On April 11, 2020, the Federal Government passed the COVID-19 Emergency Response Act, No. 2 ("Bill C-14"), which formalized the terms of the Canada Emergency Wage Subsidy program (the CEWS).

Now that the CEWS has received Royal Assent and become law, we're able to clarify some key details and questions that up until now remained unanswered.

  Download the CEWS calculation
spreadsheet template

Below are answers to the top 22 questions employers have about the CEWS:

22 Questions Employers have about the CEWS: Answered

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What is the CEWS?

The Canada Emergency Wage Subsidy program (CEWS) will provide eligible employers with 75% of the weekly remuneration they pay to their employees, up to a weekly maximum of $847, for up to 12 weeks, retroactive to March 15, 2020.

The goal of the CEWS is to provide financial support to employers to mitigate against the need for future layoffs and dismissals and rehire employees who were dismissed due to the COVID-19 pandemic.

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What employers are eligible to receive the CEWS?

An “eligible employer” who can receive the CEWS includes: 

• corporations,
• registered charities;
• persons exempt from tax under the Income Tax Act because they are:
  • agricultural organizations
  • corporations created exclusively for promoting scientific research and experimental development;
  • labour organizations; and,
  • ·non-profit organizations;
• partnerships consisting of eligible employers, regardless of the number of employees.

An ineligible employer who cannot receive the CEWS includes any “public institutions” such as municipalities, hospitals, local governments, Crown corporations, public schools, colleges and universities.

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How long will the CEWS remain in place? What time periods does it cover?

Currently, the CEWS is available for 12 weeks, retroactive from March 15 to June 6, 2020. There is a possible extension by regulation, but if this becomes the case, it won't be extended any later than September 30, 2020.

The CEWS is available to employers for the three current "claim periods”:

Period	Dates
1	March 15, 2020 to April 11, 2020
2	April 12, 2020 to May 9, 2020
3	May 10,2020 to June 6, 2020

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How do employers calculate revenue?

The following guidelines apply when calculating revenue:

• An employer’s “qualifying revenue” consists of revenue earned in Canada from the sale of goods and services. Revenues from extraordinary items and amounts on account of capital must be excluded.
• Qualifying revenue is to be computed using the employer’s normal accounting method.
• Employers can choose to calculate revenue via the cash or accrual accounting method, but not a combination of both. 
• Employers must select a method when first applying for the CEWS and must continue to use the same method for the duration of the CEWS program.
• Affiliated groups of eligible employers can compute their revenues on a consolidated basis. 
• Charities and non-profits have the option to exclude funding received from the government from their calculation of revenue. 

Download the CEWS calculation
spreadsheet template

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How do employers measure a decline in revenue?

An employer must show a decline in revenue by comparing:

1. Its monthly revenue from the same month of the previous year, or
2. To the average revenue earned in January and February 2020.

• For example, for the April 2020 reference period, an employer can either compare its April 2020 revenue to its revenue from April 2019, or to the average revenue from January and February 2020.
• Employers must choose whether they will use the year-over-year comparison approach, or the average of their revenue earned in January and February 2020, when they first apply for the CEWS – keeping in mind that the same approach must be used for the duration of the CEWS program. 

The requirements for the reference periods used to measure revenue declines are summarized in the following table:

	Claim Period	Required Reduction in Revenue	Reference Period for Eligibility
Period 1	March 15 to April 11	15%	March  2020 over: March 2019 or Average of January & February 2020
Period 2	April 12 to May 19	30%	Eligible for Period 1 or April 2020 over: April 2019 or Average of January & February 2020
Period 3	May 10 to June 6	30%	Eligible for Period 2 or May 2020 over:  May 2019 or Average of January & February 2020

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Do employers have to re-apply for the CEWS?

No re-applying needed. Once an eligible employer is found eligible for a specific period of the CEWS program, they will automatically qualify for the period that immediately follows.

For example:

• If an employers revenue dropped more than 15% in March, they would qualify for the first and second periods of the program, covering remuneration paid between March 15 and May 9.
• If an employers revenue dropped 30% in April, they would qualify for the second and third periods of the program, covering remuneration paid between May 10 to June 6.

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What remuneration paid to employees is eligible for the subsidy?

The government will provide eligible employers with a subsidy equivalent to the greater of:

• 75% of the amount of remuneration paid, up to a maximum benefit of $847 per week per employee; and
• the amount of remuneration paid, up to a maximum benefit of $847 per week or 75% of the employee’s pre-crisis weekly remuneration, whichever is less.

Remuneration that is eligible for the subsidy includes the following:

• salary or wages;
• superannuation or pension benefits;
• death benefits;
• certain benefits under the Unemployment Insurance Act;
• amounts received as a benefit under a supplementary unemployment benefit plan;
• an annuity payment or a payment in full or partial commutation of an annuity; and,
• fees, commissions or other amounts for services.

Remuneration that is ineligible for subsidy includes the following:

• retiring allowances;
• any amount received by the employee that can reasonably be expected to be returned to the employer.
• any amount received by the employee in excess of the employee’s “baseline remuneration” (based on the average weekly earnings of the employee between January and March 15, 2020).

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Are employers required to top-up the CEWS?

Employers are expected to “make their best effort to top-up employees' salaries to bring them to pre-crisis levels. However, an employer is not required to pay employees their pre-crisis remuneration, defined in Bill C-14 as “baseline remuneration” in order to qualify for the subsidy.

• The “baseline remuneration” is based on the average weekly remuneration paid to the employee between January 1, 2020 and March 15, 2020, excluding any period of seven or more consecutive days for which the employee did not receive remuneration.
• While no top up is required, employers shouldn’t be surprised if Canada Revenue Agency (CRA) officials ask for an explanation as to why they did not pay the top-up to their employees.

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Is there a maximum cap on the subsidy provided?

No. There is no limit on the total aggregate subsidy amount an employer may claim if eligible. 

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What about payroll remittances?

The CEWS offers a 100% refund for certain employer-paid contributions to Employment Insurance and the Canada Pension Plan.

• The government explains that this refund covers 100% of employer-paid contributions “for eligible employees for each week throughout which those employees are on leave with pay and for which the employer is eligible to claim for the CEWS for those employees.”  
• Note that this coverage of payroll remittances is not available if the employee is on leave but works part of the week.
• Employers will be required to continue to collect and remit employer and employee contributions to each program as usual. However, employers will be able to apply for a refund at the same time that they apply for the base CEWS subsidy, and this refund will not be subject to the weekly maximum benefit of $847 per employee.
• There will also be no overall limit on the refund amount that an eligible employer may claim.

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How does the CEWS interact with the 10% temporary wage subsidy?

The 10% wage subsidy is a three-month measure that allows eligible businesses to reduce their payroll remittances to the government by 10%, up to $1,375 per employee, to a maximum of $25,000.For employers that are eligible for both the CEWS and the 10% wage subsidy, any benefit from the 10% wage subsidy for remuneration paid in a specific period generally reduces the amount available to be claimed under the CEWS in that same period.

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How does the CEWS interact with the CERB?

Originally, the Canada Emergency Response Benefit (CERB) didn’t permit overlap with the CEWS.

However, the government is encouraging all eligible employers to apply for the CEWS in order to rehire employees as quickly as possible.

As a result, the updated policy is as follows: to ensure that the CERB applies as intended, “we are considering implementing an approach to limit duplication. This could include a process to allow individuals rehired by their employer during the same eligibility period to cancel their CERB claim and repay that amount.” 

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How does the CEWS interact with the EI Work-Sharing Program?

The work-sharing program helps employers avoid lay-offs by providing EI benefits to employees who agree to reduce their normal working hours due to COVID-19 developments that are beyond their employers control.  

EI benefits received by employees through the Work-Sharing program will reduce the benefit that their employer is entitled to receive under the CEWS.

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Can an Employee apply for EI to top up reduced Employee Hours/Earnings when an Employer is Eligible for CEWS?

Although not clearly stated, the general view is that an employee is not eligible for EI when an employer is eligible for CEWS since both CERB and EI require that the employee be unemployed.

The CRA states on their website that "when an employee’s salary falls below 60% of regular weekly earnings because of illness, injury, quarantine, pregnancy, the need to care for a newborn or a child placed for the purposes of adoption or the need to provide care or support to a family member who is critically ill, an interruption of earnings occurs". Therefore, it does not address whether an employee can still qualify for EI if hours are reduced for other reasons.

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If an employer currently has employees on layoff, will they all have to be recalled?

Bill C-14 expects employers to make their best efforts to recall or re-hire employees, but there is no requirement for a full recall as a condition of eligibility for the CEWS.

However, CEWS payments won’t be available for employees who are without remuneration from their employer for 14 or more consecutive days in the applicable qualifying period.

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Are employers required to have work for recalled or retained employees to perform while on the CEWS?

The CEWS requirement is for employers to place employees back on payroll, but it doesn’t require that they perform work. In effect, they could be classified as being on a paid leave of absence, subsidized in part by the CEWS. 

In fact, as noted above, coverage for employer-paid payroll remittances only applies to those employees covered by the CEWS that are not performing work for the employer during the week.

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What records are employers required to keep?

Employers should keep records that demonstrate:

1. their revenue calculations, and
2. the remuneration paid to employees

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Will employers be taxed on the CEWS?

Any wage subsidies received by employers will be considered government assistance and included in the employer’s taxable income.

Assistance received under the CEWS or the 10% wage subsidy available to eligible small businesses will reduce the amount of remuneration expenses eligible for other federal tax credits calculated on the same remuneration.

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Could their be any penalties for employers?

Yes. To maintain the integrity of the CEWS program, employers who receive the CEWS but are later determined ineligible will be required to repay the amount claimed in full.

• Employers who deliberately attempt to reduce their revenue to qualify for the CEWS will be required to repay the full subsidy that was improperly claimed as well as a penalty equal to 25% of the CEWS amount claimed.
• Under existing provisions of the Tax Act, "persons making, or participating in making, a false or deceptive statement could be prosecuted with a summary or indictable offence". Anyone found guilty could be sentenced to prison for up to 5 years.

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How do employers apply?

 Beginning April 27, applications will be open for the CEWS.

• Most businesses may apply using My Business Account
• If you represent a business, you may apply using Represent a Client
• Alternatively, you may apply using a separate online application form (available April 27)

Visit the new official CEWS  webpage to find all necessary information on How to Apply.

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When will funds become available? 

No specific date has been provided yet. However, the government suggested that funds will become available in approximately 6 weeks.  It's anticipated that the subsidy will be paid within one 1 month of applying. 

More details about the application process are coming soon. 

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Does ConnectsUs HR have any CEWS calculation templates available for download?

We do. 

Download the CEWS calculation
spreadsheet template

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Visit the official CEWS webpage for more information.