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Significant changes coming to the CEWS program

Thursday July 23, 2020

On July 17th, the federal government unveiled details of their proposed changes to the Canada Emergency Wage Subsidy (CEWS). The program will be extended to December 19th, 2020 and the 30% revenue loss eligibility threshold will be replaced with a sliding scale rate—opening up eligibility to companies that have experienced revenue declines of less than 30%. The proposed changes to the CEWS program are very complex and will be debated in the House of Commons this week. If passed, they will be retroactive to July 5th, 2020.

Program details have been released for Qualifying Periods 5 through 9:

Period 5:          July 5 – August 1, 2020
Period 6:          August 2 – August 29, 2020
Period 7:          August 30 – September 26, 2020
Period 8:          September 27 – October 24, 2020
Period 9:          October 25 – November 21, 2020

Subsidy proportional to revenue loss
Previously, employers were subject to a 30% revenue loss test to be eligible for a payroll subsidy of 75% to a weekly maximum of $847 per employee.

Beginning Period 5, the CEWS will consist of two parts:

  • a Base Subsidy available to all eligible employers experiencing revenue loss, with the subsidy amount varying based on percentage revenue decline; and
  • a Top-Up Subsidy of up to an additional 25% for employers who have experienced more than a 50% decline in revenue.

The maximum pay used to calculate the per-employee subsidy will be $1,129 per week. No changes are proposed to the definition of eligible remuneration.

Base Subsidy for all employers
The expanded CEWS will allow any eligible employer experiencing revenue decline to qualify for some level of CEWS support. The CEWS base rate will vary depending on the level of revenue loss experienced by the specific employer, which will be determined based on the change in their monthly revenues as outlined previously. Note: companies will have the option to use either the current OR previous month as a revenue comparison to the same month in 2019 or the average of January and February in 2020, BUT whichever method is used for Period 5 must also be used for all subsequent periods.

For employers with revenue loss of less than 50%, the base subsidy rate will be 1.2 times their revenue decline for Periods 5 and 6, and then reduced to 1.0 times revenue decline for Period 7, 0.8 times for Period 8, and 0.4 times for Period 9.

Employers with revenue loss of 50% or more will receive the maximum base rate of 60% for Periods 5 and 6, and then a reduced rate of 50% for Period 7, 40% for Period 8 and 20% for Period 9.

Excluding the Top-Up Subsidy, the maximum weekly base subsidy per employee will be $677 in Periods 5 and 6, gradually decreasing to $226 in Period 9.

Top-Up Subsidy
In addition to receiving up to 60% of their employees’ salaries, employers who have experienced a three-month average revenue decline of more than 50% may also be eligible for the Top-Up Subsidy. The Top-Up Subsidy rate is equal to 1.25 times their average revenue decline in excess of 50%, to a maximum top-up rate of 25%, which would be attained at a three-month average revenue decline of 70%.

As with the base rate, the top-up CEWS rate would only apply to remuneration of up to $1,129 per week. The top-up CEWS rate is illustrated below:

Three-month average revenue dropTop-up CEWS rate
70% and over25.00%
65%18.75%
60%12.50%
55%6.25%
50% and under0.00%

As an example, in Period 5, an employer with a three-month average revenue decline of 70% would qualify for the highest possible subsidy amount per employee of $960 per week: the base rate of 60% plus the top-up rate of 25% = 85% of $1,129.

Safe Harbour provision
The Safe Harbour provision enables employers to receive the same subsidy amount for Periods 5 and 6 as they would have under the previous rules (75% wage top-up for revenue declines of 30% or more) if the new rules result in a lower subsidy.

Key Employee Eligibility Changes

  • Employees who have been without remuneration for 14 or more consecutive days in an eligibility period will now be eligible for CEWS
  • For Periods 5 and 6, the subsidy calculation for a furloughed employee will remain the same as for Periods 1 to 4 (maximum benefit of $847 per week) but beginning in Period 7, the subsidy calculation will be adjusted to align with the benefits provided through the Canada Emergency Response Benefit (CERB) and/or Employment Insurance (EI)

Additional Information
Please visit Adapting the Canada Emergency Wage Subsidy to Protect Jobs and Promote Growth on the federal government website for additional details on the proposed amendments to the CEWS—including legislative changes, additional changes to employee eligibility, and examples of subsidy calculations.

S+C Partners is committed to helping you
Our team is ready to assist you. Please call us at 905-821-9215 or email us at tax@scpllp.com if you have any questions regarding the proposed changes to the CEWS, or if you require any assistance with your CEWS application.

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