Canada Emergency Wage Subsidy (CEWS)
Update: April 21, 2020
The government has been changing the rules constantly in respect to the wage subsidy. In my example below, total wages are $41,170.33 and the government will provide a subsidy of $30,692.31. Therefore, the total net wages for the month is $10,478.02. And so, the company will be out of pocket on source deductions until the subsidy is paid into your account. If you have ‘My Business Account’ with CRA, you can set this up with direct deposit. CRA has developed their own online calculator. Unfortunately, they have made it very complicated.
How to Apply
The Canada Revenue Agency is opening up applications on April 27, 2020. There are three alternative methods to apply and they are as follows:
1. Open your own My Business Account at CRA online.
2. Our office could apply on behalf of the client using online access which is referred to as ‘Represent a client’. The client will have to sign off and approve the calculations.
3. CRA maybe using a separate online application form. There is nothing available at this time.
The rules are as follows regarding the wage subsidy:
1. It applies for wages paid between March 15, 2020 and June 6, 2020.
2. There are two methods to calculate the drop in revenue
a) Regular method
Monthly revenues for March 2020 must drop 15% from March 2019.
Monthly revenues for April 2020 must drop 30% from April 2019.
Monthly revenues for May 2020 must drop 30% from May 2019.
b) Alternative method
You can calculate the average revenues from January and February 2020 to the subsequent period. If the March revenues drop 15% from the average then business will qualify for the subsidy. If the April 2020 revenues are down 30% from the average of January and February 2020, then the business will qualify for the subsidy. If the May 2020 revenues are down 30% from the average of January and February 2020, then the business will qualify for the subsidy. The alternative approach is ideal for companies that are new in business and may not have had higher revenues in 2019.
Please note, once a method is used, it cannot be changed
3. You cannot apply for the Canadian Emergency Wage Subsidy and the Temporary Wage Subsidy at the same time.
4. The maximum wage subsidy is as follows:
Wages up to $847 per week will achieve a 100% subsidy back from the government.
5. There is no short cut to calculate the wage subsidy. You must do the math for each employee to calculate the wage subsidy. You must keep your calculations to support the claim.
In the example below the wages and subsidy will be as follows ignoring employee benefits:
This table is an illustration and it will change based on the individual needs and may not be accurate to you.
The maximum pay period will change on the frequency you pay your employee.
Temporary Wage Subsidy
CRA has produced a temporary wage subsidy on income taxes withheld on payroll not CPP and EI. The subsidy can only be used by Canadian Controlled Private Corporations. This is only for existing payroll account not new accounts set up. CRA is applying a subsidy for wages paid to employees between March 18, 2020 and June 20, 2020.
Canada Emergency Wage Subsidy
The federal government has announced a wage subsidy to cover 75% of salaries for businesses that qualify for up to 3 months. The subsidy is retroactive to March 15, 2020. The purpose of the wage subsidy program is to help employers that have been hurt by the Covid-19 pandemic and that there is an incentive to keep workers employed.