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Over the past months, the Government of Canada has announced various updates and amendments to the Canada Emergency Wage Subsidy (CEWS). A summary of these updates and amendments is provided below.
To be eligible for the CEWS, applications must be made on or before the later of January 31, 2021 and 180 days after the end of the claim period.
*Once an approach is chosen, the eligible employer is required to use the same approach for all of the claim periods in Periods 5 – 16. Further, the chosen approach must be used for both the base revenue reduction percentage and the top-up revenue reduction percentage.
For claim periods 5 to 7, the top-up wage subsidy is based on the three-month revenue-reduction test. For claim periods 8 to 10, the top-up wage subsidy is based on the greater of the amount determined under the three-month revenue-reduction test and the one-month revenue reduction. For claim periods 11 to 13 the top-up wage subsidy is calculated based on the one-month revenue reduction test.
The relevant reference period for the three-month revenue reduction test for claim periods 5 – 10 is provided as follows:
The relevant reference period for the one-month revenue reduction test for claim periods 8 – 13 is provided as follows:
The relevant reference period for claim periods 14 – 16 has not yet been released.
The subsidy amount considers an eligible employee’s baseline remuneration, being the average weekly remuneration paid between January 1, 2020 and March 15, 2020. However, employers may elect, for periods 5 – 13 to use the average weekly remuneration from July 1, 2019 – December 31, 2019.
For periods 14 – 16, it has been proposed that employers may elect to use one of the following periods to calculate baseline remuneration:
These approaches exclude any seven-day period in respect of which the employee did not receive remuneration. As the election is in respect of an employee, the employer must keep a list of names of such employees for each claim period for which it makes an election.
The rate of the base CEWS (referred to as the “base percentage”) will depend on the eligible entity’s level of qualifying revenue decrease.
The maximum base CEWS will be provided to those employers with a qualifying revenue decrease of 50% or more. The base percentages and the maximum weekly benefit per employee under the base CEWS are provided as follows:
*The maximum weekly benefit per employee is the maximum base percentage multiplied by the maximum remuneration of up to $1,129 per week.
**Generally, the revenue reduction percentage is the percentage by which qualifying revenues have decreased in the qualifying period when compared to the prior reference period.
Beginning in Period 5, a top-up CEWS (“Top-up Percentage”) of the base CEWS will be available to employers facing a revenue decrease of over 50%.
The top-up CEWS applies to remuneration of up to $1,129 per week and is maximized at a 70% revenue decrease, with a gradual reduction to $nil at a 50% revenue decrease as illustrated in the table below:
The CEWS is considered government assistance received immediately before the end of the claim period to which it relates. The amount is taxable and should be included in the eligible employer’s income but will not be included in calculating its qualifying revenue for the purposes of determining CEWS. Eligible remuneration paid to the employee should be considered a deductible expense for the employer.
Please refer to the Smythe update issued on July 23, 2020 here.
For non-furloughed employees, the amount of the wage subsidy in respect of a week in the claim period is the sum of the employer’s base percentage and top-up percentage, multiplied by the least of the following amounts:
For furloughed employees, the wage subsidy is calculated as the least of:
For furloughed employees, applicable for period 7 and subsequent periods, the wage subsidy is $0 unless the revenue reduction percentage, or the top-up percentage for the claim period is greater than 0%. If these are amounts are greater than 0%, the subsidy amount should also include the employer contributions to Employment Insurance, CPP and QPP and the Quebec Parent Insurance Plan for the eligible employee.
The amount calculated for both furloughed and non-furloughed employees is reduced by the amounts claimed under the 10% Temporary Wage Subsidy and the total of all amounts received by the eligible employee for each week in the claim period as a work-sharing benefit under the Employment Insurance Act.
For periods 7 and 8 the amount determined by regulation is the greater of: