The COVID-19 pandemic has created many complicated issues for employers. Prudent employers should ensure they’re aware of the resources that may be available during this uncertain time when information regarding government support is rapidly changing.
Canada Emergency Wage Subsidy
On March 30, the federal government announced the Canada Emergency Wage Subsidy, a program that will be in place for the period between March 15 and June 6, 2020. It’s intended to help employers keep workers on their payroll in light of the difficulties caused by the COVID-19 pandemic, bring workers laid off for COVID-19-related reasons back to work and/or resume normal operations, if permissible.
The wage subsidy program may bolster the ability to continue operating essential businesses despite decreases in revenue. For businesses that are unable to operate, or can only operate partially, the CEWS may offer the ability to provide support to employees. Employers are encouraged to seek legal advice when determining how to proceed and communicate with employees.
The CEWS will be available to eligible employers that have faced a drop of at least 15 per cent in gross revenue for the month of March 2020 and 30 per cent for April and May. For the purposes of determining eligibility, employers will be able to compare their gross revenue for March, April and May to either: (1) the average gross revenue earned in January and February 2020, or (2) the same month in 2019 (the comparator period).
Once a comparator period is selected, it will apply across all three periods. Gross revenue, for the purposes of CEWS’ eligibility, is gross revenue earned from carrying on business in Canada from arm’s length sources. Employers can use the accrual or the cash method to determine gross revenue. Once a method is selected, that method must be used for each monthly application. Revenue from extraordinary items and amounts on account of capital will be excluded from the calculation of gross revenue, as well as revenue from non-arm’s length sources.
Public institutions aren’t eligible for the wage subsidy program. Employers, particularly publicly-funded organizations, should consult their corporate or tax counsel to confirm whether their organization falls within the definition of “public institution.”
Eligible employers can make a claim under the CEWS program in respect of their Canadian employees who have not been without remuneration by the eligible entity for a period of more than 14 consecutive days in the qualifying period. The subsidy amount for a given employee on eligible remuneration paid for the eligible remuneration period is generally determined as the greater of (a) and (b), where (a) is 75 per cent of the amount of remuneration paid during a week (up to a maximum of $847 per week), and (b) is the lesser of the amount of remuneration paid, 75 per cent of the employee’s pre-crisis weekly remuneration (or baseline remuneration) and $847.
The pre-crisis weekly remuneration for a given employee would be based on the average weekly remuneration paid between Jan. 1 and March 15, 2020, inclusively, excluding any seven-day periods in which the employee didn’t receive remuneration.
In an example provided by the federal government, an employer would be able to continue paying $800 per week to an employee who regularly earns $800 per week, and the employer would receive a $600 subsidy for that employee.
Since the government announced the wage subsidy program, it has also consistently noted that it encourages employers that are eligible for CEWS to make their best efforts to top-up employees’ wages to their pre-crisis levels.
The legislation giving effect to CEWS (Bill C-14) received Royal Assent on April 11, 2020. The subsidy is enacted through amendments to the Income Tax Act.
Canada Emergency Response Benefit
On April 1, 2020, the government introduced the Canada Emergency Response Benefit, which provides income relief for eligible applicants who have stopped worked as a result of the COVID-19 pandemic.
The government confirmed that anyone who became eligible for regular and sickness employment insurance benefits on or after March 15 would receive the CERB (applicants eligible for EI benefits prior to March 15 will continue to be processed under the existing EI system). The amount of the income relief is $500 every week or $2,000 paid every four weeks. Recipients of the CERB should be aware that the payments are taxable, but taxes won’t be deducted at source.
The CERB is available to both employees and self-employed workers who have income of $5,000 or more from employment, self-employment or pregnancy or parental EI benefits or the Quebec equivalent in the 12 months preceding the application for the CERB; are at least 15 years old and a resident of Canada; and have ceased working for reasons related to COVID-19 for at least 14 consecutive days within the initial four-week period in respect of which they apply for the payment.
Eligibility for the CERB is triggered by 14 consecutive days without employment and other specified income during the first four-week period. For subsequent four-week periods, the employee must confirm they have received no employment income and other specified income in the prior four-week period and expect no income during the subsequent four weeks.
The CERB application, which can be found here, is set up to accept applications on certain days of the week based on the applicant’s birth month, so applicants should ensure when they’re able to apply.
Additional details regarding the CERB and regulations under the Canada Emergency Response Benefit Act are expected to be released soon.