What you need to know about the Canada Emergency Wage Subsidy program
Find out if you are eligible for Canada's Emergency Wage Subsidy (CEWS) program and how you can use it to your advantage.
Over the last two months, the Canadian government has created a series of emergency economic relief programs to lessen the financial fallout of COVID-19 for both Canadians and businesses. Of particular interest to struggling businesses and their employees is the new Canada Emergency Wage Subsidy (CEWS) that was launched on April 11, 2020.
What is CEWS?
The Canada Emergency Wage Subsidy is designed to help businesses struggling with the economic effects of the coronavirus retain and/or rehire their employees.
The CEWS program provides a salary subsidy of 75% of an employee’s wages (up to a weekly cap of $847) for up to 12 weeks, retroactive from March 15, 2020 and ending on June 6, 2020. The subsidy is intended to make it easier for eligible employers to avoid laying off or terminating employees, as well as to bring back staff that were laid-off due to COVID-19 by significantly lessening the organization’s payroll costs.
Who Is Eligible For CEWS?
There are two parts to the eligibility equation to qualify for the CEWS: the employer must be eligible to apply for the employee wage subsidy and the respective employee must be eligible to receive the funds.
A) Who Is An Eligible Employer?
Whether or not an employer/business qualifies for the CEWS depends on three main things:
- The kind of business it is
- If it meets a specified reduction in revenue
- It must have had a CRA payroll account on March 15, 2020
“Eligible entities” (which is the actual term the CEWS legislation uses) can be individuals like trusts, corporations, registered charities and non-profit organizations. Employers overseeing public institutions—like government municipalities, crown corporations, universities, school boards and more—do not qualify for the CEWS.
The wage subsidy is divided into three periods, which each represent an employee’s four-week pay period. The required revenue reduction the employer must experience to be eligible for CEWS depends on what period they are applying for:
- Period 1: To be eligible for CEWS for this period (which covers the employee pay period of March 15 to April 11, 2020), employers must have had at least a 15% reduction in revenue in March 2020. The lower threshold of 15% recognizes that the negative economic effects of COVID-19 did not begin until mid-March.
- Period 2: (Covers pay period of April 12 to May 9, 2020) employer must show a reduction of at least 30% in revenue in April 2020.
- Period 3: (May 10 to June 6, 2020 pay period) a reduction of at least 30% in May of 2020.
Employers can apply for the CEWS for one, two or all three periods.
The government provides also has very specific guidelines about how a potential CEWS recipient can determine lost revenue. Employers must compare their earnings for the claim period they are applying for with a baseline revenue. They can establish a baseline revenue by comparing their earnings of March, April and May 2020 to either:
- March, April and May of 2019
- Or an average of revenue earned in January and February of 2020
B) Who Is An Eligible Employee?
Employees are eligible as long as they are employed in Canada during the claim period. However, an employee does not qualify if there was a period of 14 or more days in the claim period in which they were not paid by the employer. This 14-day exception is to ensure that laid-off employees don’t receive subsidized wages during a period they may have received a CERB payment.
CERB vs. CEWS
The Canada Emergency Response Benefit and the Canadian Emergency Wage Subsidy are two very different programs and workers can’t receive money from both programs at the same time.
The CERB is intended for self-employed, terminated/laid-off workers or employees with significantly reduced hours who are making less than $1000 a month. The benefit provides $500 a week for up to a maximum of 16 weeks. You (and not your employer) are responsible for applying for the benefit.
The CEWS, on the other hand, goes directly to the employers to make it easier for business to stay open and keep staff on the payroll and off of unemployment or CERB. It’s employers rather than the government who “distribute” the payment via an employee’s paycheque. Businesses are under no obligation to apply for CEWS.
Check out our comprehensive guide – personal finances during COVID-19
What CEWS Means For You
If you’re a business owner, the CEWS helps make it more affordable to keep your organization running by substantially lightening the burden of paying your employees’ wages. Employers are encouraged but are not required to top up their employee’s wages with the additional 25%.
For employees, the hope is that the subsidy will provide a measure of job security and potentially get laid-off or terminated employees back to work. Workers will receive 75% of their wages (or 100% if your employer tops you up with the additional 25%) up to a maximum of $847 per week. Be warned, however, that it doesn’t necessarily mean your working life will be going back to normal. There are important factors to keep in mind:
- Your employer is under no obligation to apply for the subsidy so you may not get your job back.
- While employers are encouraged to top up the 75% wage subsidy, there is no requirement to do so, so you may be asked to work for less pay.
- The employer may treat the subsidy like an employee paid sick leave and pay you but request that you do not return to work for the time being as there may not be enough work available.
- Employers may also require that you come back to work but in a different capacity (i.e. answer the phone for take-out orders rather than serve in-house diners) in order to stay on the payroll.
- If your employer starts paying you, you may be required to repay any CERB you received if the payment periods overlap.
- The wage subsidy is taxable.
What To Ask Your Employer
If your employer is applying for the CEWS, be sure you fully understand your rights and responsibilities. Here are some things to consider:
- Confirm they are taking off taxes as they would normally from your pay
- Ask if they intend to top up the 75% wage subsidy to your full pay
- Confirm if you will be expected to go back to work in the same capacity or will you be required to do different duties
Check out these government resources here and here for more info.
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