It has now been a year since the COVID-19 pandemic began. The pandemic has caused major economic issues across the globe, especially for employers and employees. When it became clear that the pandemic would have negative effects for many employers in Canada, the federal government created a program called the Canadian Emergency Wage Subsidy (CEWS) to aid employers during the pandemic.
The Canada Emergency Wage Subsidy
Many Canadian employers and employees were hit hard when the pandemic made its way into Canada. Some employers could not afford to keep all staff, and had to let some workers go, which meant that workers were unemployed and had to apply for Employment Insurance or the Canada Emergency Response Benefit (CERB). In other cases, employers were forced to cut hours, drastically reducing the income of a number of employees.
The Canadian government recognized this hardship and created the CEWS program for employers. This program allows eligible employers to apply for a subsidy that will allow them to hire back employees they were forced to lay off, therefore keeping people employed and earning income during this health crisis.
For an employer to be eligible to receive CEWS, the employer must meet all three criteria set out by the federal government. Those criteria are as follows:
- The employer must have had a Canada Revenue Agency (CRA) payroll account on March 15, 2020. However, even if an employer did not meet this criterion, there are two situations that would allow an employer to still qualify for CEWS, which include:
- Another partnership or person made remittances on the employer’s behalf; or
- The employer purchased all, or nearly all of another person’s, or partnership’s, business assets.
- The employer also had to be a certain type of employer. This list includes, but is not limited to:
- Corporations, or trusts that are not exempt from income tax;
- Partnerships, which consist of eligible employers;
- Registered charities;
- Prescribed organizations, which include some Indigenous government-owned corporations that carry on a business, private schools, or private colleges, registered Canadian amateur athletic associations, and more.
- The employer must have experienced a drop in revenue during the relevant claim periods.
It should be mentioned that public institutions are excluded from being eligible for the subsidy. Public institutions include Crown corporations, public colleges, universities, schools, and hospitals. It also excludes local governments and municipalities.
How does an employer qualify for CEWS?
The government of Canada calculates an employer’s drop in revenue by comparing their eligible revenue during the pandemic with their eligible revenue from a previous period. To qualify during the specific claim periods, an employer must show that their eligible revenue dropped by a minimum amount. For instance, claim period 1 ran from March 15 to April 11, 2020. The baseline review period was March 2019, or the average of January and February of 2020. The required drop for that period was 15 percent. Since claim period 1, there have been several more claim periods. For example, the current claim period is period 10, which runs from November 22 to December 19, 2020, with the last date of application for that period being June 17, 2021. The next claim period is period 11, which runs from December 20, 2020 to January 16, 2021.
What recent changes has the government implemented to CEWS?
The federal government recently announced that it would be increasing the maximum CEWS wage subsidy rate. Over the claim periods, the subsidy rates have varied. For example, for claim periods 1 to 4, the subsidy calculation was based on a fixed rate of 75 percent. After period 4, the CEWS rate was variable and depended on the percentage a business’s revenue had dropped during the relevant period. This calculation was based on the formula of: Overall subsidy rate = base rate + top-up rate. Based on this calculation, the maximum CEWS amount that an employer was eligible to receive, based on the given formula and during periods 5 to 10, was 65 percent.
The recent government announcement puts the maximum rate back to 75 percent for the next three periods. That means that periods 11, 12 and 13, which run from December 20, 2020, through to March 13, 2021, will all qualify for the higher base rate. The government stated that the rate had been raised to help employers and employees through the “tough months ahead” during the second wave of the pandemic, which has seen all of Ontario placed in lockdown mode.
The government also explained that they have made the subsidy more flexible by making employers eligible for the maximum subsidy rate based on a single month’s revenue decline instead of having to show a decline over a three-month period.
Given there are complex calculations involved in trying to determine how much of a wage subsidy an employer qualifies for, it would be prudent to consult with an employment lawyer to assess your business’s eligibility for CEWS.
For advice on these and other employment or labour law matters, contact the offices of Toronto employment lawyers Grosman Gale Fletcher Hopkins LLP. We regularly advise workplace parties on a wide range of legal workplace issues. Contact us online or by phone at 416-364-9599 to schedule a consultation.
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