CEWS extension: Proposed changes to wage subsidy scheme

Canada vows to extend help through CEWS until mid-2021. Here are possible changes to look out for

CEWS extension: Proposed changes to wage subsidy scheme

While Canada braces for the impact of a COVID-19 second wave, the federal government is enhancing its wage subsidy program to help businesses and their workforce weather the crisis.

Prime Minister Justin Trudeau has committed to extending the Canada Emergency Wage Subsidy (CEWS) scheme through to June 2021, with the estimated cost expected to rise to $68.5bn.

To date, over 3.7 million jobs in more than 300,000 businesses have been protected through CEWS.

Coverage extension
Claim period 9 will cover wages only up to Nov. 21 this year, but the government is introducing new parameters to the two-tier system (base rate and top-up rate) which could be implemented until mid-December.

Under the proposal, the base subsidy rate from Sept. 27 to Oct. 24 would continue to apply during Period 10, running from Oct. 25 to Dec. 19 this year.

“As such, the maximum base subsidy rate would be set at 40% for this period, and the maximum top-up subsidy rate would remain at 25%,” the government announced.

Read more: CEWS: What to expect from Canada's enhanced wage subsidy scheme

Period of revenue decline
To calculate the top-up subsidy, the government will no longer use the three-month revenue decline test. Instead, both the base and top-up rates would be determined by the year-over-year decline in the employer’s monthly revenues (for either the current or previous month).

“This means an employer with a 70% or greater revenue loss in a period would be eligible for a 65% wage subsidy,” the government said.

On the other hand, employers who use the alternative revenue decline test – which calculates the average of their January and February 2020 revenues – would receive base and top-up rates based on their monthly revenue decline relative to the average of the January-February period.

CEWS would also include a “safe harbour” rule from Sept. 27 to Dec. 19.

“This rule would entitle an eligible employer to a top-up subsidy rate that is no less than it would have received under the three‑month revenue decline test,” the government said.

Support for furloughed employees
By Oct. 25, furloughed employees will receive wage subsidies in line with other benefits under the Employment Insurance program.

The weekly subsidy of an arm’s length employee (or a non-arm’s length employee who received pre-crisis remuneration for the relevant period) would be:

  • The amount of eligible remuneration paid in respect of the week; or,
  • If the employee receives remuneration of $500 or more in respect of the week, the greater of $500 and 55% of their pre-crisis remuneration, up to a maximum subsidy of $573.

The government is expected to draft legislation to support the CEWS extension.

Read more: More Canadian employers rehiring workers through wage subsidy

Dan Kelly, president of the Canadian Federation of Independent Business, is hopeful the program will help businesses gauge “how many staff they can afford to hire, retain or call back”, especially in the face of another shutdown.

“With fears of a second wave leading to further business closures, it is absolutely critical that the federal and provincial governments find ways to provide full economic supports for affected firms,” Kelly said.

According to a KPMG survey, more than half of employers (53%) believe CEWS has helped to ease the pressure of remunerating staff amid the cash crunch, and has enabled them to cover other COVID-related costs in the meantime, HRD reported in September.

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