The coronavirus pandemic has dramatically shifted the economic landscape globally, and Canada has been no exception.
To help business owners through this crisis, the Canadian Government created the Canadian Emergency Wage Subsidy (CEWS). But as the impacts of COVID-19 have continued to mount, and the struggles facing businesses are increasing, the CEWS has undergone an update.
To maximize the support available to you, we’ve put together this quick guide to the CEWS to help you understand what’s new and what these changes mean for you.
What is the Canada Emergency Wage Subsidy (CEWS)?
As a quick refresher, the Canadian Emergency Wage Subsidy (CEWS) is designed to help businesses retain or rehire their employees during the economic downturn caused by the coronavirus.
The CEWS provides a wage subsidy of 75% up to a maximum of $847 per week retroactive from March 15, 2020.
In other words, this subsidy will provide $847 per week or 75% of employees’ pre-COVID weekly pay, whichever amount is less.
Eligible businesses seeking the 10% Temporary Wage Subsidy (TWS) should be aware that any benefit received from TWS will reduce the amount they are eligible to receive under the CEWS. The CEWS claim must be reduced by same the amount claimed under TWS for pay dates during specific CEWS claim periods.
Who is Eligible for the Canada Emergency Wage Subsidy?
The CEWS is available to Canadian businesses that:
- Had a CRA payroll account on March 15th, 2020
- Didn’t have a payroll account, but another person or partner made remittances on behalf of the business
- Had purchased all of another person’s or partnership’s assets
- Are a qualifying employer, including individuals or partnerships, corporations, tax-exempted from income tax (like non-profit organizations and labour organizations), registered charities, and prescribed organizations (like private schools, registered journalism)
- Have experienced a drop in eligible revenue
A drop in revenue is determined by calculating the reduction in eligible revenue during the pandemic compared to revenues before your application.
Employees will have to be eligible as well:
- Employees must have been employed in Canada during the claim period except if there were 14 consecutive days or more within that period that did not receive any payment from you.
- Laid-off and rehired employees can be eligible retroactively if their retro pay and status meet the claim period requirement. Simply, they need to be rehired and paid before you can include them in the claim.
- Severance pay, benefits like stock options, and personal use of a corporate vehicle are not eligible.
- To calculate the baseline remuneration needed to determine the subsidy, find the average weekly eligible remuneration paid during January 1, 2020, and March 15, 2020.
What’s New With the Canada Emergency Wage Subsidy?
When the CEWS was first announced, there was a minimum revenue drop of 30% (15% for March 2020) to be eligible for the subsidy. These conditions cover periods 1-4 (March to June). In July, changes were announced to expand qualifications to include businesses that were still struggling but seeing some recovery and to allow enterprises that were hit the hardest to qualify for additional funds.
In November 2020, the Government of Canada introduced Bill C-9 to introduce amendments to the CEWS and introduce the Canada Emergency Rent Subsidy. The changes to CEWS are as follows:
- The subsidy is extended to June 2021
- The maximum subsidy rate for periods 8 to 10 will remain 65% (40% base rate plus 25% top-up)
- By period 8, the top-up rate and the base rate are calculated using the same one-month revenue drop. So, in periods 8-10, you can use the new top-up calculation or the previous 3-month average revenue drop, whichever one works out in your favour.
- The application deadline is January 31, 2021, or 180 days after the end of the claim period, whichever is later.
- By period 9, the calculation for employees on leave with pay will now better align with EI benefits.
- You can now calculate baseline remuneration for employees who were on certain types of leave, retroactive to period 5
- The Canadian Emergency Rent Subsidy (CERS) has been introduced for businesses, non-profits, and charities.
How to Apply for The Canada Emergency Wage Subsidy
The good news is that it is relatively easy to calculate and apply for your subsidy.
Once you have these numbers in hand, you can apply for the subsidy through the CRA “My Business Account,” through the WebForms Application, or your representative can apply on your behalf through the “Represent a Client” option.
After the application is completed and approved, you can expect to receive the subsidy within 3 to 8 business days if you are registered for direct deposit on your payroll account. Unfortunately, it takes longer to receive a cheque by mail, so you can expect payment to be delayed by at least a few days. Consider registering for direct deposit before you apply for the CEWS to ensure quick payment.
It is important to remember that each period covered under CEWS lasts for four weeks, beginning on a Sunday, and it does not renew automatically. This means that you must confirm your eligibility and calculate the required amount based on the criteria laid out for each specific period in which you are applying.
And finally, do not forget that this subsidy is considered taxable income and must be accounted for on the company’s corporate tax return.
Keeping your business afloat in the middle of a global pandemic and navigating the economic fallout is difficult at best.
If you are eligible for the CEWS, do not hesitate to apply or speak to your bookkeeper or payroll partner for guidance.
If you would like payroll support, bookkeeping, or need help figuring out what all of this means for your corporate tax filings, WTC is here for you. As a Canadian professional accounting firm, we have the knowledge and the skills to assist you through these trying times. Get in touch today and find out what we can do for you!