Taking Advantage of the Canada Emergency Wage Subsidy Program

Posted on February 10, 2021

The Canada Emergency Wage Subsidy (CEWS) program is helping many citizens weather the impact of COVID-19.

If you’re reading this, you’re most likely a business owner. More importantly, you’ve more than likely seen a drop in revenue since the emergence of COVID-19.

If so, it’s possible that you’re eligible for a subsidy that will cover most of your employees wages. Furthermore, the wage subsidy program could help to cover your employee wages retroactively to March 15, 2020.

With the subsidy, you can rehire workers. You can also use the subsidy to prevent future job losses. Most importantly, you can use the funds to ease your business back into normal operation.

To learn more about taking advantage of the Canada Emergency Wage Subsidy, continue reading.

What is CEWS?

The government created the Canada Emergency Wage Subsidy (CEWS) program to prevent layoffs. The program is also intended to encourage the rehiring of laid-off employees.

CEWS submits funds directly to qualified employers. So far, there have been several phases of the program.

Phase one of the program ended July 5, 2020. The second phase of the program ran from July 5 to November 21, 2020.

The government expects employers to use the funds to retain existing employees and rehire laid-off workers. Ideally, employers can even use subsidy funds to hire new workers.

Also, you may have had workers on paid leave. If so, the Canada Emergency Wage program will refund 100% of your contributions to the following programs:

• Employment Insurance
• The Canada Pension Plan
• The Québec Pension Plan

CEWS is a wage subsidy. However, that doesn’t mean that the government will pay employees’ wages.

Instead, it’s more accurate to say that the Canada wage subsidy is wage-related. In other words, the funds that you can access directly correlates to what you pay your employees.

The Canada Wage Subsidy Extension

Initially, the government established the Canada Emergency Wage Subsidy Program to run through March 15 to June 6, 2020. The program provides a 75% wage subsidy to all eligible employers.

In May, the government extended the program for 12 weeks through August 2020. In July 2020, they modified the program to give more employers access to the wage subsidy program. Also, lawmakers revised the program to make sure that it better met the needs of employers.

At that time, the government also proposed extending the wage subsidy through December 2020. Now, officials want to further extend the program until June 2021.

Due to the coronavirus, economic and health conditions are changing. Resultantly, the Canadian government wants to enhance the CEWS program further.

They want to revise CEWS to meet the latest demands generated by the coronavirus. Furthermore, they want to ensure that the program continues meeting the needs of employers.

Before the current CEWS program expires, the government will provide details on new eligibility periods. They’ll also work to make sure that the program responds to the nation’s current economic situation.

CEWS Program Rules

The government considers qualifying revenue as your inflow of cash, receivables, and other considerations. You must earn these considerations during normal business activities. In Canada, this excludes extraordinary items and earnings from non-arm’s-length partnerships and persons.

When calculating your revenue, you must use your normal accounting methods. There are some exceptions and special rules, however, for registered charities and other tax-exempt organizations.

There are also some exceptions for employers who consolidate their pay statements—as there are for employers who are a part of a joint venture or affiliated group. Finally, there are exceptions for employers who generate 90% of their revenue from partnerships that they do not deal with at arm’s length.

You can calculate your revenue using the accrual or cash method. However, you cannot use both methods.

Before applying for the Canada wage subsidy, you must choose one method or the other. Also, you must continue to use that accounting method for the duration of the Canada wage subsidy program.

The Benefits of the Canada Emergency Wage Subsidy Program

The government uses a formula to determine program eligibility. They’ll assess your eligibility using one of two calculations:

  • 75% of remuneration pay up to $874 per week
  • The lower amount between remuneration paid up to $874 per week or 75% of pre-crisis salaries

Eligible remuneration includes salaries and wages. It also includes taxable benefits.

However, severance pay is not eligible for remuneration. Likewise, items such as stock options or the use of a corporate vehicle are not eligible for the program.

In some instances, employees may not have dealt at arm’s length with an employer. In that case, the eligible remuneration amount is limited to the lesser of $874 per week or 75% of pre-crisis weekly remuneration.

The subsidy amount for this class of employees is limited to the pay periods between March 15 and June 6, 2020. Subsidies for non-arm’s length employees will take priority.

The government wants employers to make their best effort to return employee wages to pre-crisis levels. For this reason, they consider pre-crisis salaries as baseline remuneration.

In other words, the government will base remuneration eligibility on average salaries paid between July 1, 2020 and March 15, 2020. The calculation will exclude any period of seven or more days that employees did not receive pay.

CEWS Eligibility

You’ll need to take two key steps to determine if your company is eligible for the Canada Emergency Wage Subsidy. Firstly, you’ll need to meet the definition of an eligible entity.

Fortunately, this definition includes nearly all businesses in Canada. However, it does exclude public sector employees.

An eligible entity includes labor organizations as outlined by the Income Tax Act. This group includes trade unions, not for profits, and charities.

However, it excludes employees who work for municipalities and school boards. It also excludes employees who work for hospitals, universities, and colleges.

If you’re an eligible employer, your next step is to see if you qualify for the subsidy. If you experienced a 15% reduction in revenue between March 2020, you qualify for the program. Also, if you experienced a 15% reduction in revenues compared to your average revenue for January and February 2020, you qualify.

If you’re applying for the program to cover remuneration between April to June 2020, you must have experienced at least 30% in losses. Still, there are other technical accounting details that you must consider. You must also consider the treatment of subsidies and other related parties.

Between July 5 and November 21, 2020, any drop in your revenue will qualify your company for the subsidy. The government will determine your eligibility on a sliding scale relative to your qualifying revenue.

The Canada revenue agency provides a tool to help you calculate your subsidy amount. After using the calculator, you can determine the remuneration for eligible employees.

The Wage Subsidy Application: How to Apply for CEWS

You need to apply by February 1, 2021 for CEWS periods one through five. The CEWS will ask you to answer a few questions to pre-qualify your company for the subsidy.

Next, you’ll need to confirm that the CEWS periods that you want to apply for are open. You’ll also need to confirm that you’ve completed the required calculations. Also, you’ll need to have an account that you can use to set up direct deposit.

Direct deposit payments will take 3 to 5 business days. If you choose to receive CEWS funds by check, however, they’ll take approximately ten days to arrive.

You’ll need to submit a separate application for each claim period. You’ll also need to submit a separate payroll application for each one of your payroll accounts. The government provides an application guide to help you better understand the online application.

There are three ways that you can apply for the Canada Emergency Wage Subsidy. Most businesses can apply for CEWS using their “My Business Account.” Business representatives with Level 2 or 3 authorization can apply using the “Represent a Client” option.

Some business owners might have a circumstance that falls outside of these two application parameters. If so, they can use the Web Forms application after obtaining a web access code.

A Trusted Partner for Managing Your Financial Health

Now you know more about taking advantage of the Canada Emergency Wage Subsidy. Hopefully, our roundup of wage subsidy information will provide you with what you need to help your loyal employees navigate this uncertain time. With so much uncertainty, there’s never been a better time to learn more about managing finances.

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