KRP LLP COVID-19 response

Ottawa outlines new 75% Canada Emergency Wage Subsidy

KRP LLP COVID-19 response

The federal government today announced details of the much-anticipated Canada Emergency Wage Subsidy.  As we noted in a previous blog, the program is designed to support Canadian businesses struggling to meet payroll and other operational needs in the face of the unprecedented COVID-19 crisis, while protecting jobs and discouraging further layoffs.

Under the proposed plan, the government would provide a subsidy of up to 75 per cent of the first $58,700 earned by employees of qualifying companies—for up to three months—retroactive to March 15, 2020. The program would be in effect until June 6, 2020, and would cover up to $847 per week per employee. The subsidy would be based on the actual salary or wages paid to employees. The government is asking qualifying employers to make every effort to cover the remaining 25 per cent of employee salaries, but it seems that doing so is not compulsory.

According to the Department of Finance, the program is expected to cost taxpayers $71 billion. However, the previously announced Canada Emergency Response Benefit—which will provide support payments to qualifying individuals of $2,000 per four-week period up to 16 weeks—is now projected to cost $24 billion, down from the original $40 billion estimate as the government revises unemployment forecasts.

To qualify for the Canada Emergency Wage Subsidy, employers must be able to demonstrate a year-over-year loss in gross revenue of at least 30 per cent in March, April or May, 2020. While the original 10 per cent wage subsidy proposed last month was directed towards small- and medium-sized businesses, the Canada Emergency Wage Subsidy will be available to employers of all sizes and across industries—including bars, restaurants, charities and non-profits. Ottawa has committed to further supporting charities and non-profits that have experienced revenue declines due to the pandemic, but has yet to announce specific details. Public sector employers will not be eligible for the program.

At this point it appears the benefit will likely be delivered as a cash grant, rather than a payroll remittance credit, as was the case under the previous 10 per cent subsidy. Employers that do not qualify for the 75 per cent wage support can still take advantage of 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 announcing the program, Prime Minister Justin Trudeau again stressed that businesses trying to take advantage of the new program will face “stiff and severe penalties.” Exactly how the federal government will manage enforcement is unclear. More details will follow when the legislation to enact the new subsidy is tabled on Monday.

To access the program, eligible employers will need to apply through a Canada Revenue Agency online portal expected to be operational in three to six weeks. Funds should be available in approximately six weeks.

We’ll be providing updates and information to help you access the program as it becomes available.

Armando Iannuzzi, Co-Managing Partner

Armando Iannuzzi

905-946-1300, x. 239