Like me, you’re likely frustrated by the lack of details on how the Canada Emergency Wage Subsidy programs will assist your organization to get through the current fiscal uncertainty created by the COVID-19 virus.
The Canadian Payroll Association has been kind enough to put together a very concise description of how the new 75% wage subsidy program will work and how it will interact with the original 10% wage subsidy program, which remains in effect. See “The Canada Emergency Wage Subsidy” below.
My recommendation is to claim the 10% wage subsidy (as this can be deducted from your next CRA Payroll remittance) first and then, if entitled, claim the 75% wage subsidy (which is at least six weeks away) less what you already claimed under the 10% subsidy.
Within a couple of days PayDirt Payroll will be releasing an update that will allow users to automatically calculate the 10% subsidy. We’re hoping that this update will also allow you to backdate this calculation. The 75% wage subsidy could also be automatically calculated by PayDirt Payroll but as it’s based on an income test, for each reporting period this year revenue must be at least 30% less than the same time period as last year, automation should only be done if your organization has seen a significant impact to their income, otherwise I recommend waiting until the end of each period and then manually calculate the 75% subsidy if entitled to claim it.
FYI: Both subsidies appear to apply to both existing employees and new hires. The other interesting thing to note (but I could be wrong) is the fact that neither wage subsidy specify that the employee has to be actually reporting for work, only that you have to be paying them.
If you are using PayDirt Payroll and are on one of our Access Level Agreements, implementing these changes will be covered by this agreement. Please email firstname.lastname@example.org and we will contact you to set up an appointment to install the PayDirt Payroll update and assist you with setting up the subsidy calculations.
If you’re not using PayDirt Payroll but would like more information on how we can assist you with managing your payroll needs, please feel free to reach out to me, Douglas Dickie, by email at email@example.com or phone toll free at 1.888.534.4344 extension 723.
THE CANADA EMERGENCY WAGE SUBSIDY
To help businesses keep and return workers to their payroll through the challenges posed by the COVID-19 pandemic, the Prime Minister, Justin Trudeau, proposed the new Canada Emergency Wage Subsidy to provide a 75 per cent wage subsidy to eligible employers for up to 12 weeks, retroactive to March 15, 2020.
Eligible employers include individuals, taxable corporations, and partnerships consisting of eligible employers as well as non-profit organizations and registered charities.
Public bodies are not eligible for this subsidy. Public bodies include municipalities and local governments, Crown corporations, public universities, colleges, schools and hospitals.
This subsidy is available to eligible employers that see a drop of at least 30 per cent of their revenue (see Eligible Periods). In applying for the subsidy, employers would be required to attest to the decline in revenue.
An employer’s revenue for this purpose would be its revenue from its business carried on in Canada earned from arm’s-length sources. Revenue would be calculated using the employer’s normal accounting method, and would exclude revenues from extraordinary items and amounts on account of capital.
The government will continue to work with the non-profits and charities sector to ensure the definition of revenue is appropriate to their specific circumstances.
Amount of Subsidy
The subsidy amount for a given employee on eligible remuneration paid between March 15 and June 6, 2020 would be the greater of:
- 75 per cent of the amount of remuneration paid, up to a maximum benefit of $847 per week; and
- The amount of remuneration paid, up to a maximum benefit of $847 per week or 75 per cent of the employee’s pre-crisis weekly remuneration, whichever is less.
Further guidance with respect to how to define pre-crisis weekly remuneration for a given employee will be provided in the coming days.
In effect, employers may be eligible for a subsidy of up to 100 per cent of the first 75 per cent of pre-crisis wages or salaries of existing employees. These employers would be expected, where possible, to maintain existing employees’ pre-crisis employment earnings.
Employers will also be eligible for a subsidy of up to 75 per cent of salaries and wages paid to new employees.
Eligible remuneration may include salary, wages, and other remuneration. These are amounts for which employers would generally be required to withhold or deduct amounts to remit to the Receiver General on account of the employee’s income tax obligation. It does not include severance pay, or items such as stock option benefits or the personal use of a corporate vehicle.
A special rule will apply to employees who do not deal at arm’s length with the employer. The subsidy amount for such employees will be limited to the eligible remuneration paid in any pay period between March 15 and June 6, 2020, up to a maximum benefit of $847 per week or 75 per cent of the employee’s pre-crisis weekly remuneration.
There is no overall limit on the subsidy amount that an eligible employer may claim.
Eligibility will generally be determined by the change in an eligible employer’s monthly revenues, year-over-year, for the calendar month in which the period began. The amount of wage subsidy (provided under the COVID-19 Economic Response Plan) received by the employer in a given month will be ignored for the purpose of measuring year-over-year changes in monthly revenues.
For example, if revenues in March 2020 were down 50 per cent compared to March 2019, the employer would be allowed to claim the Canadian Emergency Wage Subsidy (as calculated above) on remuneration paid between March 15 and April 11, 2020.
The table below outlines each claiming period and the period in which it has a decline in revenue of 30 per cent or more.
|Claiming period||Reference period for eligibility|
|Period 1||March 15 – April 11||March 2020 over March 2019|
|Period 2||April 12 – May 9||April 2020 over April 2019|
|Period 3||May 10 – June 6||May 2020 over May 2019|
For eligible employers established after February 2019, eligibility would be determined by comparing monthly revenues to a reasonable benchmark.
How to Apply
Eligible employers will be able to apply for the Canada Emergency Wage Subsidy through the Canada Revenue Agency’s My Business Account portal as well as a web-based application.
Employers will have to keep records demonstrating their reduction in arm’s-length revenues and remuneration paid to employees. More details from CRA regarding the application process will be made available shortly.
In order to maintain the integrity of the program and to ensure that it helps Canadians keep their jobs, the employers will be required to repay amounts paid under the Canada Emergency Wage Subsidy if they do not meet the eligibility requirements and pay their employees accordingly.
Penalties may apply in cases of fraudulent claims. In addition, anti-abuse rules will be proposed to ensure that the subsidy is not inappropriately obtained and to ensure that employees are paid the amounts they are owed.
The government is considering the creation of new offences that will apply to individuals, employers or business administrators who provide false or misleading information to obtain access to this benefit or who misuse any funds obtained under the program. The penalties may include fines or even imprisonment.
Interaction with 10% Wage Subsidy
On March 18, 2020, the Prime Minister announced a temporary 10 per cent wage subsidy. For employers that are eligible for both the Canada Emergency Wage Subsidy and the 10 per cent wage subsidy for a period, any benefit from the 10 per cent wage subsidy for remuneration paid in a specific period will generally reduce the amount available to be claimed under the Canada Emergency Wage Subsidy in the same period.
For more information on the 10% Wage Subsidy click here.
Interaction with the Canadian Emergency Response Benefit
An employer will not be eligible to claim the Canada Emergency Wage Subsidy for remuneration paid to an employee in a week that falls within the 4-week period during which the employee is eligible for the Canadian Emergency Response Benefit.
Employers who are not eligible for the Canada Emergency Wage Subsidy will still be able to furlough employees who will receive up to $2,000 a month.
The usual treatment of tax credits and other benefits provided by the government will apply. As a consequence, the wage subsidy received by an employer would be considered government assistance and be included in the employer’s taxable income.
Assistance received under either wage subsidy would reduce the amount of remuneration expenses eligible for other federal tax credits calculated on the same remuneration.