How to choose between the Canada wage subsidy and emergency benefit response
It can be difficult navigating the various federal financial aid packages for businesses and individuals who have been significantly impacted by the COVID-19 pandemic.
The Canadian Emergency Response Benefit (CERB) and the Canada Emergency Wage Subsidy (CEWS) are both meant to relieve financial burden, but individuals cannot be on both programs at the same time.
So, which is the right program to be on? And if you’re already on one program, can you switch to another?
What CERB and CEWS offer
If an individual has stopped working, or has a reduced income from the pandemic, CERB may provide temporary income support, with $500 a week for up to 16 weeks.
On April 15, Prime Minister Justin Trudeau announced that CERB had been expanded for individuals earning $1,000 or less a month, those who have lost or been running out of EI since January 1, and seasonal workers who can no longer find employment.
And on April 27, applications opened for CEWS, which aims to help Canadian employers keep and rehire workers amidst the challenges posed by the pandemic.
The federal government has implemented a subsidy for eligible employers to give 75% of employee wages for up to 12 weeks, retroactive from March 15, 2020, to June 6, 2020.
The maximum benefit is $847 per employee each week.
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You can’t have both
“Canadians can’t really choose to access CERB instead of CEWS — or vice versa,” Steven Van Alstine, Vice President of Education at the Canadian Payroll Association told Daily Hive.
Alstine notes that employees who are on payroll and receiving their regular wages – including those subsidized through the CEWS – are not eligible for the CERB.
Knowing what to apply for can become confusing, as there are certain regulations in place and individual circumstances can differ.
According to Alstine, anyone who applied for EI in mid-March was automatically transferred to the CERB program, but they are not entitled to CERB and CEWS together.
Similarly, if a previously laid-off employee who applied for the emergency benefit is brought back onto payroll, they are no longer eligible for CERB. And, if they receive retroactive pay upon being brought back onto payroll, the employee will have to repay funds received through the CERB program to the Canada Revenue Agency (CRA).
Funds are taxable
While the funds received through the programs are taxable, individuals who received financial aid through the CERB program will only be taxed when an individual files their personal income tax next year.
“Employers utilizing CEWS will make all regular statutory withholdings, including taxes, when paying their employees,” Alstine said.
Considerations for employers and employees when switching programs
Alstine emphasized that residents can move from one program to another, but there are important factors to consider.
For example, if an employee moves in-and-out of being on payroll, their ability to access CERB will change according to their immediate circumstance, as their personal financial history will be more difficult to track.
Similarly, if an employer lays off an employee, they cannot access CEWS funds intended to subsidize that employee’s pay.
Why these programs are important for Canadians right now
“Even in good times, financial stress can have a profound impact on our ability to focus on what needs to be done,” Alstine said.
Last year, the Canadian Payroll Association research found that the financial stress of working Canadians costs the economy roughly $16 billion per year in lost productivity.
“Even if everyone were to return to work tomorrow, for many who have seen their savings depleted or missed a paycheque in the last month, financial stress will intensify,” Alstine noted.
“Both the CERB and CEWS packages are crucial for supporting the financial wellness of those who have had their employment and business impacted by COVID-19.”
While the emergency response benefit helps individuals manage their finances in the short term, the wage subsidy allows employees to stay on the payroll, enabling businesses to return to a “relative state of normal more quickly.”
Alstine said he sees the benefits of both programs to help individuals in the present and ensure that businesses can bounce back when physical distancing measures are loosened.
For now, he recommends that Canadian residents take advantage of the programs and research which best suit their needs based on personal circumstances.