COVID-19 Wage Subsidy Programs in Canada

The coronavirus has brought on the need for different wage subsidy programs in Canada. The Canada Emergency Wage Subsidy (CEWS) is to help Canadian small businesses negatively impacted by the COVID-19 pandemic. This emergency wage subsidy provides 75 per cent of your employees’ wages (for a maximum benefit of $847 per week) for up to 12 weeks. (Note: employees will continue to have to pay taxes on these wage subsidies.) As a small business, it allows you to rehire laid-off workers.

Who is an eligible employer?

Before applying for the CEWS, it’s essential to make sure your business is eligible. To receive the wage subsidy, an employer must meet the guidelines. Also, you must have seen a suitable reduction in revenue and had a payroll account with the Canada Revenue Agency (CRA) on March 15th, 2020.

The Canadian government has a list of the types of employers eligible for the wage subsidy. Those include:

  • individuals (includes trusts)
  • taxable corporation
  • individual exempt from corporate tax, besides a public institution
    • agricultural organization
    • benevolent or fraternal benefit society or orders
    • board of trade
    • chamber of commerce
    • labour organization or society
    • non-profit corporation of scientific research and experimental development
    • non-profit organization
  • Registered charity
  • The partnership of eligible employers

Note that public institutions aren’t eligible for the wage subsidy. Crown corporations, local governments, municipalities, public universities, schools, and hospitals also do not qualify.

Determine your eligibility for the Canada Emergency Wage Subsidy (CEWS)

Being an eligible employer isn’t enough to qualify for the wage subsidy. You also have to experience a qualified reduction in revenue.

You must figure out if a decrease in your company’s revenue makes you eligible for the wage subsidy in a specific qualifying period.

Once you figure out that your business qualifies for the CEWS in one claim period, you’ll qualify in the claim periods that follow.

Start by calculating your revenue reduction. Compare your business’s revenue at the beginning claim period month with your company’s baseline revenue. Your company’s baseline revenue is the revenue earned in one of two time periods: your company’s revenue in the corresponding month in 2019 or the average company revenue during January and February 2020.

It’s up to you to choose one of the two baseline revenue options when applying for the wage subsidy. You won’t be able to change the calculation in the two following periods.

There are three eligible periods so far for the CEWS.

The first eligibility period is for between March 15th, 2020, and April 11th, 2020. They use baseline revenue from March 2019 or the average of January and February 2020. This is for March 2020 eligibility period revenue and requires a 15 per cent reduction.

The second eligibility period is for between April 12th, 2020, and May 9th, 2020. They use baseline revenue from April 2019 or the average of January and February 2020. This is for the April 2020 eligibility period revenue and requires a 30 per cent reduction.

The third eligibility period is between May 10th, 2020, and June 6th, 2020. They use baseline revenue from May 2019 or the average of January and February 2020. This is for May 2020 eligibility period revenue and requires a 30 per cent reduction.

For the wage subsidy, eligible revenue means it is revenue earned in Canada from selling goods, performing services, and from others’ use of your resources.

Make sure to use your company’s regular accounting method when determining revenue. You may use the cash or accrual method, but you must use the same process.

Determine your eligible employees

Learning who is an eligible employee isn’t overly complicated. To be eligible, an employee must be an individual employed in Canada by an eligible employer during the period of the claim. The only exception is if the employee didn’t receive any wages from the employer for 14 days in a row or more.

Being an eligible employee is based on whether the employee works in Canada, not where they reside.

If you’re an employee who has been laid off or furloughed due to COVID-19, you can become an eligible employee retroactively. The only caveat is that the employer has to rehire you, and your retroactive pay and status meet the eligibility criteria. Your employer must rehire you and pay you before they can include you in their calculation for the wage subsidy.

Calculate your subsidy amount

When applying for the CEWS, you’ll need to provide information about your business, such as the number of eligible employees and your gross payroll. You can estimate your business’s subsidy amount ahead of time by using the government of Canada’s CEWS subsidy amount calculator.

Before applying for the subsidy, you’ll want to make sure your business is eligible. It’s also essential to be truthful in your application because after you apply, they will check and verify your information.

How to apply for the Canada Emergency Wage Subsidy (CEWS)

Starting April 27th, applications are open for the CEWS. For most businesses, the simplest way to apply is by using CRA My Business Account. If you’re someone who represents a business, you can apply using Represent a Client. There’s also a separate online application you can use to apply.

Note the CEWS is processed at the payroll program (RP) account level. You’ll need to file a separate claim for each RP account that your business has.

If you receive a login error or you’re running into social insurance number (SIN) validation problems, reach out to the CRA for help.

Contact the CRA: Canada Emergency Wage Subsidy (CEWS)

The CRA has put together a particularly helpful list of frequently asked questions. Also online, you’ll find your personalized account information from CRA My Business Account. Here you can apply for the CEWS and update your business and banking information.

You can also reach the CRA by phone. In addition, the CRA has set up a dedicated phone line for the CEWS. If you have any questions and prefer to speak to a live human, you can call 1-833-966-2099.

Without a doubt, these Wage Subsidy Programs in Canada can really help a lot of people during this challenging time. Besides asking the CRA, you may have other financial questions we could help with. Learn about credit counselling, budgeting, and financial literacy above all. Contact us today to start your debt-free journey.

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