Eligible Employers (75% Wage Subsidy)
- Employers who are eligible include taxable corporations, individuals, partnerships consisting of eligible employers, registered charities and non-profit organizations. Employers of all sizes and across all sectors qualify except for public bodies.
- These employers must show a decline of 15% in revenue of March 2020 and a decline of at least 30% in April and May 2020.
The Revenue Test (75% Wage Subsidy)
- Employers can calculate their revenue using either the cash method or the accrual method but not a combination of both.
- This method must be used for the duration of the program.
- There are two benchmarks for the revenue test as given below:
- Employers can compare their revenues of March, April and May 2020 to the same months in 2019 or
- They can compare revenues of March, April and May 2020 to an average of their revenue in January and February 2020.
- Once a benchmark is selected, it must be used for the entire duration of the program.
Amount of the 75% Wage Subsidy
The amount of the subsidy for an eligible employee on eligible remuneration paid between March 15 and June 6, 2020 is the greater of:
- 75% of the amount of remuneration paid, up to a maximum benefit of $847 per week; and
- The amount of remuneration paid, up to a maximum benefit of $847 per week or 75% of the employees pre-crisis weekly remuneration, whichever is less
Eligible remuneration does not include severance pay or stock option benefits.
Non-Arm’s Length Employees (Shareholder or their relatives)
In case employees do not deal with employers at arm’s length, there is a special rule which limits the subsidy to the eligible remuneration paid in any pay period between March 15 and June 6, 2020. It will be the lesser of:
- $847 per week
- 75% of the employees pre-crisis weekly remuneration
This subsidy is available to non-arm’s length employees who were hired before March 15, 2020. The subsidy is different for these employees as the government wants employers to hire or retain arm’s length employees during this time.
The calculations for non-arm’s length employees also does not seem to favor them especially if they received dividends as remuneration before the crisis.
Payroll Contribution Refunds
- As per the available information, there might be a 100% for eligible employees for certain contributions made to the Canada Pension Plan, Employment Insurance, the Quebec Pension Plan and the Quebec Parental Insurance Plan for employees who are on paid leave.
- Employers should continue to collect and remit employer and employee contributions to the plan as usual and then apply for the refund when they apply for CEWS.
Duration of CEWS (75% Wage Subsidy)
- The 75% wage subsidy will be available from March 15, 2020 till June 6, 2020
- It will consist of 3 periods.
- The first period is from March 15 to April 11, 2020
- The second period is from April 12 to May 9, 2020.
- The third period is from May 10 to June 6, 2020.
How to Apply for CEWS (75% Subsidy)
- Eligible employers can apply for CEWS through the CRA’s My Business Account portal. A web-based application will also be made available.
- As an employer, you will have to keep records showing reduction in arm's-length revenues and remuneration paid to employees.
- You would have to apply separately for each period.
- More information regarding the application process will be available shortly.
Temporary Wage Subsidy (TWS)(10% Wage Subsidy)
- This is a 3 month measure that will allow employers to reduce the amount of payroll deductions required to be remitted to the CRA.
- It will last from March 18 till June 19, 2020
- Employers are eligible if you are an individual, partnership, non-profit organization, registered charity or Canadian-controlled Private Corporation eligible for small business deduction.
- You must have an existing business number and payroll program account with the CRA on March 18, 2020
- You must also pay salary, wages, bonuses or other remuneration to an eligible employee.
- The subsidy is 10% of the remuneration you pay from March 18 to June 19, 2020 up to $1,375 for each eligible employee up to a maximum of $25,000 total per employer.
How to Apply for TWS (10% Wage Subsidy)
- You do not need to apply for the subsidy.
- Continue deducting income tax, Canada Pension Plan (CPP) contributions, Employment Insurance (EI) premiums from remuneration paid to your employees.
- The subsidy is calculated when you remit these amounts to the CRA.
- For example if you pay 5 employees monthly salaries of $4,100 for a total monthly payroll of $20,500 then your wage subsidy for the month will be $2,050 (10% of $20,500)
- You cannot reduce remittances of CPP contributions or EI Premiums.
- In the above example, suppose you deducted $2,500 as income tax from your employees. Since you calculated a subsidy of $2,050, you will reduce your current payroll remittance of federal, provincial or territorial income tax by $2,050. You will remit $450 as income tax to the CRA and keep $2,050 as your subsidy for the month.
- Eligible employers can apply for CEWS through the CRA’s My Business account portal. A web-based application is in development.
- Employers who do not meet the eligibility requirements will have to repay any amounts received under CEWS.
- The subsidy will be taxable and more details will be provided regarding this matter.
- The penalties for fraudulent claims will be severe and will include fines and possible imprisonment.
- Anti-abuse rules will also be formulated to ensure that employees are paid the amounts they are owed.
- If employers applied for the 10% Temporary Wage Subsidy (TWS) and also meet the requirement for CEWS, they should get in touch with their account to determine which program to go for as any benefit from TWS would generally reduce the amount available to be claimed under CEWS.
- If an employer does not meet the criteria for CEWS they can still claim the TWS as long as they meet the requirements for the program.
Get in touch with the team at Syed A. Raza Professional Corporation if you have any questions or queries.