The Canada Emergency Wage Subsidy (CEWS) has been an important program for businesses struggling with the economic fallout of the pandemic. This program (which began on March 15, 2020) was designed to keep employees on the payroll during a time when businesses were experiencing unprecedented disruption in revenue. The federal government is phasing out this program by reducing the subsidy rate over the remaining four periods, from June 6 to Sept. 25, 2021.

The phase out of the CEWS program is being supplemented with a new policy called the Canada Recovery Hiring Program (CRHP). Consisting of six four-week periods and designed to get employees fully back to work, this program (which started on June 6 and ends on Nov. 20, 2021) offsets a portion of the extra costs employers may face as they reopen – either by increasing wages, increasing hours worked or hiring more staff.

The amount provided by the CRHP is calculated by applying the subsidy rate for the respective period to the incremental payroll costs, which is the difference between the current period payroll costs and the base period payroll costs from March 14 to April 10, 2021. As a business slowly recovers and starts to hire more employees or increases employee hours, its revenues will slowly return to normal, resulting in a reduced CEWS subsidy. In these situations, the CRHP bridges the gap and allows for a more targeted – sometimes higher – subsidy, reflecting increases in payroll costs.

Many of the eligibility requirements for the CRHP are the same as the CEWS program, with the main difference being the subsidy calculation. The first four periods of the CRHP overlap the CEWS program, resulting in many businesses qualifying for both subsidies. An eligible employer cannot apply for both subsidies, but will be allowed to apply for the program which results in a higher subsidy.

For additional information related to the CRHP, please see:

• Appendix A – Table summarizing the CRHP
• Appendix B – Specific details on the CRHP
• Appendix C – Example provided in the 2021 federal budget, outlining the interaction between CEWS and CRHP

It will be important to review both the CEWS and CRHP subsidy calculation for each overlapping period to determine the program with the highest subsidy amount. Consult your Baker Tilly advisor today to find out which subsidy will help your business the most.

Appendix A: Table summarizing the CRHP program

* Period 17 of the Canada Emergency Wage Subsidy would be the first period of the Canada Recovery Hiring Program. Period identifiers have been aligned for ease of reference.

Appendix B: Details of the CRHP

• Subsidy amount is equal to the subsidy rate for a qualifying period multiplied by the incremental remuneration for that same qualifying period.
• Incremental remuneration for a qualifying period is the difference between an employer’s total eligible remuneration paid to eligible employees for the qualifying period and its total eligible remuneration paid to eligible employees for the base period of March 14 to April 10, 2021. In both the qualifying period and the base period, eligible remuneration for each eligible employee would be subject to a maximum of $1,129 per week.
• Eligible employers for CRHP would generally be those eligible for CEWS. However, a for-profit corporation must be a Canadian-controlled private corporation (including a cooperative corporation that is eligible for the small business deduction).
• Eligible employers (or their payroll service provider) would be required to have had a payroll account open with the CRA on March 15, 2020.
• An eligible employee must be employed primarily in Canada by an eligible employer throughout a qualifying period (or the portion of the qualifying period throughout which the individual was employed by the eligible employer).
• Furloughed employees are not eligible.
• Eligible remuneration generally includes salary, wages and other remuneration for which employers are required to withhold or deduct amounts because of the employee’s income tax obligations, excluding:
  • Severance pay; and
  • Other items such as stock option benefits and personal use of a corporate vehicle.
• Limitation for non-arm’s length employees is the same limitation that applies for CEWS and cannot exceed their baseline remuneration determined for that week.
• To qualify for the program, an eligible employer would have to experience a revenue decline more than:
  • 0 per cent, for the qualifying period between June 6, 2021 and July 3, 2021; and
  • 10 per cent, for qualifying periods between July 4, 2021 and Nov. 20, 2021.

• Revenue decline is calculated in the same manner as required under CEWS. Employer can elect to use either the general or alternative approach but must continue with the selected determination and cannot change.
  • General approach – Comparing employer’s revenue from the current month to that of the same calendar month (pre-pandemic).
  • Alternative method – Comparing employer’s revenue from the current month to the average of its Jan. 2020 and Feb. 2020 revenue.
  • Deeming rule provides that an employer’s decline in revenues for any particular qualifying period is the greater of its decline in revenues for the particular qualifying period and the immediately preceding qualifying period.

Appendix C: Example provided in the 2021 federal budget outlining the interaction between CEWS & CRHP.

Dorothy and Stan run a bookstore whose storefront was shut down sporadically through the winter and spring due to public health restrictions. While their business survived, they had to lay off three of their 10 employees, whom they pay $600 per week. Their baseline payroll from March 14 to April 10 was $16,800 (i.e., 7 employees x $600 x 4 weeks). As public health restrictions are lifted and the vaccination campaign continues, their business begins to recover. In May, their revenues are still down 50 per cent from their level before the pandemic, but are only down 20 per cent in June, and by July are close to their pre-pandemic level. As a result, they are able to hire back their three laid-off employees starting June 6, and are even able to add an additional employee starting July 4. As a result of measures proposed in the budget, Dorothy and Stan’s business will benefit from either the extended Canada Emergency Wage Subsidy or the new Canada Recovery Hiring Program:

• For June 6 to July 3, their payroll is $24,000. Their business would be eligible for a wage subsidy rate of 40 per cent (based on a 50-percent revenue decline), resulting in a wage subsidy of $9,600. Alternatively, the business would be eligible for a hiring subsidy rate of 50 per cent, which would be applied to the difference between its current payroll and its baseline payroll, resulting in a hiring incentive of $3,600. They are better off claiming the wage subsidy of $9,600 for this period.
• For July 4 to July 31, their payroll is $26,400. Their business would be eligible for a wage subsidy rate of 8.75 per cent (based on a 20 per-cent revenue decline), resulting in a wage subsidy of $2,310. Alternatively, the business would be eligible for a hiring subsidy rate of 50 per cent, which would be applied to the difference between its current payroll and its baseline payroll, resulting in a hiring incentive of $4,800. In this instance, they are better off claiming the hiring incentive of $4,800 for this period. In total, Dorothy and Stan will be eligible for at least $14,400 in support from these two measures to help their business rebuild as the economy recovers.