Canada's $73-billion wage subsidy program passes in House of Commons
In what Prime Minister Justin Trudeau said is the “largest economic policy” since World War II, the House of Commons today passed the legislation needed to enact the Canada Emergency Wage Subsidy (CEWS) which was announced last month.
The legislation was passed during an emergency recall of the House of Commons on Saturday, will now be brought before the Senate before officially being enacted.
Earlier this week, Trudeau said that since the initial announcement, he has since received input from businesses on making changes.
“These conversations have helped us to adjust what we first announced,” he said. “This subsidy is based on the steps we have already taken.”
The initial wage subsidy announced required businesses show a 30% drop in revenue in March 2020 compared to March 2019.
Now, however, businesses will just have to show a 15% decline in revenue in March compared to 30%, and that businesses can compare March revenue to January and February 2020.
Charities, as well as non-profits, can also choose to include or exclude government funding when making their calculations.
As for young Canadians, Trudeau said that the federal government will pay 100% of the wages paid by employers in the Canada Summer Jobs program.
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Eligible employers
Eligible employers include individuals, taxable corporations, partnerships consisting of eligible employers, non‑profit organizations, and registered charities.
Public bodies would not be eligible for this subsidy. Public bodies would generally include municipalities and local governments, Crown corporations, wholly owned municipal corporations, public universities, colleges, schools, and hospitals.
This subsidy would be available to eligible employers that see a drop of at least 15% of their revenue in March 2020 and 30% for the following months (see “eligible periods” below). In applying for the subsidy, employers would be required to attest to the decline in revenue.
Amount of subsidy
The subsidy amount for a given employee on eligible remuneration paid for the period between March 15 and June 6, 2020 would be the greater of 75% of the amount of remuneration paid – up to a maximum benefit of $847 per week – and the amount of remuneration paid, up to a maximum benefit of $847 per week or 75% of the employee’s pre-crisis weekly remuneration, whichever is less.
The pre-crisis remuneration for a given employee would be based on the average weekly remuneration paid between January 1 and March 15 inclusively, excluding any seven-day periods in respect of which the employee did not receive remuneration.
Employers will also be eligible for a subsidy of up to 75% of salaries and wages paid to new employees.
Eligible remuneration may include salary, wages, and other remuneration like taxable benefits. These are amounts for which employers would generally be required to withhold or deduct amounts to remit to the Receiver General on account of the employee’s income tax obligation. However, it does not include severance pay, or items such as stock option benefits or the personal use of a corporate vehicle.
A special rule will apply to employees that do not deal at arm’s length with the employer. The subsidy amount for such employees will be limited to the eligible remuneration paid in any pay period between March 15 and June 6, 2020, up to a maximum benefit of the lesser of $847 per week and 75% of the employee’s pre-crisis weekly remuneration. The subsidy would only be available in respect of non-arm’s length employees employed prior to March 15, 2020.
There would be no overall limit on the subsidy amount that an eligible employer may claim.
Employers are expected to make their best effort to top-up employees’ salaries to bring them to pre-crisis levels.
Eligible periods
Eligibility would generally be determined by the change in an eligible employer’s monthly revenues, year-over-year, for the calendar month in which the period began.
On April 8, 2020, the Government announced that all employers would be allowed to calculate their change in revenue using an alternative benchmark to determine their eligibility. This is meant to provide more flexibility to employers for which the general approach may not be appropriate, including high-growth firms, sectors that faced difficulties in 2019, non-profits and charities, as well as employers established after February 2019.
The Government also announced that in order to provide certainty to employers, once an employer is found eligible for a specific period, the employer would automatically qualify for the next period.
Eligible employees
An eligible employee is an individual who is employed in Canada.
Eligibility for the CEWS of an employee’s remuneration will be available to employees other than those who have been without remuneration for 14 or more consecutive days in the eligibility period, i.e., from March 15 to April 11, from April 12 to May 9, or from May 10 to June 6.
This rule replaces the previously announced restriction that an employer would not be eligible to claim the CEWS for remuneration paid to an employee in a week that falls within a four-week period for which the employee is eligible for the Canadian Emergency Response Benefit.
How to Apply
Eligible employers would be able to apply for the CEWS through the Canada Revenue Agency’s My Business Account portal as well as a web-based application. Employers would have to keep records demonstrating their reduction in arm’s-length revenues and remuneration paid to employees. More details about the application process will be made available shortly.