The Canada Emergency Wage Subsidy (CEWS) is a 75% subsidy to help businesses retain their workforce, or, in some cases, even hire back employees who have been laid off due to the pandemic. In our next “Your COVID-19 Business Questions Answered” video, Michael Espinoza, Senior Manager, National Tax Services, explains the important points you need to remember if applying for the CEWS program, including:
0:21 Who is eligible for CEWS?
0:49 Revenue test
2:19 How do you calculate the subsidy?
3:19 CERB vs. CEWS
3:44 How do you apply for CEWS?
So today I'm here to talk to you about the Canada Emergency Wage Subsidy or the “CEWS” for short. That’s the 75% wage subsidy offered to businesses to help them retain their workforce, or even in some cases hire back people that they've laid off due to the pandemic.
Now the application opened on Monday, April 27th. So, who is eligible?
- Self-employed individuals: that's sole proprietors – this actually also includes trusts.
- Taxable corporations,
- registered charities,
- nonprofit organizations, and
- partnerships whose partners or any of the legal entities I just mentioned.
Public institutions are not eligible. This includes municipalities crown corps, schools, universities, colleges, hospitals, and the like.
Now, in order for an eligible entity to qualify, it actually has to meet a specific revenue test. Right now the CEWS is available for March, April and May 2020. Known as the current reference periods, the rules require a decrease in revenue of at least 15% for March 2020 and at least 30% for each of April and May 2020. As compared to a prior reference period the revenues from the prior reference period can be either revenues for the same month of the previous year or an average of revenues for January and February of 2020.
Once you determine that you met the test, you can get the wage subsidy for wages paid in respect to the qualifying period that pertains to that current reference period. So for example, if your business has at least a 15% decrease by comparing March 2020 revenues to March 2019 revenues, then you can receive a subsidy for the four week period from March 15 to April 11th.
Now, it's important to note that if you qualify for one period, you actually automatically qualify for the next period - so in our example since you qualify for March, you're actually going to automatically qualify for April, too.
Now, whichever reference period you choose, you have to stick with it for all three periods. No flip-flopping.
Now it may not seem like it, but this is actually a quick summary of the basic rules. These rules can get quite complex so make sure you speak to your advisor if these rules apply to you.
So how much subsidy are you actually entitled to?
Now you probably already know that at least one component of the subsidy is equal to 75% of wages paid to your employee. But there are actually several components so let's take a look at this at a high level.
The main component of the subsidy is calculated as seventy-five percent of wages paid with respect to the qualifying period up to eight hundred and forty-seven dollars per week per employee. The employer paid portion of premiums related to employment insurance, Canada Pension Plan, Quebec Pension Plan and the Quebec Parental Insurance Plan for employees on paid leave is also included.
An employer eligible for the CEWS could also be eligible for the ten percent wage subsidy which the employer effectively receives by reducing payroll remittances subject to certain limits.
Now for employers eligible for both wage subsidies, any amounts that the employer is eligible to claim under the ten percent wage subsidy would reduce the amount that can be claimed under the CEWS. And the same goes for AI amounts received by employees participating in a work sharing program.
Special rules also apply to limit the subsidy for non arms-length employees. This can include for example a business owner and their spouse.
So if these rules apply to you make sure you take special care. Other limits can also apply. It's important to note that if an employee has received the CERB (the Canada Emergency Response Benefit) – that's a two-thousand-dollar monthly payment for those who have lost their job – the employer cannot also receive the CEWS for the same four-week period.
In these cases, if the employer wants to receive the CEWS, the employee will have to repay the CERB.
So how do you apply if you're an employer that is eligible for the CEWS?
There are three ways to apply.
- You can apply through CRA's MyBusiness account portal.
- You can also apply through a new web forms application. You're going to need to obtain a special payroll web access code if you're using this option.
- Or, you can have your representative like an accountant apply for you through the represent a client portal.
Whichever option you choose, make sure you sign up for a direct deposit before you actually do the application to make sure you're getting the funds as quickly as possible.
As you can see these rules can get quite complex so make sure you visit our COVID-19 resource hub and talk to your advisor. We're here to help.
About the video series
Get insights on the latest Canadian government programs, business risks and more in our series of Q&A videos intended to help guide businesses through the COVID-19 pandemic.