Starting a Business in Canada

Get the free book!

Flock Free Nation

No nonsense information on small business.

Apr 27, 2020 - 5 minute read - Comments - government

Canada Emergency Wage Subsidy (CEWS)

The Canada Emergency Wage Subsidy (CEWS) is a subsidy that generally covers 75% of an employee’s wages – up to $847 per week - for employers of all sizes and across all sectors who have suffered a drop in gross revenues of at least 15% in March, and 30% in April and May.

The program will be in place for a 12-week period, from March 15 to June 6, 2020.

Employers who are eligible for the CEWS are entitled to receive a 100% refund for certain employer contributions to Employment Insurance, the Canada Pension Plan, the Quebec Pension Plan, and the Quebec Parental Insurance Plan paid in respect of employees who are on leave with pay.

For employers that are eligible for both the CEWS and the 10% Temporary Wage Subsidy for a period, any benefit from the Temporary 10% Wage Subsidy for remuneration paid in a specific period will generally reduce the amount available to be claimed under the CEWS in that same period.

Eligible Employers

To qualify you must:

  • be an eligible employer
  • have experienced an eligible reduction in revenue, and
  • have had a CRA payroll account on March 15, 2020

Types of Eligible Employers

  • individuals (including trusts)
  • taxable corporations
  • persons that are exempt from corporate tax (Part I of the Income Tax Act), other than public institutions:
  • non-profit organizations
  • agricultural organizations
  • boards of trade
  • chambers of commerce
  • non-profit corporations for scientific research and experimental development
  • labour organizations or societies
  • benevolent or fraternal benefit societies or orders
  • registered charities
  • partnerships consisting of eligible employers

Ineligible Employers

Public institutions including:

  • municipalities and local governments
  • Crown corporations
  • public universities
  • colleges
  • schools
  • hospitals

Eligible Revenue Reduction

You must determine if your reduced revenue makes you eligible to apply for the wage subsidy in a particular period.

Eligible revenue generally includes revenue earned in Canada from:

  • selling goods
  • rendering services, and
  • others’ use of your resources

Use your normal accounting method when calculating revenue. You can use the cash method or the accrual method, but you must use the same approach throughout.

If you determine that you qualify for the CEWS for one claim period, you will automatically qualify for the following claim period.

Calculate your reduction by comparing your eligible revenue for the starting month of the claim period with your baseline revenue. Your baseline revenue is either:

  • the revenue you earned in the corresponding month in 2019, or
  • the average of the revenue you earned in January and February, 2020

You must choose one of these baseline revenue options for your method of comparison and will not be able to change it for your subsequent calculations for the other 2 periods.

Period Dates Baseline Revenue Eligibility Period Revenue Required Reduction
March 15, 2020 to April 11, 2020 March 2019, or an average of January and February 2020 March 2020 15%
April 12, 2020 to May 9, 2020 April 2019, or an average of January and February 2020 April 2020 30%
May 10, 2020 to June 6, 2020 May 2019, or an average of January and February 2020 May 2020 30%

Eligible Employees

When applying for CEWS or calculating the amount of wage subsidy to expect, you will need to understand which of your employees are eligible to be included in the calculation. You will also need to know the amount of their pay (eligible remuneration).

Who Are Eligible Employees

An eligible employee is an individual employed in Canada by you (the eligible employer) during the claim period, except if there was a period of 14 or more consecutive days in that period in respect of which they were not paid eligible remuneration by you.

Employee eligibility is based on whether the person is employed in Canada, not where they live.

Retroactively Hiring and Paying Employees

Employees who have been laid off or furloughed can become eligible retroactively, as long as you rehire them and their retroactive pay and status meet the eligibility criteria for the claim period. You must rehire and pay such employees before you include them in your calculation for the subsidy.

What Is Eligible Remuneration

Eligible remuneration includes amounts you paid an employee as salary, wages and other taxable benefits, fees, and commissions. These are amounts employers would be required to make payroll deductions on to be remitted to the CRA.

Severance pay and items such as stock option benefits or the personal use of a corporate vehicle are not part of eligible remuneration.

Baseline Remuneration

When calculating the wage subsidy, you will need to determine an employee’s baseline remuneration. Baseline remuneration is considered to be the average weekly eligible remuneration paid to an employee during the period of January 1, 2020, to March 15, 2020. However, you may exclude from your calculation any period of seven or more consecutive days in respect of which the employee was not paid.

Application Process

If you are applying for CEWS yourself the best way to apply is through My Business Account on the CRA website. If you are not set up for My Business Account with CRA, it’s a good idea to get set up. The government will likely administer other programs using this site. Also, remember to register your bank account for pre-authorized deposits from CRA so that you get your money quicker.

Canada Emergency Business Account (CEBA)

comments powered by Disqus