The federal government has announced several economic measures to assist employers and their employees as a response to the COVID-19 pandemic:
- Wage subsidy: the government will cover up to 10 percent of an employer’s remuneration costs for three months
- Work-sharing program: the timeline for this existing program has been extended for up to 76 weeks
- Additional credit is now available through Export Development Canada and the Business Development Bank of Canada
- Emergency Care Benefit: this benefit will provide up to $900 bi-weekly for up to 15 weeks for those who don’t qualify for EI sickness benefits and who don’t have paid sick leave
- Emergency Support Benefit: this benefit will provide up to 14 weeks of support for those don’t qualify for EI and who face unemployment
On March 18, the federal government announced significant economic measures to support the economy during the COVID-19 pandemic. A total of $82 billion in financial aid, equal to three percent of Canada’s gross domestic product, was announced, including
- $27 billion in direct payments to Canadians who will require support, and
- $55 billion in tax deferrals available to all taxpayers.
The package announced on March 18, 2020, together with the economic aid announced last week, provide economic stimulus totaling $93 billion. This tax alert outlines the economic measures for businesses and their employees announced as part of that stimulus package. The tax measures that were announced as part of that package are not detailed here but can be found in this previous alert.
Economic measures targeted towards employers
The stimulus package included a wage subsidy to cover 10 percent of an employer’s remuneration costs for a period of three months. This measure will be available for “small employers,” which includes corporations eligible for the small business deduction, non-profit organizations and charities.
The following limits apply:
- Maximum $1,375 per employee
- Maximum $25,000 per employer
The government’s news release stated that this measure is “effective immediately” and that it would be accessed through a reduction of the required remittances for employee income tax withholdings. Therefore, an employer could calculate 10 percent of an employee’s remuneration paid over a period of three months and reduce the amount of the remitted income tax withholdings by that amount, up to $1,375 per employee, and up to $25,000 in total.
The Work Sharing Program is a federal government program administered through its employment insurance program that allows employers to coordinate with their employees to share work hours in an effort to avoid layoffs.
Employers who participate in the program due to COVID-19 can do so for up to 76 weeks, which is an extension of the usual maximum period of 38 weeks.
To be eligible for this program, an employer must be experiencing a downturn in business activity related to the global outbreak of COVID-19 and have:
- Work-sharing (WS) agreements signed between March 15, 2020 and March 14, 2021,
- WS agreements that began or ended between March 15, 2020 and March 14, 2021, and
- WS agreements that ended between June 23, 2019 and March 14, 2020 and are in their mandatory cooling-off period.
Additional requirements apply to both employers and employees and can be found at the Work Sharing Program website.
There is a mandatory “cooling-off” period, where an employer cannot re-enter a WS agreement with the same employees; however, the cooling-off period is being temporarily waived. Furthermore, any employers that participated in the program and whose participation period ended prior to March 13, 2020 may be able to waive the mandatory cooling-off period to participate in the program again.
Cash flow and liquidity are going to be of primary concern to many businesses. To address this concern, a coordinated response between the federal government, government agencies and the Bank of Canada was announced to help facilitate the availability of credit for businesses. The following measures have been implemented:
- $10 billion of additional financing, mainly for small and medium-sized enterprises, provided through Export Development Canada (EDC) and the Business Development Bank of Canada (BDC)
- BDC and EDC will work with private lenders (e.g. banks) to provide financing to sectors hard-hit by the economic slowdown, including oil & gas, air transportation and tourism
- Increased credit availability for businesses in farming and the agri-food sector through Farm Credit Canada
- Assistance for exporters through increased limits to the Canada Account, which is a program funded by the federal government and administered through EDC, to assist with export transactions in the national interest
- The Bank of Canada lowered its key interest rate to 0.75 percent (decrease of 100 basis points since beginning of March)
- The purchase by the federal government of up to $50 billion of insured mortgages through the Insured Mortgage Purchase Program, which will provide banks and lenders with additional liquidity and stability to facilitate private lending to Canadian businesses and individuals
Other significant measures affecting businesses
The Canadian and US governments agreed to close the border for tourists, shoppers and all non-essential travel. However, the border remains open for commerce (e.g. trucks with delivery of goods) to ensure minimal disruption to supply chains and the flow of goods.
Although not a government measure, Canada’s banks have confirmed that they will provide Canadian businesses and individuals with up to a six-month deferral of mortgage payments and other credit relief, which can be extremely helpful for businesses dealing with cash flow issues in the near future.
Economic measures targeted towards employees
New measures have been introduced, and changes have been made to existing measures, by the federal government in an effort to assist individuals who may be faced with losing their job or reduced wages due to the COVID-19 pandemic.
Employment insurance change
For workers eligible for employment insurance (EI), the one-week mandatory waiting period has been waived for those accessing EI due to impacts from COVID-19. Furthermore, the requirement for a doctor’s note has also been waived.
EI provides an employee with 55 percent of their earnings, to a maximum of $573/week.
Both employed and self-employed individuals can qualify for EI. The individual must participate and pay into the EI program, have lost at least 40 percent of their usual pay and worked a minimum of 600 hours in the year prior to the claim or since their last claim. Self-employed individuals must wait at least 12 months after registering to participate in the program.
The application for EI can be found on the benefits page of the government of Canada’s website. Depending on the type of assistance being applied for, and the type of worker, workers can click on the appropriate link and provide the information required, including personal and banking details (to receive payment) and potentially a copy of the Record of Employment (ROE), if a paper-copy is provided. If electronic copies of the ROE are submitted to Service Canada, this step is not required.
Emergency Care Benefit
The Emergency Care Benefit (ECB) is a new measure that provides up to $900 bi-weekly for up to 15 weeks to workers who do not qualify for EI sickness benefits and who are quarantined, sick with COVID-19 or taking care of a family member who is sick with COVID-19. It will also be available for parents who can’t work as they take care of their children, regardless of whether they qualify for EI.
The government has stated that the application will be made available by April, although no specific date has been provided yet. Furthermore, they stated the process will be simple: supporting documentation will not be required, but the applicant will be asked to attest that they meet the requirements (and they will have to re-attest every two weeks).
The application will be available:
- Online via Canada Revenue Agency’s (CRA) My Account
- Online via My Service Canada Account
- Through a toll-free number (not yet available at date of this alert’s publication)
Emergency Support Benefit
Similar to the ECB, the Emergency Support Benefit is available to workers not eligible for EI. This benefit is for workers who face unemployment or reduced hours due to the economic impact of COVID-19. It will provide up to 14 weeks of support and will be comparable to EI.
It is expected that this benefit will also be administered through the CRA’s website and that the application will open in April. The government will provide additional details about this benefit in the coming days.
Additional support for individuals
Other support that the government is providing to individuals includes:
- GST credit top-up: a one-time payment to be made in early May
- $400 for single individuals
- $600 for couples
- Canada Child Benefit top-up: a one-time payment also in early May
- Student loans: six-month moratorium on student loan payments, interest-free
- RRIF: minimum withdrawals reduced by 25 percent
- Old Age Security and Guaranteed Income Supplement payments will continue on a regular basis
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