From its inception, the Canada Emergency Wage Subsidy (“CEWS”) has always been in a state of change. Though the seemingly constant changes are challenging to keep track of, they ensure that the CEWS continues to be accessible to the employers that need it.
The federal government plans to extend the CEWS to June 2021, and it plans to introduce legislation that would implement the extension. A technical backgrounder on the extended CEWS will be provided as well.
In the meantime, the government announced new changes to the CEWS on October 14, 2020. It is important to be aware of these changes since they will either apply momentarily or retroactively and are relevant until December 19, 2020.
Increasing the Base Subsidy Rate
The base subsidy rate is currently 40% from September 27 to October 24 and would be 20% for October 25 to November 21, 2020. However, the federal government proposes to maintain the 40% base subsidy rate until December 19, 2020 (with the top-up subsidy remaining unchanged at 25%).
Harmonizing the Revenue-Decline Tests
Currently, the base subsidy and the top-up subsidy have separate revenue-declines tests to determine eligibility. To make the top-up subsidy more responsive to sudden changes in revenue, the revenue-decline test for the top-up subsidy will be determined in the same manner as for the base subsidy—this applies from September 27, 2020. This means that eligibility for the top-up subsidy is determined by the change in an eligible employer’s monthly revenues, year-over-year (rather than comparing to a three-month average), or compared to the average of January and February 2020 revenues using the alternative method.
To prevent this change in the revenue test from reducing the amount of CEWS that an employer would have otherwise been eligible for under the old test, the government is providing a safe harbor. This ensures that an employer’s top-up subsidy rate will be no less than what it would have received under the old revenue-decline test.
Separate Rate Structure for Furloughed Workers
To align the CEWS with respect to furloughed workers with benefits that are provided through the EI system, the federal government intends to provide a separate CEWS calculation for such employees. Effective October 25, 2020, the government’s new proposed rate structure for furloughed employees will take effect. The weekly subsidy in respect of an arm’s length employee (or a non-arm’s length employee who received pre-crisis remuneration for the relevant period) is the amount of eligible remuneration paid for the week; or, if the employee receives remuneration of $500 or more for the week, the greater of $500 and 55% of pre-crisis remuneration for the employee, up to a maximum subsidy amount of $573.