Canada Emergency Wage Subsidy (CEWS)- Revisions
Canada Emergency Wage Subsidy (CEWS)- Revisions
May 19,2020
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By Segal LLP
The government recently introduced amendments to the CEWS program which are meant to extend the applicability of the program. The CEWS is the program where the government reimburses eligible employers for a portion of their employees salaries. Many of these changes are retroactive to the beginning of the program. This means, that where you may not have been eligible previously, you would be eligible now and could file for prior periods.
Some of the key changes are:
Extension to August 29, 2020
The government announced that the program will be extended by 12 weeks to August 29, 2020.Partnerships with One or More Non-Eligible Members
Currently, in order for a partnership to be eligible for the CEWS, all of its members must be eligible entities (generally, individuals, taxable corporations, non-profit organizations, or registered charities). As a result, partnerships in which non-eligible entities hold even a minority interest are currently precluded from claiming the CEWS.Partnerships will be eligible entities for purposes of the CEWS so long as non-eligible members, taken together, do not hold a majority of the interests in the partnership. Specifically, in order for a partnership to qualify for the CEWS, the fair market value of interests in the partnership held by non-eligible entities at all times in the qualifying period must not exceed 50 per cent of the fair market value of all interests in the partnership.
This change is retroactive to April 11, 2020, which means that it applies to the first qualifying period starting March 15, 2020 and subsequent qualifying periods.
Support for Seasonal Employees and Employees Returning from Extended Leave
Under the CEWS, the subsidy amount for a given employee on eligible remuneration paid in respect of the period between March 15 and June 6, 2020 is the greater of:- 75 per cent of the amount of remuneration paid in respect of a week, up to a maximum benefit of $847 per week; and
- the amount of remuneration paid in respect of a week, up to a maximum benefit of $847 per week, or 75 per cent of the employee’s pre-crisis weekly remuneration, whichever is less. The pre-crisis remuneration for a given employee is 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.
In effect, employers may be eligible for a subsidy of up to 100 per cent of the first 75 per cent of pre-crisis wages or salaries of existing employees. These employers would be expected where possible to maintain existing employees’ pre-crisis employment earnings.
In addition, a special rule applies to employees that do not deal at arm’s length with the employer. The subsidy amount for such employees is limited to the eligible remuneration paid in respect of any week in a qualifying period, up to a maximum benefit of the lesser of $847 per week and 75 per cent of the employee’s pre-crisis weekly remuneration. In effect, the subsidy is available in respect of non-arm’s length employees only for those employed prior to March 16, 2020.
These rules can lead to unintended outcomes in some situations, such as when employees were on parental, disability, or unpaid leave from January 1 to March 15 of 2020, or when individuals – whether dealing at arm’s length or non-arm’s length with their employer – are employed on a seasonal basis.
To bridge these gaps, the government proposes to amend the CEWS to allow employers to choose one of two periods when calculating the baseline remuneration of their employees. Specifically, employers would be allowed to calculate baseline remuneration for an employee as the average weekly remuneration paid to the employee from January 1 to March 15 of 2020 or, alternatively, as the average weekly remuneration paid to the employee from March 1 to May 31 of 2019, in both cases excluding any period of 7 or more consecutive days without remuneration. Employers would be able to choose which period to use on an employee-by-employee basis.
This change is proposed to be retroactive to April 11, 2020, which means that it would apply to the first qualifying period starting March 15, 2020 and subsequent qualifying periods.
Amalgamations
Corporations formed on the amalgamation of two or more predecessor corporations (or where one corporation is wound up into another) may not qualify for the CEWS since they would not have benchmark revenues to prove a revenue decline or their benchmark revenues may not provide a full picture of their pre-crisis revenues.The government proposes to amend the CEWS to allow corporations formed on an amalgamation of two or more predecessor corporations (or where a corporation is wound up into another), to calculate benchmark revenue for the CEWS revenue-decline test using their combined revenues, unless it is reasonable to consider that one of the main purposes for the amalgamation (or the winding up) was to qualify for the CEWS.
This change is proposed to be retroactive to April 11, 2020, which means that it would apply to the first qualifying period starting March 15, 2020 and subsequent qualifying periods.
Other Changes
There are also revisions related to the following:- Indigenous Government-Owned Businesses
- Registered Canadian Amateur Athletic Associations
- Registered Journalism Organizations.
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