July 22, 2020
We would like to provide you with an update on changes to the Canada Emergency Wage Subsidy (CEWS). The following changes are based on the government’s legislation on July 21, 2020:
WHAT CHANGES WERE ANNOUNCED?
EFFECTIVE JULY 5, 2020, CEWS WILL NOW BE SPLIT INTO TWO COMPONENTS.
1) Base Subsidy – Up to 60% of employee’s wages until August 29, 2020.
After August 29, 2020, base subsidy % decreases depending on CEWS period. See APPENDIX.
2) Top-up Subsidy – Up to 25% of employee’s wages until November 21, 2020.
Employers can receive up to 85% (60% plus 25%) until August 29, 2020 of employee wages if they meet the requirements for the maximum Base Subsidy and Top-up Subsidy. The combined maximum CEWS is reduced to 75%, 65% and 45% respectively for CEWS periods after August 29, 2020.
Where the drop in production/collections does not meet the requirement for the maximum subsidy, employers can still receive a reduced CEWS.
The maximum Base Subsidy for a CEWS period is available where revenues have dropped by at least 50%. Where production/collections have dropped between 0 – 49%, you will still be eligible to receive the Base Subsidy, but it will be reduced on a sliding scale. See attached appendix for details.
A new Top-up Subsidy of up to 25% of an employee’s wages is available where average monthly revenues from the three preceding months decreased by at least 50% compared to average monthly revenues of same three months in 2019 or January 1 to February 29, 2020. The maximum Top-up Subsidy of 25% is available where production/collections drop by at least 70%. See attached appendix for details.
For example, for the July claim period, if average monthly revenues from April 1 to June 30, 2020 decreased by 70% compared to April 1 to June 30 in 2019 or January 1 to February 29, 2020, then you would be eligible for the maximum Top-up Subsidy of 25%.
OLD RULES CAN STILL BE APPLIED UNTIL AUGUST 29th, 2020
For CEWS periods up until August 29th, the government is allowing you to calculate the CEWS under the old rules and new rules. You will receive the greater of the two amounts.
In other words, you will receive at least as much CEWS as you would have received under the old rules until August 29, 2020. After August 29, 2020, only the new rules will apply.
The deadline to file CEWS applications is January 31, 2021.
CEWS AVAILABLE TO MORE EMPLOYEES
Effective July 5, 2020, employees who have been without pay for 14 or more consecutive days in an eligibility period are eligible for CEWS. In other words, you can apply for CEWS for employees hired/rehired at the end of a CEWS period or even if they worked for one day during the claim period.
Baseline remuneration for arms-length (non-related) employees is no longer required to be calculated in computing CEWS for periods beginning July 5, 2020.
Related employees still require a baseline remuneration (i.e. pre-crisis pay) to qualify for CEWS. However, effective July 5, 2020, the baseline remuneration is calculated based on average weekly remuneration paid from either January 1 to March 15, 2020 or July 1, 2019 to December 31, 2019. Previously, a related employee could only receive CEWS if they were paid salaries between January 1 to March 15, 2020.
Employees who have not returned to work but are still being paid will continue to be eligible for CEWS under the old rules until August 29, 2020. After August 29, 2020, the CEWS for these employees would be changed to be in line with Canada Emergency Response Benefits (CERB) and/or Employment insurance (EI) benefits.
DEEMING RULE HAS CHANGED
Previously, where your production/collections decreased by at least 30% in the month prior, you were deemed to automatically qualify for CEWS for the current month. This rule has changed, such that in determining your new CEWS, you can use either the decrease in revenue in the current month or the prior month, whichever is higher to determine which provides you the bigger subsidy. For example, if in July and August, your production/collections decreased by 30% and 20% respectively, you can use the 30% decrease in July to determine your August CEWS.
HOW DOES THIS IMPACT YOU?
1) Getting the maximum subsidy will be more difficult as it requires a 50% decrease in production/collection compared to a 30% decrease under the old rules.
2) For those who were exceeding 70% of their pre-crisis production/collections, they may now be eligible to receive a reduced CEWS whereas previously they may not have been eligible for any CEWS.
WHAT SHOULD I DO?
1) Determine if you qualify for the Top-up Subsidy:
Compare your average monthly revenues/collection for the three months immediately before the current claim period to either
a) Average monthly revenue/collection for same three months in 2019; or
b) Average monthly revenue/collection for January and February of 2020
Where there is at least a 50% drop, you qualify for the Top-up Subsidy. Where there is at least a 70% drop, you qualify for the maximum Top-up Subsidy of 25%.
2) Monitor your production/collections and determine whether you qualify for the Base subsidy.
Any decrease in production/collections compared to baseline production/collections in the current month of preceding month will result in you being eligible for the Base Subsidy for the current month. However, the smaller the decrease in production/collections, the lower the subsidy.
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