The 75 per cent Canada Emergency Wage Subsidy (CEWS) opened for applications on April 27. The 75 per cent CEWS is in addition to the 10 per cent Small Business Wage Subsidy (SBWS), which was enacted a few weeks earlier.
It is a temporary measure
The program will be in place for a 12-week period, from March 15 to June 6, 2020.
- Eligible entities will be able to access the subsidy if they have suffered a drop in gross revenues of at least 15 per cent in March 2020, 30 per cent in April 2020, and/or 30 per cent in May 2020 as compared to the same timeframe in 2019 or to the average monthly revenue for January and February 2020.
Two revenue benchmarks
- First, as a general year-over-year approach, the revenue decline can be measured by comparing the applicable month in 2020 to the same month in 2019. For example, comparing March 2020 to March 2019.
- Alternatively, the revenue of the applicable month in 2020 can be compared to the average of January and February 2020 revenue. The employer can choose only one approach to use throughout the program period.
- In addition, where an eligible entity qualifies under one of the revenue benchmarks in the first period (March), it will automatically qualify for the second period (April), but will need to perform the revenue decline test for May and re-apply for the wage subsidy in the third period.
- Revenue can be calculated using the accrual method of accounting or the cash method.
- An eligible employee is an individual employed in the claim period, i.e., from March 15 to April 11, from April 12 to May 9, and from May 10 to June 6. However, it does not include an employee who has been without remuneration from the eligible employer in respect of a period of 14 or more consecutive days in the claim period.
- Where an employee does not meet this test in one claim period, for example because they were hired toward the end of the claim period, they could still be eligible in the next claim period.
Quantification of the subsidy
- The subsidy will be available to eligible employers at a rate of 75 per cent of weekly remuneration paid to a maximum of $847 per employee. This is equivalent to 75 per cent of an annual salary of $58,700.
- The subsidy amount for a given employee on eligible remuneration paid between March 15 and June 6, 2020, is be the greater of:
1. 75 per cent of the amount of eligible remuneration paid in respect of that week, up to a maximum benefit of $847 per week; and
2. The amount of eligible remuneration paid to the employee in respect of that week, up to a maximum benefit of $847 per week or 75 per cent of the employee’s pre-crisis weekly remuneration, whichever is less.
Owner-Manager and related party remuneration
- The wage subsidy only applies to the owner if there was a wage paid prior to them at the start of the program (referred to as baseline remuneration).
Strict compliance rules
The federal government has implemented strong penalties if a business is found not to have met the CEWS eligibility requirements after receiving the subsidy. Audits will be conducted by the Canada Revenue Agency.
This subsidy is to help businesses of all sizes faced with a significant decline of revenue to either keep their workforce on payroll or re-hire them. Talk to your tax advisor to help you navigate the CEWS application process and avoid costly errors.
Scott Conner is a partner in BDO’s Huntsvile office, with over 20 years of experience providing corporate and personal tax planning strategies for family-owned businesses, entrepreneurs, and large corporations. He helps his clients with shareholder remuneration strategies, estate planning, as well as business structuring to minimize taxes.