The Canada Emergency Wage Subsidy (CEWS) program – which went through a facelift before hitting the House of Commons – was revised just before receiving Royal Assent on April 11, 2020. The intent of this program is to provide financial support to businesses that were affected by COVID-19 – in order to prevent further job losses, encourage employers to re-hire workers previously laid off and help transition Canadian businesses back into a thriving economy post pandemic.
As the government is finding out, it is difficult to draft legislation that can help everyone, particularly when it is drafted this quickly. As a result, we are now in our third round of changes.
The table below details the changes with the CEWS between the original announcement date (April 1), the revision date (April 8) and the Royal Assent date (April 11). For further details on the revised CEWS, reference our Federal relief measures guide.
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Eligible entity |
Individuals, taxable corporations, partnerships (all partners are eligible entities), NPOs and charities. |
No change. |
The following exempt entities have been added:
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Percentage of decrease in revenue required: |
A 30 per cent decrease in gross revenue is required for the months of March, April and May. |
A 15 per cent decrease in gross revenue is required for March, while April and May remain at 30 per cent. |
A deeming provision was added to provide a level of certainty to employers. Once an employer is found eligible for a specific period, the employer automatically qualifies for the next period. |
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Periods used to determine decrease in revenue percentage: |
March 2019 vs. March 2020 April 2019 vs. April 2020 May 2019 vs. May 2020 |
Use either method 1 or method 2 (consistently throughout):
Method 1
Method 2
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The legislated calculation under method 2 is designed to accommodate start-up businesses that did not operate a business continuously throughout January and February. |
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CEWS interaction with Canada Emergency Response Benefit (CERB): |
Employer would not be eligible to claim the CEWS for remuneration paid to an employee in a week that falls within a four-week period for which the employee is eligible for the CERB. |
Eligibility for the CEWS of an employee’s remuneration will be limited to employees that have not been without remuneration for more than 14 consecutive days in the eligibility period (i.e., from March 15 to April 11, from April 12 to May 9 and from May 10 to June 6).
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No change. |
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Accounting method used to calculate revenue: |
Revenue in Canada earned from arm’s length sources is calculated using the employer’s normal accounting method and would exclude revenues from extraordinary items and amounts on account of capital. |
You can now use either the accrual method or the cash method, if it is applied consistently. |
Qualifying revenue has been further defined as follows: “inflow of cash, receivables or other consideration arising in the course of the ordinary activities of the eligible entity – generally from the sale of goods, the rendering of services and the use by others of resources of the eligible entity.
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Calculating revenue for eligible employer: |
Not applicable. |
Not applicable. |
Provision added to assist with the calculation of revenue for the four following groups:
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Calculating revenue for charities and other exempt entities: |
Normal accounting method with further details to be provided. |
You are allowed to use either the accrual method or the cash method, as long as it is applied consistently. You are also permitted to choose whether or not to include revenue from government sources, as long as it is applied consistently.
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Qualifying revenue is further defined as follows:
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The term “pre-crisis remuneration” used in the subsidy calculation: |
Not previously defined. |
This is defined as the average weekly remuneration paid between January 1 and March 15, 2020 inclusively, excluding any seven-day periods in which the employee did not receive remuneration.
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Changed the name from “pre-crisis remuneration” to “baseline remuneration”. |
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Subsidy for non-arm’s length employees: |
Subsidy for such employees will be limited to the eligible remuneration paid in any pay period between March 15 and June 6, 2020, up to a maximum benefit of the lesser of $847 per week or 75 per cent of the employee’s pre-crisis weekly remuneration.
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The previous limitation still applies, but an additional requirement adds that the non-arm’s length employee must have been employed prior to March 15, 2020 to qualify for the subsidy. |
No change. |
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Refund of certain payroll contributions: |
Not previously provided. |
This is a new 100 per cent refund for certain employer-paid contributions to Employment Insurance, the Canada Pension Plan, the Quebec Pension Plan and the Quebec Parental Insurance Plan. This refund is for those employees that are on leave with pay for which the employer is eligible to claim CEWS. |
No change. |
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Penalties, fines and repayment: |
Ineligible claims would be subject to repayment of the amount with penalties in cases of fraudulent claims that could result in fines or imprisonment (undefined). |
Ineligible claims would be subject to repayment of the amount with penalties, in cases of fraudulent claims that could result in fines or imprisonment. In his press release on April 8, Minister Morneau mentioned possible fines of 225 per cent of the subsidy amount and up to five years in prison. Employers who engage in artificial transactions to reduce revenue for the purpose of claiming the CEWS would be subject to a penalty equal to 25 per cent of the value of the subsidy. |
Specific new legislative penalty provisions related to CEWS are:
No other provisions related to penalties or offences were legislated. Already existing penalties and offences would apply. |
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