Canada Emergency Wage Subsidy Extension, New Adjustments and Details

A picture to denote person looking at finances to see if qualifies for the Canada Emergency Wage Subsidy Extension changes.

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:

TimingPeriod 5*:
July 5 – August 1
Period 6*: August 2 – August 29Period 7: August 30 – September 26Period 8: September 27 – October 24Period 9:
October 25 – November 21
Maximum weekly benefit per employeeUp to $677Up to $677Up to $565Up to $452Up to $226
Revenue drop     
50% and over60%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 dropTop-up CEWS rateTop-up calculation = 1.25 x (3 month revenue drop – 50%)
70% and over25%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 under0.0%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.

You Might Also Like: https://bargainblog.ca/canada-emergency-wage-subsidy-extension/

Canada Emergency Wage Subsidy Extension

A picture to denote business owner calculating the canada wage subsidy program for their employees

The Canada Emergency Wage Subsidy Extension was just announced today by the prime minister this morning. The news is definitely a relief for the many businesses struggling to stay afloat during this pandemic. How long is the extension for and when does the program end? See below:

What is the Canada Emergency Wage subsidy? Quick Review

Here’s a quick summary from a CBC article today: “The program covers 75 per cent of wages, up to a weekly maximum of $847, for workers at eligible companies and non-profits affected by the economic slowdown caused by the COVID-19 pandemic.”

Originally the program went from March 15, 2020 to August 29, 2020. This meant that an employer could collect a 75% wage subsidy on an employee’s wages up to 24 weeks as per the government’s website. For more details on the Canada Emergency Wage Subsidy Program, please look at my original article regarding this.

Canada Emergency Wage Subsidy Extension

As mentioned earlier, the prime minister announced that the government will be extending the program until December 2020. The exact weeks extension and when you can apply for the extension was not announced as of yet. Once further details are given, we will update these details.

Conclusion

As mentioned above, many small businesses will welcome the extension of the program as the economy recovery from the pandemic is slow. Also, with uncertainties surrounding covid-19 such as a potential second wave, many businesses are worried about their future. And any help during this unstable time is good help for sure. Stay safe!