Now that provinces have implemented reopening strategies, businesses may be looking to rehire employees who were previously put on unpaid leave or laid-off altogether. Employers transitioning their businesses into the “new normal” would like this transition to flow as seamlessly as possible. To achieve this, both the employer and employee should know the implications and interactions between two government subsidy programs: the Canadian Emergency Wage Subsidy (CEWS) and the Canadian Emergency Response Benefit (CERB).
If you are an employer who has applied, or plans to apply, for CEWS or an employee who has previously applied for CERB, it’s important to understand the interplay between these two programs to get the timing right so the return to work for employees and employers can be as smooth as possible.
What is CEWS?
CEWS is a program implemented to provide financial support directly to businesses in an effort to encourage businesses to keep their employees on payroll. CEWS, also referred to as the 75 percent wage subsidy, can provide significant financial relief by subsidizing employee wages and salaries, where revenues have declined and other transition expenses have consumed cash flow. This program has already provided many businesses with financial support during these challenging times and, with the recent government announcement extending CEWS into August 2020, can potentially help many more employers who are looking to rehire their staff.
Is my business eligible for CEWS?
A business is eligible for CEWS if it meets the definition of an eligible entity.1 Once you determine that your business meets that definition, you will then need to determine which employees would qualify as an “eligible employee,” in order to claim the CEWS on their remuneration.
An eligible employee is defined as an individual, employed in Canada by an eligible entity, other than an individual who is without remuneration by the eligible entity in respect of 14 or more consecutive days in the claim period. When rehiring employees, keep in mind that the definition of eligible employee specifically excludes individuals who are without remuneration in respect of 14 or more consecutive days in a qualifying period.
1 The purpose of this tax alert is not to outline the criteria to determine when a business is eligible for CEWS; rather, it is to discuss the CEWS from the perspective of the impact on the employee. For a more detailed analysis on the CEWS, visit Grant Thornton’s COVID-19 hub.
2 In the CEWS legislation, the claim period is referred to as the “qualifying period”—see subsection 125.7(1) of the Income Tax Act.