What is CEWS?
Retailers in Canada who have seen a drop in revenue due to the COVID-19 pandemic, are eligible for a subsidy to cover part of their employee wages.
The CEWS program has been significantly adjusted several times since it began in 2020, most recently in the April 2021 federal Budget and, before that, in the Fall Economic Update released on November 30, 2020.
The CEWS program is now extended until September 2021, with three claim periods of reduced support leading up to what could be the wage subsidy’s final month, pending further extension.
A new hiring subsidy program, the Canada Recovery Hiring Program, has been established from June to November 2021. Retailers bringing staff back during recovery will be able to turn to it as an alternative to CEWS to help with payroll costs.
Retailers should be aware that the measures announced in the April 2021 budget still need to pass in the legislature. Parliamentary negotiations may affect them.
April 2021 Federal Budget updates to the CEWS program
The CEWS Program has been extended until September 25, 2021 but for claim periods starting July 4, 2021 (periods 18, 19 and 20), the CEWS will only offer reduced financial support. Starting July 4, retailers experiencing revenue declines of less than 10% will not qualify for a wage subsidy.
For periods 15, 16 and 17, i.e., up until July 4, 2021, the base subsidy remains at the current rate of 0.8x revenue reduction between 0% and 50%. Hence the maximum assistance through the CEWS base subsidy is 40%. The CEWS top up subsidy remains in place for companies that have experienced revenue reductions greater than 50% and is available at 1.75x the revenue losses between 50% and 70% (for a further maximum of 35%).
However, over the final three periods (18, 19 and 20; July 4 to September 25, 2021), the rate for the base subsidy will be reduced first by subtracting 10% from your revenue loss percentage and then using multipliers of 0.875 (period 18), 0.625 (period 19) and then a sharp drop to 0.25 (period 20). The top up subsidy will also be reduced but more simply, by applying a rate of 1.25 (period 18), 0.75 (period 19) and 0.5 (period 20).
The maximum effective rates are therefore 75% until July 4, then 60%, 40% and 20%, respectively, for periods 18, 19 and 20.
Canada Emergency Wage Subsidy Base and Top-up Rate Structure,
Periods 17 to 20
– July 3
– July 31
– August 28
– September 25
|Maximum weekly benefit per employee||$847||$677||$452||$226|
|70% and over||75% (i.e., Base: 40% + Top-up: 35%)||60% (i.e., Base: 35% + Top-up: 25%)||40% (i.e., Base: 25% + Top-up: 15%)||20% (i.e., Base: 10% + Top-up: 10%)|
|50-69%||Base: 40%+ Top-up: (revenue decline -50%) x 1.75|
(e.g., 40% + (60% revenue decline – 50%) x 1.75 = 57.5% subsidy rate)
|Base: 35%+ Top-up: (revenue decline -50%) x 1.25|
(e.g., 35% + (60% revenue decline – 50%) x 1.25 = 47.5% subsidy rate)
|Base: 25%+ Top-up: (revenue decline -50%) x 0.75|
(e.g., 25% + (60% revenue decline – 50%) x 0.75 = 32.5% subsidy rate)
|Base: 10%+ Top-up: (revenue decline -50%) x 0.5|
(e.g., 10% + (60% revenue decline – 50%) x 0.5 = 15% subsidy rate)
|> 10- 50%||Base: revenue decline x 0.8|
(e.g., 30% revenue decline x 0.8 = 24% subsidy rate)
|Base: (revenue decline – 10%) x 0.875|
(e.g., 30% revenue decline – 10%) x 0.875 = 17.5% subsidy rate)
|Base: (revenue decline – 10%) x 0.625|
(e.g., 30% revenue decline – 10%) x 0.625 = 12.5% subsidy rate)
|Base: (revenue decline – 10%) x 0.25|
(e.g., 30% revenue decline – 10%) x 0.25 = 5% subsidy rate)
|0-10%||Base: revenue decline x 0.8 |
(e.g., 5% revenue decline x 0.8= 4% subsidy rate)
Furloughed employees: The subsidy for furloughed employees will be capped at $595/week bringing it into line with the maximum amount available under EI.
Deeming rule: The deeming rule continues in place that 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.
This essentially means automatic qualification at the same revenue decline level for two periods in a row. It also means that you would get one last month of CEWS support even if your revenues show no decline in the current month as long as your previous month did have a revenue decline.
Those who happen to experience deeper relative revenue drops in successive months would of course be free to use the revenue decline of the current month if that would deliver a better CEWS outcome.
New Executive pay claw-back: There is a new rule designed to deter companies from receiving CEWS while increasing executive compensation in 2021 beyond 2019 levels. The amount of the wage subsidy required to be repaid would be equal to the lesser of:
- the total of all wage subsidy amounts received in respect of active employees for qualifying periods that begin after June 5, 2021; and
- the amount by which the corporation’s aggregate specified executives’ compensation for 2021 exceeds its aggregate specified executives’ compensation for 2019.
This requirement to repay would be applied at the group level and would apply to wage subsidy amounts paid to any entity in the group. Specified executives are defined for the purposes of this rule and generally include CEOs, CFOs and a corporation’s three other most highly compensated executives. View more information.
Current and Forthcoming CEWS Claim Periods
|Period 14||Period 15||Period 16|
|March 14 to April 10, 2021||April 11 to May 8, 2021||May 9 to June 5, 2021|
Summary of Fall 2020 CEWS changes.
The Content Below Only Applies to Claim Periods After December 19, 2020 Until July 3, 2021 (end of period 17)
The Fall Economic Update released on November 30, 2020 made adjustments to the CEWS program. It provided for two different levels of assistance depending on the claim period.
The major Fall 2020 change was with respect to support for those businesses that experienced revenue reduction of more than 50% (the most deeply affected, to use government’s terminology), for which there was an enhanced subsidy that kicked-in on December 20, 2020.
The then-existing 0.8x multiple for the base subsidy on a revenue drop between 0% and 50% remained in place, so 40% maximum. But for corporations down by >50%, the multiple for the top-up subsidy was raised to 1.75x (from 1.25x), for another 35% in that tranche between >50% and <70%, hence 75% maximum in total. (See Period 17 in the above table in the April 2021 budget section).
The subsidy for furloughed employees was capped at the greater of $500 or 55% of pre-crisis remuneration up to a maximum subsidy of $590/week*, in line with the maximum amount available under EI/CRB. Employers continued to be entitled to claim under the wage subsidy their portion of contributions in respect of the Canada Pension Plan, EI, the Quebec Pension Plan and the Quebec Parental Insurance Plan in respect of furloughed employees but not for active employees.
*Note: The $590/week maximum subsidy for furloughed employees after December 19, 2020 is $17/week higher than that available for periods before December 20, 2020, as the corresponding EI rate also increased.
The Content Below Only Applies to Claim Periods Before December 20, 2020
Claims for the twelve weeks running from September 27, 2020 through December 19, 2020 will provide a subsidy for up to 65% of eligible wages. (Applications for the September 27 to October 24, 2020 claim period are no longer open).
The CEWS base subsidy for the period September 27, 2020 until December 19, 2020 has a subsidy rate of 0.8x revenue reduction between 0% and 50%. Hence the maximum assistance through the CEWS base subsidy is 40% of eligible wages up until December 19, 2020.
For these claim periods, the subsidy for furloughed employees is capped at the greater of $500 or 55% of pre-crisis remuneration up to a maximum subsidy of $573/week, in line with the maximum amount available under EI/CRB. Employers also continue to be entitled to claim under the wage subsidy their portion of contributions in respect of the Canada Pension Plan, EI, the Quebec Pension Plan and the Quebec Parental Insurance Plan in respect of furloughed employees but not for active employees.
For those with YOY revenue reductions in excess of 50% in these claim periods, there is a top-up subsidy on eligible wages of 1.25x the revenue loss between 50% and 70%, which maxes out at a subsidy for 25% of eligible wages, bringing the maximum total subsidy to 65% (i.e., 40% base + 25% top-up).
Reference Periods – Current for all Claim Periods Open for Application
Your revenue for a month is measured either against revenue in the same month last year or against the average of January and February 2020.
You can also choose to compare either the current month or the immediate past month to its corresponding month in a year earlier as the basis to determine the assistance due for the current month (or can compare either the current month or the immediate past month against the average of January and February 2020). That ensures that you will receive at least two months at consistent levels of financial support.
If you do choose to use the January & February 2020 average for comparison purposes for CEWS, you must also use that method for CERS and vice versa.
For periods beginning September 27, 2020, applicants for the top-up subsidy can use the current month (or immediate prior month) YOY comparison in the same way as they do for the base CEWS subsidy. However, you can still opt to use the previous rolling three-month average YOY comparison if it would be advantageous to do so.
Hence, the CEWS top-up subsidy is calculated based on the better of (a) the same current month/previous month year-over-year comparison as exists for the base CEWS; or (b) the three-month revenue decline compared year-over-year.
Further detail on the CEWS program can be found at on the Government of Canada website.
How to apply
There are three options for retailers to apply for CEWS with CRA:
- Most retailers will apply using their My Business Account
- Business representatives may also apply using Represent a Client
- Alternatively, a retailer may use the Web Forms application
- RCC’s COVID-19 Relief Measures by Region
- CEWS application
- The CEWS Backgrounder
- CEWS Subsidy Calculator
The federal government established the Canada Emergency Wage Subsidy (CEWS) to help employers keep staff on payroll despite revenue declines caused by COVID-19.
CEWS support takes the form of government subsidies based on specific criteria that include revenue reduction levels. First established in the early stages of the pandemic, the CEWS program has undergone various developments and extensions since then.
Now extended until September 2021, subsidies from the CEWS program will be reduced gradually starting July 2021. Starting June 2021, publicly listed companies that receive the CEWS but whose senior executives receive higher compensation in 2021 than they did pre-COVID (2019) will have to return the excess in executive compensation to the government.
Employers can combine the CEWS and the WS program. However, WS benefits received by employees will reduce the amount of CEWS on a dollar for dollar basis. For example, an employer eligible for $500 in CEWS with an employee who received $275 through WS benefits, would receive a subsidy of $225 ($500 – $275).
For further information regarding the interaction between WS and CEWS you can find more information on the government’s site. View information.
For further information, please contact: Karl Littler, Senior Vice President, Public Affairs at email@example.com or 416-906-0040.