The federal government has provided a series of updates and clarifications regarding deduction considerations and qualification eligibility for the Canada Emergency Wage Subsidy, a program designed to encourage employers to retain workers or re-hire those that have been laid off due to COVID-19. The updates are available on the program’s FAQ page and are in addition to changes announced last week that expanded access and eligibility to more groups.
As we detailed previously, the Canada Emergency Wage Subsidy (CEWS) program provides a subsidy of up to 75 per cent of the first $58,700 earned by employees of qualifying companies (those that experienced a revenue decrease of 15 per cent in March or 30 per cent in April and May)—to a maximum of $847 per employee per week. The government has indicated that it may also adjust the 30 per cent revenue decline threshold going forward.
Employers that don’t qualify for the 75 per cent wage support can apply for the 10 per cent subsidy for remuneration paid from March 18 to before June 20, up to a maximum subsidy of $1,375 per employee and $25,000 per employer.
In the new update, Ottawa clarified that employers that are eligible for both the Canada Emergency Wage Subsidy and the 10 per cent Temporary Wage Subsidy for Employers can essentially elect not to apply the 10 per cent temporary wage subsidy against the 75 per cent subsidy. Previously, the 75 per cent wage subsidy was automatically reduced by the 10 per cent subsidy, essentially requiring those that qualified for the 10 per cent subsidy to apply for that subsidy first. The website notes that:
“For an eligible employer that is eligible for both subsidies for a period, all amounts that the employer claims under the 10 per cent temporary wage subsidy for remuneration paid in a specific claim period, reduce the amount available to be claimed under the CEWS in that same period.
If the income taxes you deduct with respect to the remuneration you paid are not sufficient to offset the value of the subsidy in that period, you can reduce future payroll remittances to benefit from the subsidy. However, the entire amount claimed under the 10% temporary wage subsidy must be applied to reduce the CEWS for the claim period in which the remuneration is paid.”
This change addresses the previous issue noted above whereby the Canada Emergency Wage Subsidy was automatically reduced by the Temporary Wage Subsidy whether or not an employer applied for the 10 per cent subsidy, requiring the employer to get that additional subsidy later. Employers can now elect a percentage of 0 per cent in respect of the 10 per cent wage subsidy when applying for the CEWS, ensuring that the 75 per cent CEWS would not be automatically reduced.
The government offers three examples to assist employers in understanding how the change plays out in practice:
“Assume an eligible employer is eligible for both the subsidies. It calculates its 10% temporary wage subsidy as $2,050 on remuneration paid from April 12 to May 9, 2020 (which coincides with the second claim period), using the 10% rate. However, it only deducted $1,050 of federal, provincial, or territorial income tax from its employees for that period.
While the eligible employer can still reduce a future payroll remittance by $1,000 in respect of the balance (even if that remittance is in respect of remuneration paid after May 9, 2020), its CEWS claim for the same period (April 12 to May 9, 2020), is reduced by the entire amount of $2,050.”
“… assume the eligible employer elects to apply a percentage less than 10% to determine the 10% temporary wage subsidy such that the subsidy is now only $1,050. It is now able to offset the entire $1,050 of the subsidy against the $1,050 from the federal, provincial, or territorial income tax withheld from its employees for that period. In this situation, its CEWS claim for the same period (April 12, to May 9, 2020), is reduced by only $1,050.”
Assume “… the eligible employer elects a percentage of 0% for the 10% temporary wage subsidy. Consequently, that subsidy will be nil on remuneration paid from April 12, to May 9, 2020 (which coincides with the second claim period). In this situation, it does not reduce the amount of federal, provincial, or territorial income tax withheld from its employees for that period. In addition, its CEWS claim for the same period (April 12, to May 9, 2020), is not reduced. Where the eligible employer does not claim any amount, it should indicate the 0% election on the self-identification form under the 10% temporary wage subsidy program.”
As always, if you have questions about the Canada Emergency Wage Subsidy or any other government relief program, please contact a member of our team.
Armando Iannuzzi, Co-Managing Partner