Targeting COVID-19 Support Measures

Targeting COVID-19 Support Measures

On October 21, 2021, the Department of Finance announced that the Canada Emergency Wage Subsidy (CEWS) and the Canada Emergency Rent Subsidy (CERS) will end on October 23, 2021. In its place, the government is introducing two new programs:

  • The Tourism and Hospitality Recovery Program
  • The Hardest-Hit Business Recovery Program

The 2021 Federal Budget provided the government with the authority to extend these programs until November 20, 2021. The government plans to introduce legislation as soon as possible to allow these programs to run past November 20, 2021, until May 7, 2022, with authority for further amendments through regulations until July 2, 2022.

Tourism and Hospitality Recovery Program

This new program is targeted to organizations in selected sectors of the tourism and hospitality industry that have been deeply impacted since the beginning of the pandemic and continue to struggle. Examples of eligible organizations in the tourism and hospitality industry include hotels, restaurants, bars, festivals, travel agencies, tour operators, convention centres, convention and trade show organizers, and others. The Department of Finance indicated that it will provide additional details on businesses that qualify for this program in the near future.

Eligible organizations would be required to meet the following two conditions to qualify for this program:

1. An average monthly revenue reduction of at least 40% over the first 13 qualifying periods for the CEWS (12-month revenue decline); and

2. A current month revenue loss of at least 40%.

The 12-month revenue decline would be calculated as the average of all revenue decline percentages for eligible organizations from March 2020 to February 2021 (claim periods 1-13, excluding claim period 10 or 11). Any periods in which an entity was not carrying on its ordinary operations for reasons other than a public health restriction (for example, because it is a seasonal business) would be excluded from this calculation. The existing rules would continue to apply for the purposes of calculating the current month revenue decline.

Under this program, the maximum subsidy rate for the wage and rent subsidies would be set at 75% from October 24, 2021 to March 12, 2022 (claim periods 22 to 26).

The wage and rent subsidy rates would continue to be calculated based on current month revenue losses compared to those of a prior reference period, as under existing rules. The subsidy rate would start at 40% for eligible organizations with a 40% current month revenue decline, increasing thereafter in proportion to current month revenue loss up to a maximum rate of 75% for those with a current month revenue decline of 75% or higher.

The rent and subsidy rates would be reduced by half from March 13 to May 7, 2022 (claim periods 27 and 28).

Lockdown Support would be available at the current fixed rate of 25% and pro-rated based on the number of days a particular location was impacted by a lockdown, as under existing rules.

The following table summarizes the wage and rent subsidy rate structure for organizations that qualify for the Tourism and Hospitality Recovery Program from October 24, 2021 until May 7, 2022:

 

Periods 22 to 26 (October 24, 2021 to March 12, 2022)

Periods 27 to 28 (March 13, 2022 to May 7, 2022)

Current month revenue decline

  

75% and over

75%

37.5%

40% to 74%

Revenue decline

(e.g., 60% revenue decline = 60% subsidy rate)

 

Revenue decline / 2 

(e.g., 60% revenue decline / 2 = 30% subsidy rate)

 

0 to 39%

0%

0%

Hardest-Hit Business Recovery Program

This new program is targeted to hard-hit organizations that do not qualify for the Tourism and Hospitality Recovery Program, but have still been deeply impacted since the beginning of the pandemic and continue to struggle.

Eligible organizations would be required to meet the following two conditions to qualify for this program:

1. An average monthly revenue reduction of at least 50% over the first 13 qualifying periods for the CEWS (12-month revenue decline); and

2. A current month revenue loss of at least 50%.

The calculation of the 12-month revenue decline would follow the same rules as under the Tourism and Hospitality Recovery Program, as discussed above. The existing rules would continue to apply for the purposes of calculating the current month revenue decline.

Under this program, the maximum subsidy rate for the wage and rent subsidies would be set at 50% from October 24, 2021 to March 12, 2022 (claim periods 22 to 26).

The wage and rent subsidy rates would continue to be calculated based on current month revenue losses compared to those of a prior reference period, as under existing rules. However, under this program the subsidy rates would start at 10% for eligible hard-hit organizations with a 50% current month revenue decline, increasing thereafter on a straight-line basis to a maximum rate of 50% for those with a current month revenue decline of 75% or higher.

The rent and subsidy rates would be reduced by half from March 13 to May 7, 2022 (claim periods 27 and 28).

Lockdown Support would be available at the current fixed rate of 25% and pro-rated based on the number of days a particular location was impacted by a lockdown, as under existing rules.

The following table summarizes the wage and rent subsidy rate structure for organizations that qualify for the Hardest-Hit Business Recovery Program from October 24, 2021 until May 7, 2022:

 

Periods 22 to 26 (October 24, 2021 to March 12, 2022)

Periods 27 to 28 (March 13, 2022 to May 7, 2022)

Current month revenue decline

  

75% and over

50%

25%

50% to 74%

10% + (revenue decline – 50%) x 1.6

(e.g., 10% + (60% revenue decline – 50%) x 1.6 = 26% subsidy rate

5% + (revenue decline – 50%) x 0.8 

(e.g., 5% + (60% revenue decline – 50%) x 0.8 = 13% subsidy rate

 

0 to 49%

0%

0%

Support in the Event of a Public Health Lockdown

To recognize the challenges that may arise from resurgences of the pandemic, organizations subject to a qualifying public health restriction would be eligible for support at the subsidy rates as calculated in the Tourism and Hospitality Recovery Program (see above), regardless of sector, if they have one or more locations subject to a public health restriction (lasting for at least 7 days in the current claim period) that requires them to cease activities that accounted for at least approximately 25% of total revenues of the employer during the prior reference period.

Applicants would not need to demonstrate the 12-month revenue decline, only a current month decline. It would be available to impacted organizations, regardless of sector.

Increasing the Monthly Cap on Eligible Expenses under the CERS

Under current rules, there is a monthly cap on eligible expenses that can be claimed under the CERS of $75,000 per business location and $300,000 in total for all locations (including any amounts claimed by affiliated entities).

To better respond to the needs of businesses, including hard hit businesses like hotels and restaurants, the government is proposing to make legislative amendments to increase the aggregate monthly cap from $300,000 to $1 million (including any amounts claimed by affiliated entities) starting on October 24, 2021.

This new monthly cap would be available to all eligible employers and organizations that meet the new eligibility requirements for the rent subsidy under the Tourism and Hospitality Recovery Program and the Hardest-Hit Business Recovery Program.

Extending the Canada Recovery Hiring Program

The Canada Recovery Hiring Program (CRHP) is set to expire on November 2021. The government is proposing to increase the subsidy rate from 20% to 50% for currently eligible employers from October 24 to November 20, 2021.

The government is also proposing to introduce legislation to extend the hiring program at the new rate of 50% past November 20, 2021 until May 7, 2022, with authority for a further extension through regulations until July 2, 2022.

Under the proposed extension, the existing baseline period of March 14 to April 10, 2021, would continue to be used to calculate incremental remuneration. The existing eligibility rules would also continue to apply, including the required revenue decline of more than 10%.

General Comments

For organizations that have managed to endure the pandemic with low to moderate revenue declines, the expiry of the current version of CEWS and CERS will mark the end of their ability to claim these subsidies. These types of organizations should consider applying for CRHP if they experience a revenue decline of more than 10% for a given month and have increased their payroll costs compared to the March 14 to April 10, 2021 period.

For organizations that have been severely impacted by the pandemic and experienced steep revenue declines, they will be able to continue receiving government support through either the Tourism and Hospitality Recovery Program or the Hardest-Hit Business Recovery Program.

In the event of any future public health lockdowns, organizations (regardless of sector) that are forced to shut down one or more locations may be able to get subsidy support as calculated under the Tourism and Hospitality Program.

If you have any questions regarding these recent government announcements, please feel free to contact your Segal advisor.

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