At the end of March, Prime Minister Trudeau announced that the federal government would be providing businesses with a wage subsidy of up to 75% of an employee’s first $58,700 of wages, up to a maximum subsidy of $847 per week per employee for businesses who have experienced a reduction in revenue of least 30%.
Finance Minister Bill Morneau provided some further details on the federal government’s previously announced Canada Emergency Wage Subsidy (“CEWS”) on April 1, 2020. At that time, the federal government signaled that Parliament would be recalled shortly to pass the legislation required to implement the CEWS program.
As Parliament has yet to pass legislation implementing the CEWS program, the exact mechanics of the program have yet to be made public and are subject to change based on feedback from stakeholders and opposition leaders. For example, earlier today (April 8, 2020) Prime Minister Trudeau announced that, after consulting with various stakeholders, the federal government would be making certain changes to the CEWS program to make it easier for businesses to access the subsidy. The below information has been updated to reflect the changes Prime Minister Trudeau announced on April 8, 2020. We will continue to monitor the progress of this program and provide updates when available.
What will the wage subsidy provide businesses?
As previously announced, the federal government intends to provide businesses with a wage subsidy of 75% of an employee’s first $58,700 of wages, up to a maximum of $847 per week per employee. This wage subsidy will be in place for three months and will be retroactive back to March 15, 2020. When asked about the possibility of extending the subsidy beyond this initial three-month period, Minister Morneau said the government was always open to looking at new measures should they become necessary.
How much of a revenue loss is required to be eligible for the subsidy?
When the CEWS was first announced, the federal government indicated that it would be available to eligible businesses that experienced a 30% decline in revenues in March, April, and/or May of this year. However, on April 8, 2020, Prime Minister Trudeau acknowledged that many businesses only began experiencing the impact of the pandemic in mid-March and announced that businesses with at least a 15% decline in revenues in March will be eligible for the subsidy for the month of March. For April and May, only businesses with at least a 30% decline in revenues will be eligible for the subsidy.
How will the revenue loss be calculated?
On April 1, 2020, Minister Morneau advised that the revenue loss would be calculated based on a comparison of the business’s revenue from the same month of previous year (i.e. March 2020 vs March 2019). This left many businesses, including start ups and companies with different types of revenue streams, with questions about possible exceptions to this requirement. As such, on April 8, 2020, Prime Minister Trudeau announced that businesses can choose to show the required loss of revenue by comparing revenues from January and February of this year instead of comparing the same month of the previous year. He explained that this change was being made to ensure that more businesses, including start-ups and other businesses that have grown exponentially in the past year but are experiencing significant reductions in their revenues, will be able to access the CEWS. Prime Minister Trudeau also announced that additional flexibility would be provided to charities and non-profit organizations with respect to the inclusion of certain subsidies in their revenue calculations.
Who will be eligible to apply for the wage subsidy?
Any businesses, including individuals, partnerships, corporations that are not publicly funded, charities, and non-profit organizations, experiencing a gross revenue loss of 15% in March of this year or 30% in April and/or May of this year will be able to apply for the subsidy. Businesses will need to re-apply each month for the subsidy.
Will employers have to pay the remaining 25% of wages?
Employers will have to show that they are paying employees 75% of their wages to get the subsidy. When asked about the remaining 25% and whether it was mandatory for employers to pay that portion of an employee’s wages, Minister Morneau advised that employers will have to attest that they are doing everything they can to pay the remaining 25% but that they will be flexible as they recognize that some businesses will not be able to do so.
How will businesses apply for the subsidy?
Businesses will apply through a CRA portal to be launched within the next 3-6 weeks. Minister Morneau advised that they expect funds to start flowing to businesses in approximately 6 weeks. However, he encouraged businesses to begin re-hiring people now if they can, knowing that the money will be coming back to them in a few weeks’ time. Minister Morneau also encouraged businesses to ensure they are set up with CRA direct deposit, as this will ensure they received the wage subsidy as quickly as possible.
The above information is based on what the government has announced in press conferences on the CEWS as of today (April 8, 2020). We are expecting more details on the subsidy to be released in the coming days. It is likely that Parliament will be recalled sometime within the next few days to pass the legislation necessary to implement this program. We are actively monitoring developments on this program and will provide further updates once more information becomes available.
Disclaimer: As always, this post does not constitute legal advice and we would encourage you to seek professional legal advice from one of our knowledgeable lawyers before making any decisions with respect to your own case.