When the Covid-19 pandemic hit early in 2020, the Parliament of Canada adopted a business wage subsidy program for struggling companies. The Canada Emergency Wage Subsidy (CEWS) came as a result of amendments made to the Income Tax Act. This program aims to help employers cover the costs of wages of their workers or employees.
As we all know, there’s an economic slowdown due to Covid-19, so this program is very helpful to its beneficiaries. By supporting employers to keep their employees paid and hire or re-hire workers, the business wage subsidy may help prevent job losses, which, in turn, helps restore the economy.
The federal government has made public that this wage subsidy program runs from March 2020 to June 2021. Read this article to learn more about the Canada Emergency Wage Subsidy and how employers can avail of this program.
Eligible Employers
All eligible employers will receive the CEWS program, which will amount to 75% of the total eligible remuneration paid to eligible employees (up to a maximum of $847 per week) within the qualifying period. Here are the types of employers that can qualify for this wage subsidy program:
- Any taxable corporation or trust
- Individuals other than trusts
- Any registered charity
- Non-profit organizations (other than public institutions)
- Any partnership with at least 50% of fair market value held by non-eligible partners
- Businesses or organizations owned by indigenous governing bodies, registered journalism associations, registered amateur athletic associations, and private schools
Qualifying Revenue
Under this legislation, qualifying revenue is defined as the sum of cash, receivables, or other consideration collected by a business during a specified period. Such revenue is generally from the sale of goods, rendering of services, and the utilization of resources of a business by others.
For registered charities, qualifying revenue means gifts and other amounts collected during the organization’s ordinary activities. When the charity runs a business, the profits from that business will be included in its qualifying revenue.
For non-profit organizations eligible for this program, qualifying revenue is the consolidated membership fees and other amounts gained within a specified period.
Amounts on account of capital, extraordinary items, and amounts from transactions that were not dealt with at arm’s length by the eligible employer are not considered qualifying revenue.
To qualify for the CEWS program, there must be a revenue decrease within a specific qualifying period. Hence, the calculation of qualifying revenue of an eligible employer.
Claim Periods
The claim period is a span of time for which eligible employers can claim the subsidy for compensation paid to eligible employees. Qualified employers may claim the subsidy for one or more of the claim periods mentioned below:
- March 15, 2020 – April 11, 2020 (Period 1)
- April 12, 2020 – May 9, 2020 (Period 2)
- May 10, 2020 – June 6, 2020 (Period 3)
- June 7, 2020 – July 4, 2020 (Period 4)
- July 5, 2020 – August 1, 2020 (Period 5)
- August 2, 2020 – August 29, 2020 (Period 6)
- August 30, 2020 – September 26, 2020 (Period 7)
- September 27, 2020 – October 24, 2020 ( Period 8)
- October 25, 2020 – November 21, 2020 (Period 9)
- November 22, 2020 – December 19, 2020 (Period 10)
- December 20, 2020, – January 16, 2021 (Period 11)
- January 17, 2021 – February 13, 2021 (Period 12)
- February 14, 2021 – March 13, 2021 (Period 13)
Eligible employers can pick either of two methods for demonstrating their revenue reduction. One method of determining the revenue decrease is to compare the applicable month to the previous year (e.g. April 2020 to April 2019). The other way is to compare the current reference period to its prior reference period (e.g. April 2020 to March 2020).
A method that an eligible employer will choose to determine revenue reduction for claim periods 1 to 4 should also be used in calculating the revenue decrease in claim periods 5 to 13. An employer should apply separately for each month, but if he/she qualifies for one qualifying period, he/she will receive at least some of the benefit of the CEWS in the next claim period.
Eligible Employees
An eligible employee is one who is working mainly in Canada under an eligible employer in the course of or a portion of the claim period for the Business Wage Subsidy.
For claim periods 1 to 4, individuals who have been without compensation for 14 or more consecutive days in that period are excluded from qualifying for this benefit. However, for claim periods 5 to 13, persons who have been without compensation for 14 or more consecutive days in that period are no longer excluded.
The status of an eligible employee is determined with regard to each week in a claim period. A person who was not qualified in a previous claim period may become eligible in the next claim period.
Eligible Remuneration
Amounts paid to an employee as wages, salary, and other compensation, certain taxable benefits (given such amounts are actually paid), and commissions, fees, or other amounts delivered for the rendering of services – all these are eligible remuneration under this legislation.
The Canada Revenue Agency requires an employer to make payroll deductions and remit them. Employment benefits and retiring allowance withheld by the employer are not considered eligible remuneration.
Delivery of the CEWS Program
The Canada Revenue Agency will pay the amount of the wage subsidy program directly to the eligible employer. This is after the employer has submitted the necessary application for the CEWS and provides the agency with proof that the qualifying wages or salaries have been paid to its employees.
For the online application for this wage subsidy program, an employer can use his/her My Business Account, use Represent a Client (if a business representative is the one who applies), or fill out Web Forms using a web access code through the CRA website.
An employer should also provide a business number for purposes of payroll deductions to qualify for the program.
Takeaway
Is your business or organization economically affected by the Covid-19 pandemic? Apply for the Canada Emergency Wage Subsidy. This program aims to help eligible employers cover the remuneration of their employees. Before you apply for the CEWS, make sure to do your research or read the important information in this blog article.
