Nothing has affected businesses in Canada more in recent months than the COVID-19 pandemic. Initial safety measures required the closure of all non-essential businesses for several months, effectively cutting off or severely restricting revenue for many industries, including retail, food and beverage service, manufacturing, personal care services and more. The federal government reacted by creating several benefits for both employees who found themselves laid off or terminated, as well as plans to help employers keep people employed, and remain a solvent business to help them weather the crisis. One of those programs is called the Canada Emergency Wage Subsidy (CEWS), which is aimed at subsidizing employer payroll expenses to enable employers to keep as many people as possible employed and earning income.
CEWS: The Initial Requirements
CEWS was originally introduced to cover a specific period, extending from March 15th to June 6th of this year, however, it was later extended to August 29th. Now that we are in the sixth month of the pandemic, the program has been extended yet again, to November 21st, with the potential to go further, to at least the end of 2020.
The program itself aims to assist employers by providing a subsidy of their payroll expenses, allowing them to keep staff employed rather than having to lay people off or terminate them altogether while revenues are on the decline. There are a total of 9 claim periods, with periods 1-4 running from March 15th to July 4th. In order to qualify for those periods, an employer was required to meet a specific percentage of decline in revenue, of at least 30%. The available subsidy was set at 75% of each employee’s income, to a maximum payment of $847.00 per week, per employee.
The Updated Program: Periods 5-9
Beginning July 5th, the eligibility rules changed to allow for a range of revenue declines, opening the program up to businesses that experienced a decline of less than 30%. This also enables businesses who suffered a big decline at the beginning of the pandemic, but who are now in recovery mode, to extend benefits into this recovery period. Given the expanded eligibility, the amount of the subsidy has also changed. The amount available for each employer will now be calculated in relation to the percentage of revenue decline, rather than being applied as 75% across the board. Under the new rules, the maximum subsidy percentage is 60%, rather than 75%.
For periods 5 & 6 (July 5-August 29, inclusive), employers can use the original calculation of a 30% or greater drop = a 75% subsidy. This is known as the ‘safe harbour’ rule, which grandfathers in the previous maximum benefit of 75% for the transition period.
For periods 6-9 (August 30-November 21, inclusive), employers must use the new method of calculation, and the new maximums will apply. The subsidy is calculated based on a maximum eligible weekly pay of $1,129.00, so employees who earn more than that amount will be calculated at the maximum.
Calculating Weekly Benefits Under the New Calculation
The new calculation is dependant on the percentage in revenue decline a business has suffered during the relevant period. For a drop of 50% or greater, CEWS will pay a subsidy of 60% of the weekly salary, to a maximum salary of $1,129/week.
If an employee’s weekly salary is $1,400, they will be calculated based on the maximum ($1,129). Therefore, 1,129 x 60% = a subsidy of $677.40 per week.
If the drop is between 0-49% during the period, the subsidy is equal to 1.2 times the revenue drop.
- If you had 20% revenue drop, your base rate is 20% x 1.2 = 24%
- Eligible employees earning $1,129/week or more would get $1,129 x 24% = $270.96/week
- Eligible employees earning less than $1,129/week would get 24% of their weekly remuneration
Top-Ups for Employers Who Were Especially Hard Hit
For employers who qualify, an additional top-up is available when the average revenue drop over the previous 3 months is equal to 50% or more. See the chart below, reproduced from the Government of Canada’ explanation of the CEWS changes:
Determining eligibility and calculating your businesses’s entitlement can become complex, as the variables change for different eligibility periods. If you are an employer looking for guidance on your options for participating in the various government-sponsored COVID-19 benefit programs, the rules are changing on a regular basis and it can be difficult to determine eligibility and scope of coverage.
Our business lawyers can advise on how best to protect your business and maintain staffing through this period of uncertainty. Contact GLG LLP in downtown Toronto for efficient and skilled advice on the management of your business. Call the firm at 416-272-7557 or contact them online to schedule a confidential consultation.