The Canada Emergency Wage Subsidy extension was passed through Bill C-20 this week. Along with the extension, there are significant changes to the program. I will try to break down these changes as clearly as possible.
Canada Emergency Wage Subsidy Extension
The Canada Emergency Wage Subsidy has been extended until December 19, 2020. Here’s a quote from an article from CPA Canada below:
- allow the extension of the CEWS until December 19, 2020, including redesigned program details until November 21, 2020
What does this mean? It means that the program is extended until December 19, 2020 but the details of the program only go to November 21, 2020. There are no details yet on how the last four weeks of the program will be administered at this time. So what are the newest changes?
Canada Emergency Wage Subsidy Extension Changes, Elimination of 30% Revenue Test
As of July 5, 2020, applicants for the subsidy will no longer have to have at least a 30% revenue drop to apply for the Canada Wage Subsidy. If you have any kind of revenue drop, you can apply. Many felt that the 30% drop requirement was too strict and due to that, many businesses could not apply. The hope now is that more businesses can apply for the subsidy. However, the subsidy has now changed, with the program now having two components, the base subsidy and the top up.
Canada Emergency Wage Subsidy Extension Changes, Base Subsidy
As of July 5, 2020 , there will be a base wage subsidy for employers to claim for wages. For example, if your revenue drop was 50% or more then you will have a base subsidy of 60% of employees’ wage. If your revenue drop was 49% or less, then your base wage subsidy will be your percentage drop x 1.2 x employee’s wage.
However, this rate is only good for the first two 4 week periods as the rates drop off afterwards. For example, if your revenue drop was greater than 50%, your base subsidy rate in the 3rd 4 week period would drop to 50%, the next 4 week period to 40% and the next one to 20%. The same is true if your revenue extension was 49% or less. In the 3rd 4 week period, your base wage subsidy would be your percentage drop x 1.0 x employee’s wage. In the fourth period you have your percentage drop x 0.8 x employee’s wage. The 5th period you would have your percentage drop x 0.4 x employee’s wage.
Chart of Canada Wage Subsidy Extension Drop
Here’s a chart from the government’s website on the drop that I just described below:
| Timing | Period 5*: July 5 – August 1 | Period 6*: August 2 – August 29 | Period 7: August 30 – September 26 | Period 8: September 27 – October 24 | Period 9: October 25 – November 21 |
|---|---|---|---|---|---|
| Maximum weekly benefit per employee | Up to $677 | Up to $677 | Up to $565 | Up to $452 | Up to $226 |
| Revenue drop | |||||
| 50% and over | 60% | 60% | 50% | 40% | 20% |
| 0% to 49% | 1.2 x revenue drop (e.g., 1.2 x 20% revenue drop = 24% base CEWS rate) | 1.2 x revenue drop (e.g., 1.2 x 20% revenue drop = 24% base CEWS rate) | 1.0 x revenue drop (e.g., 1.0 x 20% revenue drop = 20% base CEWS rate) | 0.8 x revenue drop (e.g., 0.8 x 20% revenue drop = 16% base CEWS rate) | 0.4 x revenue drop (e.g., 0.4 x 20% revenue drop = 8% base CEWS rate) |
Canada Emergency Wage Subsidy Extension Changes, Top Up
A second part of the program is a top up available for businesses that have lost 50% or more in revenue. The top-up increases depending upon the revenue to a maximum of an additional 25% subsidy which would be added to the amount of your base subsidy. Here’s another chart from the government of Canada’s website that highlights this below:
| 3-month average revenue drop | Top-up CEWS rate | Top-up calculation = 1.25 x (3 month revenue drop – 50%) |
|---|---|---|
| 70% and over | 25% | 1.25 x (70%-50%) = 25% |
| 65% | 18.75% | 1.25 x (65%-50%) = 18.75% |
| 60% | 12.5% | 1.25 x (60%-50%) = 12.5% |
| 55% | 6.25% | 1.25 x (55%-50%) = 6.25% |
| 50% and under | 0.0% | 1.25 x (50%-50%) = 0.0% |
Canada Emergency Wages Subsidy Extension Changes, Safe Harbour Rule
What is the safe harbour rule? It is when an employer who was on the program prior to July 5, 2020 and was receiving wage subsidy for their employee(s) of 75%. For the next two periods ending August 29, 2020, they will either receive 75% of employee(s) wages or the next base rate plus top up, whichever is greater. However, after August 29th, they would be subject to the new changes fully.
Conclusion
The government’s changes to the Canada Emergency Wage Subsidy does have the potential to help more Canadian businesses. However, it is a short term solution as the program has a “weaning off process” as it pays less and less over time. So there is definitely incentive for businesses to get up and going quickly.
However, there are unknowns based on how quickly certain areas of the economy can recover from the pandemic and if there is another wave or surge. At that point all bets are off and was probably why the government did not provide details for last period going into December. As that is the great unknown. The changes are a bit complicated and will take some time to understand and hopefully more details will be provided in the days ahead.
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