Over the past month, the federal government has announced a wave of measures to help businesses manage the impact of COVID-19. While the government has continually evolved its policy response, the Canada Emergency Wage Subsidy (CEWS) in particular has seen a significant evolution. Within hours of its initial announcement, some of Canada’s most prominent business voices identified how some would slip through the cracks in eligibility, given the nature of their business models. Not soon after, high profile organizations in the not-for-profit, research and charitable sectors followed suit. Today’s announcement signals the government’s willingness to respond and move quickly to fill gaps where there has been a reasonably demonstrated need for improvement and additional measures.
Canada Emergency Wage Subsidy
The threshold for demonstrated revenue loss for March will be reduced from 30 per cent to 15 per cent to reflect that the major impacts on business began in mid-March. Employers will be allowed to measure revenues by accrual or cash accounting.
Recognizing the unique operating realities of non-profits, start-ups and new businesses, these stakeholders will now be able to use an average of January and February of 2020 as reference points for calculating changes in revenues for March, April and May.
The government will also refund employer contributions to Canada Pension Plan, the Quebec Pension Plan and Employment insurance for those businesses that qualify for the CEWS.
Unchanged CEWS program details include:
- Employers of all sizes are eligible for a 75 per cent wage subsidy per employee of up to $847 per week for 12 weeks, retroactive to March 15
- Companies must apply every month – for March, April and May – and must demonstrate a 30 per cent reduction in revenues for the April and May
- Entitlement to this wage subsidy will be based entirely on the salary or wages actually paid to employees
- Public bodies are not eligible – including municipalities and local governments, Crown corporations, public universities, colleges, schools and hospitals
- Companies can apply online through the CRA portal that will be launched in 3-5 weeks
- CRA will direct deposit or send a cheque
It is also worth noting that the government’s Temporary Wage Subsidy for Employers announced on March 18, 2020, will continue. The subsidy is equal to 10 per cent of the remuneration paid from March 18, 2020 to June 19, 2020, up to $1,375 for each eligible employee and to a maximum of $25,000 total per employer. The key differentiator being that employers do not need to demonstrate a reduction of revenue.
Finance Minister Bill Morneau has warned of severe penalties for those businesses that abuse the CEWS; they will be subject to a fine of up to 225 per cent of the amount received and up to 5 years in prison.
Canada Summer Jobs Program
The government also announced changes to the Canada Summer Jobs Program for students today. The program will now offer a 100 per cent wage subsidy, will allow businesses to hire on a part-time basis and benefits from an extended end date – to February 2021.
The CEWS, as outlined, requires legislative change and approval by Parliament. The Prime Minister noted, and Minister Freeland reiterated, that the wage subsidy is the largest economic measure ever introduced by a Canadian government, and as such, parliamentary oversight and opposition buy-in will remain important.
The government has shared its draft legislation with opposition parties in the hopes of securing their unanimous consent to quickly pass the bill required to implement the CEWS. Negotiations are ongoing and the timing of Parliament’s recall is dependent on their outcome.
Engaging Government for COVID-19 Support
Additional measures for seniors, workers in the freelance or “gig economy” and students will be forthcoming. Similarly, the government has signaled that more flexibility will be afforded under the Canada Emergency Response Benefit.