Moore Stephens

COVID-19: 75% Emergency Wage Subsidy


Last update: August 6, 2020

The emergency wage subsidy is available for 36 weeks, from March 15 to November 21, 2020 (subject to a 4-week extension until December 19), for businesses that have experienced a decrease in their gross income.

For the first 4 periods (March 15 to July 4, 2020), this program takes the form of a wage subsidy at the rate of 75% of an employee’s eligible income up to an annual maximum of $58,700, representing a maximum weekly benefit of $847 per employee (i.e. 75% of $1,129).

For Period 5 (July 5 to August 1st), the subsidy is at a maximum rate of 60% (base CEWS) and will be adjusted (reduced) according to the decrease in the eligible employer’s gross revenue for a given period. The maximum rate of the subsidy will also decrease gradually over the periods until it reaches a maximum rate of 20% for Period 9 (October 25 to November 21).

A top-up subsidy is also available as of Period 5 for businesses most affected, i.e. businesses whose gross revenue has decreased by 50% or more. This additional subsidy will be based on a modulated rate of up to 25% depending on the average loss of gross revenue suffered by the eligible employer.

This measure has no limit on the number of employees eligible for the subsidy.

Eligible entities (valid for all periods)

  1. Corporations and trusts, other than a corporation whose revenue is exempt from Part 1 tax or a public institution;
  2. Individuals (other than a trust);
  3. Registered charities (other than a public institution);
  4. Non-profit organizations (NPOs), other than a public institution);
  5. Aboriginal government-owned corporations that carry on business, and partnerships whose members are Aboriginal governments and qualifying employers;
  6. Registered journalistic organizations;
  7. Registered Canadian amateur athletic associations (i.e., associations responsible for promoting sport nationally);
  8. Non-public colleges and non-public schools (for-profit or not-for-profit);
  9. Partnerships in which all partners qualify as eligible entities;
  10. Partnerships in which 50% or less of the fair market value of the interests is owned by non-eligible members;
  11. Prescribed organizations.

To be eligible, the entity must also have, as of March 15, 2020, a Business Number used for amounts to be remitted under payroll deductions (Business Number ending in RP000) and must apply for CEWS on or before January 31, 2021.

Employers who use a payroll service provider can now claim CEWS. Employers can therefore retroactively qualify for CEWS and receive benefits effective as of 15 March 2020.

New clarification regarding restructurings involving corporate mergers was also introduced. For all periods, and unless it is reasonable to consider that one of the main purposes of the merger is to ensure the new corporation qualifies for the CEWS or to increase the amount of the subsidy, the new corporation formed as a result of the merger will be deemed the same corporation as, and successor to, each predecessor corporation. For example, the corporation after the merger will compare its revenues with the revenues of each of the corporations that were merged.

Period 1 to 4 (March 15 to July 4, 2020) 

To be eligible for the CEWS for periods 1 to 4, the eligible employer must have suffered a loss of revenue of 15% in March for period 1 or 30% in April, May or June for periods 2, 3 or 4. For the purposes of analyzing the decrease in revenue, the term “qualifying income” is used:

  • Income determined in accordance with the corporation’s usual accounting practices;
  • Receipts of cash and other considerations received or receivable in the normal course of the entity’s operations in Canada;
  • Excludes extraordinary items;
  • Excludes amounts obtained or derived from a person or partnership with which the entity does not deal at arm’s length;
  • The decrease in allowable revenue should be analyzed on a monthly basis by comparing the allowable revenue for the month concerned in 2020, i.e. March/April/May, to the same month in 2019.
    • For example, a business would be eligible if its revenues for the month of April 2020 have decreased by at least 30% compared to the revenues for April 2019.
  • If the qualifying entity makes an election, the entity can use an alternative method by comparing, on a monthly basis, the qualifying revenues for the relevant month of the year 2020, i.e., the months of March/April/May/June, to the average of the monthly qualifying revenues for the months of January and February 2020. If an election is made, it must be applied to the first four periods.
  • If the entity was not carrying on a business and not engaged in normal activities on March 1, 2019, it must compare the decrease in eligible revenues to the average monthly eligible revenues for January and February 2020.
  • If a qualifying entity qualifies for a period (example: April), it will automatically qualify for the period immediately following (May for the purposes of the example).
  • In recognition of the wide variation in the time lag between when revenues are earned and when they are received in certain sectors of the economy, qualifying entities may elect to calculate the amount of their qualifying revenues on a cash basis instead of on an accrual basis (and vice versa). This election must be kept for all periods of the program.
  • Amounts received as a wage subsidy will not be required to be included in the gross revenue calculation for the calculation of the subsidy.

Additional rules applicable to groups of entities:

  • If a group of specified entities normally prepares consolidated financial statements, each member of the group may determine its eligible revenue separately to the extent that each member of the group determines its eligible revenue on that basis.
  • If a specified entity and each member of an affiliated group of specified entities to which it belongs make a joint election to this effect, the qualifying income of the group, determined on a consolidated basis in accordance with applicable accounting practices, is used by each member of the group.
  • Special rules are also provided for joint ventures.
  • If all or substantially all of an entity’s qualifying income, i.e., 90% or more, for a qualifying period is derived from one or more specified persons or partnerships with which it does not deal at arm’s length, and if each of those persons or partnerships makes a joint election, additional rules will apply in computing the income. Further details will be provided in this regard.

Additional rules for registered charities and NPOs:

  • For registered charities, qualifying income includes income from a related business activity, gifts, and amounts received in the ordinary course of business.
  • For NPOs, qualifying revenue includes membership fees (registration or other fees) and other amounts received in the ordinary course of business.
  • registered charities and NPOs may also elect to exclude government funding from their eligible revenue for the purposes of calculating the subsidy.

The following is a summary table for periods 1 to 4:

Period 5 to 9 (July 5 to November 21, 2020)

Notion of “reference period”  

No changes are proposed to the definition of revenue calculation for periods 5 to 9. However, significant changes have been adopted with respect to the definition of “qualifying periods” for the purpose of calculating the revenue loss test.

For periods 5 to 9, the employer has to keep whichever income recognition method (either cash or accrual accounting) that he used for periods 1 to 4.However, the employer can change the reference period for the calculation of the percentage loss either:

  • By comparing the month of the current period with the same month of the previous year; or
  • Comparing the month of the current period with the average revenue in January and February 2020.

The revenue recognition method (accrual or cash basis) and the loss calculation method chosen must be used for all periods 5 to 9. The approach chosen applies to the calculation of the base CEWS and the top-up CEWS, as described below.

This will give employers the opportunity to adjust their approach for Periods 5 to 9 to reflect the new circumstances that they may encounter as the CEWS is extended.

For Period 5 and subsequent periods, an eligible employer that qualifies for a given period continues to automatically qualify for the next period. In addition, the employer may use the greater of the percentage decline in revenue between the current and previous period’s rate to determine qualification for base CEWS and the current period’s base CEWS rate. For example, an employer who would have lost 55% of revenue in August and 32% of revenue in September can use its percentage decline in revenue for August to determine its September base subsidy.

To this end, here are the summary tables prepared by the federal government:

Calculation of base CEWS

The main change, for periods 5 to 9, is that employers are eligible to receive support as soon as they have a decrease in their gross revenue, regardless of the percentage. Indeed, the maximum subsidy for these periods is now modulated according to the given period and the loss incurred (as shown in Table 1). To receive the maximum subsidy, however, employers will need to have experienced a decline of 50% or more in their gross revenue in a given period. Maximum weekly remuneration used to calculate the credit remains at $1,129 per employee, but is based upon a different ratio.

Meaning of “eligible remuneration”.

A qualifying employee is an individual who is employed in Canada.

Periods 1 to 4:

For the first four periods, eligibility for the subsidy for an employee’s remuneration will be limited to employees who have not been without pay for at least 14 consecutive days during the eligibility period, i.e., March 15 to April 11, April 12 to May 9, May 10 to June 6 and June 7 to July 4.

The subsidy will be the greater of the following amounts:

(a) 75% of the amount of remuneration paid for the week, up to a maximum weekly benefit of $847

(b) The lesser of the remuneration paid for the week, to a maximum of $847 or 75% of the employee’s weekly earnings prior to the crisis.

  • The maximum weekly subsidy per employee is $847.
  • An employee’s weekly remuneration prior to the crisis will be based on an average of the employee’s weekly remuneration paid between January 1 and March 15, 2020, excluding periods of 7 consecutive days where the employee received no pay.
  • For Periods 1, 2 and 3, it will be possible to elect to have the employee’s average weekly remuneration prior to the crisis calculated over the period from March 1 to May 31, 2019; this flexibility is primarily intended for seasonal businesses.
  • For Period 4, an employee’s pre-crisis earnings will be based on the average weekly remuneration paid to the employee from January 1 2020 to March 15, 2020; from March1, 2019 to May 31, 2019; or from March 1,2019 to June 30,2019.
  • Special treatment will apply to employees who do not deal at arm’s length with the employer. The amount of the subsidy for these employees will be limited to eligible income earned in any pay period between March 15 and July 4, 2020, up to the lesser of the maximum weekly benefit of $847 or 75% of the employee’s pre-crisis weekly remuneration. A subsidy will not be available for a non-arm’s length employee who was not earning before the crisis.
  • An employer who has received wage subsidies under the 10% temporary wage subsidy program will have to reduce the amount of this other subsidy by the amount that can be claimed under the Canada Emergency Wage Subsidy (at the rate of 75%) during the same period.
  • In the event that an employer implements the Work-Sharing program in its business, the EI benefits received by its employees will directly reduce the amount of the wage subsidy.

Sample Calculation:

An employer has two employees. Their earnings before and during the crisis remain the same. One has weekly remuneration of $1,500 and the other has weekly remuneration of $800. Subject to meeting the other criteria, the employer could receive a subsidy of $1,447 per week ($847 for the first employee and $600 for the second).

Period 5 to 9:

The definition of eligible income remains unchanged for Periods 5 to 9. However, changes have been made to certain concepts surrounding the definition of eligible income.

  • Effective July 5 2020, the eligibility criteria would no longer exclude employees without pay for 14 or more consecutive days in an eligible period;
  • For arm’s length employees, the amount of compensation is now calculated exclusively on the actual compensation paid without reference to the pre-crisis compensation concept used for Periods 1 to 4;
  • The subsidy for non-arm’s length[1] employees is calculated, for a maximum revenue of $1,129, on the lesser of:
    • Weekly remuneration
    • Pre-crisis compensation
  • Each employee’s remuneration can now be based on the average weekly remuneration[2] paid determined by one of the following periods (whichever is the most advantageous):
    • January 1, 2020 to March 15, 2020; or
    • July 1, 2019 to December 31, 2019

Calculation of top-up CEWS (Period 5 to 9):

An additional amount of up to 25% of the remuneration paid to the employee may be claimed by employers with significant drops in revenue. According to the formula used, the full 25% bonus will be available to employers who have experienced a decrease of 70% or more in their gross income. Table 3 below illustrates the modulation of the top-up CEWS for each period.

The top-up CEWS rate is determined based on either:

  • The percentage decrease in average monthly revenues for the three months prior to the period compared to the same three months in the previous year; OR
  • The percentage decrease in average monthly revenues in the three months prior to the period compared to the average revenue in January and February 2020.

This choice should match the revenue decrease calculation determined for the base subsidy. The election must be retained for periods 5 to 9.

Transitional Rule (Exemption Rule for Periods 5 and 6)

The company is entitled to determine the amount of the CEWS for Periods 5 and 6 only on the basis of the more advantageous of:

  • The rules applicable to Periods 1 to 4; or,
  • The rules applicable to Periods 5 to 9 (including the basic and supplementary calculation)

CEWS for temporarily laid-off employees:

The calculation of the CEWS for temporarily laid-off employees remains the same for periods 5 and 6 only.

Starting in Period 7, the amount of the CEWS paid for temporarily laid-off employees is adjusted to align with the Canadian Emergency Benefit (ECP) and/or Employment Insurance (EI) program.

The employer portion of the contributions paid on the salaries of temporarily laid-off employees to the Canada Pension Plan, Employment Insurance, Québec Pension Plan and the Québec Parental Insurance Plan remains refundable.


Entities eligible for the subsidy will also be eligible to receive a refund of employer contributions for Employment Insurance (EI), Canada Pension Plan (CPP), Québec Pension Plan (QPP) and Québec Parental Insurance Plan (QPIP) for amounts paid in respect of remuneration paid to an employee for a week during which the employee is on paid leave.

An employee is considered to be on paid leave when he is paid for a full week but does not perform any work for his employer during that week.

There would be no maximum refund of employer contributions, i.e., the refund would be in addition to the maximum weekly wage subsidy.

Employers will have to continue to calculate contributions on their employees’ wages and remit them to the tax authorities. The refund would be issued to eligible employers at the same time as the payment of the wage subsidy.

How to apply and other considerations

There are three ways to apply:

  • On the “My Business Account” portal
  • On the “Represent a Customer” portal
  • With the web form

The subsidy funds will be disbursed within 3 to 10 days of the processing of the application. The three (3) day time limit will be applicable for businesses registered with the CRA for direct deposits.

Records will be required to be kept for the calculation of income and eligible income remuneration.

Applications must be filed no later than January 31, 2021.

The person who has principal responsibility for the entity’s financial activities will be required to certify that the application is based on accurate and complete financial information.

How to amend an application 

It is now possible to amend a request that has been forwarded to the CRA. If the original request was made through the “My Business Account” or “Represent a Client” portals, the change can be made online. If the initial request was made using the Web form, requests for changes will have to be made by calling the CRA’s Business Enquiries line.

To make an adjustment, the following information is required:

  • The payroll program account number (RP0001);
  • The period for which the request is being adjusted;
  • The new amount for each facility to be adjusted.

A new certification will have to be completed and signed for each of the adjusted periods.

The wage subsidy received by an eligible entity will be considered government assistance and must be included in the employer’s taxable income in the year it is received.

The assistance received as a wage subsidy will reduce the amount of expenses eligible for other federal tax credits calculated on the same remuneration.

Other Considerations

  • The wage subsidy received by an eligible entity will be considered government assistance and must be included in the employer’s taxable income in the year it is received.
  • The assistance received as a wage subsidy will reduce the amount of expenses eligible for other federal tax credits calculated on the same remuneration.

Potential Penalties

In the event that an employer fraudulently claimed the subsidy and was subsequently determined to be ineligible for the wage subsidy, penalties of up to 225% of the subsidy claimed and imprisonment could be applicable.

[1] Applies only to non-arm’s length employees who were employed by the corporation before March 16, 2020.

[2] The calculation of the average excludes any period of 7 consecutive days without pay.

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