroll program account with the CRA on March 18, 2020; and
pays salary, wages, bonuses, or other remuneration to an eligible employee.
Employers can take advantage of this benefit by continuing to deduct income tax, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums from salary, wages, bonuses, or other remuneration paid to their employees, as they currently do. They then calculate their subsidy and reduce their current payroll remittance of federal, provincial, or territorial income tax that they send to the CRA by the amount of the subsidy.
It is important to note that an employer cannot reduce their remittance of CPP contributions or EI premiums. Employers must continue remitting the CPP contributions and EI premiums that they deducted from their employees, as well as their share of CPP contributions and EI premiums, to the CRA.
3. Extension of the Work-Sharing Program:
Effective from March 15, 2020 until March 14, 2021 the Federal Government has extended maximum length of the pre-existing Work-Sharing Program from 26 weeks to 76 weeks for eligible employers.
The Work-Sharing program is a three-party agreement between employers, their employees and Service Canada. It is designed to help employers and employees avoid layoffs when there is a temporary decrease in business activity beyond the control of the employer. It works by providing Employment Insurance (EI) benefits to eligible employees who agree to equally share what work is available over a specified period of time, resulting in a reduction of the employee’s hours.
Through the Work-Sharing program, employees receive EI benefits while keeping their job. The benefits payable are based on the employee’s normal average weekly earnings, as calculated at the start of the Work-Sharing agreement. If the employees work irregular hours, the average weekly wage is calculated by averaging the hours worked per week over the 2 years preceding the application.
To be eligible for the Work Sharing program, the employer must be in business in Canada. There must be a shortage of work that is beyond their control – for example, COVID-19 related shut-downs - and a recent decrease in business activity of 10%.
Employees being proposed for a Work-Sharing agreement must have a year round permanent full-time or part-time position, be eligible to receive Employment Insurance benefits; and must agree to reduce their working hours to share available work. Temporary employees, either on a term or contract basis, must not be seasonal.
To be eligible for a Work-Sharing (WS) agreement, your business must:
be a year-round business in Canada for at least 1 year
be a private business or a publicly held company, or
have at least 2 employees in the WS unit
Eligibility has also temporarily been extended to:
Government Business Enterprises (GBEs), also referred to as public corporations, and;
not-for-profit employers experiencing a shortage of work due to a reduction of business activity and/or a reduction in revenue levels due to COVID-19
The content of this article is not legal advice or a legal opinion and is intended to provide general information on the subject matter. For more information about your specific circumstance, please contact us at 514-842-9994 or email us at mnb@bergmanlawyers.com. You should always consult a lawyer concerning any legal matter.
Bergman & Associates provides a diversified practice, which encompasses the spectrum of corporate, transactional, litigation and regulatory matters. © 2020 by Bergman & Associates. All rights reserved.
Co-Author:
Michael N. Bergman, Lawyer
Co-Author:
Rachel R. Renaud,
Student-at-law