COVID-19: Canada Emergency Wage Subsidy

Insights
| 3/10/2021

The Canada Emergency Wage Subsidy (CEWS) is a $68.5 billion Federal Government program for employers impacted by COVID-19. 

The program is effective from March 15, 2020 to June 2021.

Eligible employers can apply for the subsidy, retroactive to March 15.

What is the CEWS

The CEWS program has evolved from its initial launch in March 2020 and has been extended by the Federal Government to June 30, 2021.

The first 16 weeks (March 15 to July 4, 2020) provide a subsidy of 75% of eligible remuneration, up to a maximum of $847 per week per eligible employee. Eligible employers, such as business owners, that see a drop of at least 15% of their qualifying revenue in March 2020 and 30% for the following months of April, May, and June, when compared to their qualifying revenue for the same period in 2019 (or the average of January and February 2020, in some circumstances), qualify for the wage subsidy.

The rules are modified substantially for the fifth (July 5 to August 1, 2020) and subsequent periods, with transitional rules (safe harbour rule) available for the fifth and sixth periods.

For the following 24 weeks (July 5 to December 19, 2020), the wage subsidy has been modified to be available for all eligible employers that experience a decline in revenue for a claim period, with a base wage subsidy amount, and an additional top-up wage subsidy amount for those employers that have been most adversely affected by the COVID-19 crisis. Further, for the fifth and sixth periods, an eligible employer can calculate their wage subsidy in certain circumstances, under the rules that apply to the first four periods if the result is more favourable (safe harbour rule).

For the next 12 weeks (December 20, 2020 to March 13, 2021), the wage subsidy has been modified so that the maximum top-up percentage has been increased to 35% from 25%, and the maximum subsidy amount for furloughed employees has been increased to $595 (from $573). All other rules related to the wage subsidy will remain the same as the previous 24 weeks (claim periods 5 to 10).

Note: More information on the claim periods after March 13 (periods 14 to 16) will be announced at a later date.

Eligibility

An eligible employer means:

  • a corporation or a trust, other than a corporation or a trust that is exempt from tax under Part I of the Income Tax Act (the Act) or is a public institution;
  • an individual other than a trust;
  • a registered charity (other than a public institution);
  • a person that is exempt from tax under Part I of the Act (other than a public institution), that is:
  • an agricultural organization;
  • a board of trade or a chamber of commerce;
  • a non-profit corporation for scientific research and experimental development;
  • a labour organization or society;
  • a benevolent or fraternal benefit society or order; and
  • a non-profit organization;
  • a partnership, each member of which is a person or partnership described in this list;
  • a prescribed organization, including certain Indigenous businesses.

A public institution is a school, school board, hospital, health authority, public university or college. It also includes an organization described in any of paragraphs 149(1)(a) to (d.6) of the Act, for example, municipalities and local governments and tax-exempt Crown corporations.

Qualifying for the Wage Subsidy

In order to qualify for the wage subsidy in respect of a claim period, an eligible employer must meet the following conditions:

  • on March 15, 2020,
  • it had an open payroll program account with the CRA or,
  • it employed one or more individuals in Canada, had another person or partnership (payroll service provider) administer its payroll, and that payroll service provider,
  • had an open payroll program account with the CRA on March 15, 2020, and
  • used its business number to make payroll remittances in respect of employees of the eligible employer;
  • it registers subsequently with the CRA for its own payroll program account;
  • If the claim is for any of the claim periods 1 to 4, it experienced the required reduction in revenue;
  • if the claim is for any of the claim periods 5 to 13, it experienced a decline in revenue for that or the immediately prior claim period;
  • it makes a wage subsidy application for the claim period, in a prescribed form and manner, on or before the later of:
  • January 31, 2021, and 
  • 180 days after the end of the claim period;
  • the individual who has principal responsibility for the eligible employer's financial activities attests that the application mentioned above is complete and accurate in all material respects.

Prescribed Organizations

Partnerships

While a partnership does not file an income tax return and is not taxed at the partnership level, it is deemed to be a taxpayer for the purposes of the wage subsidy and any related notice of determination.

For the purposes of the wage subsidy, a partnership is an eligible employer if each of its members is an eligible employer, including other partnerships that themselves are eligible employers.

A partnership that has one or more members that are prescribed organizations, will qualify for the wage subsidy provided:

  • all the remaining members are eligible employers or Indigenous governments, or
  • where the remaining members are not all eligible employers or Indigenous governments, then throughout the claim period, 50% or more of the fair market value of all interests in the partnerships are held — directly or indirectly, through one ore more partnerships — by eligible employers.

Provided the partnership had an open payroll program (RP) account on March 15, 2020 or, had a payroll service provider administer its payroll service and certain conditions are met, and meets all other eligibility requirements, it can make an application for the wage subsidy.

Trusts

For a claim period that begins on or after March 15, 2020 and ends before May 10, 2020, trusts may be eligible employers.

For a claim period that begins on or after May 10, 2020, the following trusts are eligible employers:

  • a trust that is not exempt from tax under Part I of the Act and is not a public institution;
  • a trust that is exempt from tax under Part I of the Act (other than a public institution) because it is a registered charity or is one of the other types of eligible tax-exempt entities;
  • a trust that is a public institution if it is a prescribed organization.

A trust that is an eligible employer may be able to claim the wage subsidy for a claim period if it satisfies all the conditions to qualify for the wage subsidy in respect of that claim period.

Non-Resident Corporations

A non-resident corporation may be an eligible employer.  If a corporation resides in a country with which Canada has a tax treaty and carries on a business in Canada but does not have a permanent establishment in Canada, the treaty might provide that such income is not taxable in Canada. The fact that the treaty provides that its income is not taxable in Canada does not prevent it from being an eligible employer.

Indigenous Businesses

Indigenous government-owned corporations that are carrying on a business and are tax-exempt, as well as their wholly-owned subsidiaries that are carrying on a business and are tax-exempt may be eligible for the CEWS. As well, partnerships where each partner of the partnership is either an Indigenous government or an eligible employer will be eligible entities for purposes of the CEWS. Indigenous governments would include First Nation bands, self-governing Indigenous governments and other comparable Indigenous governing bodies.

Other Prescribed Organizations

The following are also considered prescribed organizations:

  • a registered Canadian amateur athletic association;
  • a registered journalism organization; and
  • a person or partnership that operates a private school or private college.

Public institutions, including colleges and schools, are not eligible employers for the purposes of the wage subsidy.

Amalgamations

A new corporation formed on an amalgamation of two or more predecessor corporations, or where one corporation is wound up into another on a tax-deferred basis, may be eligible for the wage subsidy provided all other required conditions have been satisfied.

For the purposes of the wage subsidy, a new corporation formed on an amalgamation of two or more predecessor corporations pursuant to subsection 87(1) of the Act, is deemed to be the same corporation as, and a continuation of, each predecessor corporation. Accordingly, the new corporation will use the combined qualifying revenue of the predecessor corporations to calculate its qualifying revenue for each relevant reference period in a particular claim period to determine if it has experienced the required reduction in revenue to qualify for the wage subsidy for that claim period. In the case of a subsidiary corporation that is wound up into its parent on a tax-deferred basis in accordance with subsection 88(1) of the Act, the parent’s qualifying revenue will be combined with its subsidiary’s qualifying revenue for each relevant reference period in a particular claim period to determine if it has the required reduction in revenue for a particular claim period.

However, the wage subsidy will be denied if it is reasonable to consider that one of the main purposes for the amalgamation (or the wind-up) was to qualify for the wage subsidy or to increase the amount of the wage subsidy.

Relevant Periods for Calculating Revenues and Deadlines

The relevant periods for calculating the wage subsidy are classified under three main headings as follows:

Qualifying Period (Claim Period)

The claim period is the period for which an eligible employer can claim the wage subsidy for remuneration paid to eligible employees.

Period  Start Date  End Date  Application Deadline 
March 15, 2020  April 11, 2020  January 31, 2021 
April 12, 2020 May 9, 2020  January 31, 2021 
May 10, 2020  June 6, 2020  January 31, 2021 
June 7, 2020  July 4, 2020  January 31, 2021 
July 5, 2020  August 1, 2020  January 31, 2021 
August 2, 2020  August 29, 2020  February 25, 2021 
August 30, 2020  September 26, 2020  March 25, 2021 
September 27, 2020  October 24, 2020  April 22, 2021 
October 25, 2020  November 21, 2020  May 20, 2021 
10  November 22, 2020  December 19, 2020  June 17, 2021
11  December 20, 2020  January 16, 2021  July 15, 2021 
12 January 17, 2021  February 13, 2021  August 12, 2021 
13 February 14, 2021  March 13, 2021  September 9, 2021 
14  March 14, 2021  April 10, 2021  October 7, 2021 
15  April 11, 2021  May 8, 2021  November 4, 2021 
16  May 9, 2021  June 5, 2021  December 2, 2021 

Current Reference Period

The current reference period with respect to a claim period, is the period in respect of which an eligible employer's qualifying revenue would be compared to its qualifying revenue in the applicable prior reference period, to determine its revenue reduction. The applicable current reference period, for a claim period is:

  • March 2020 – for the claim period 1;
  • April 2020 – for the claim period 2;
  • May 2020 – for the claim period 3;
  • June 2020 – for the claim period 4;
  • July 2020 – for the claim period 5;
  • August 2020 – for the claim period 6;
  • September 2020 – for the claim period 7;
  • October 2020 – for the claim period 8;
  • November 2020 – for the claim period 9;
  • December 2020 – for claim period 10;
  • December 2020 – for claim period 11;
  • January 2021 – for claim period 12; 
  • February 2021 – for claim period 13;
  • March 2019 – for claim period 14;
  • April 2019 – for claim period 15; and
  • May 2019 – for claim period 16.

Prior Reference Period

The prior reference period is the period in respect of which an eligible employer's qualifying revenue would be compared to its qualifying revenue in the applicable current reference period, to determine its revenue reduction. The applicable prior reference period in respect of a claim period will depend on the approach the eligible employer chooses to compare its revenue.

Under the general year-over-year approach, the eligible employer compares its qualifying revenue in the current reference period to that of the same month for 2019. Under this approach, the prior reference period for a claim period is:

  • March 2019 – for the claim period 1;
  • April 2019 – for the claim period 2;
  • May 2019 – for the claim period 3;
  • June 2019 – for the claim period 4;
  • July 2019 – for the claim period 5;
  • August 2019 – for the claim period 6;
  • September 2019 – for the claim period 7;
  • October 2019 – for the claim period 8;
  • November 2019 – for the claim period 9;
  • December 2019 – for claim period 10;
  • December 2019 – for claim period 11;
  • January 2020 – for claim period 12; 
  • February 2020 – for claim period 13;
  • March 2019 – for claim period 14;
  • April 2019 – for claim period 15; and
  • May 2019 – for claim period 16.

Under the alternative approach, an eligible employer may compare its qualifying revenue in the current reference period with that of its average revenue earned in the months of January and February of 2020. Hence, under the alternative approach, the prior reference period for a claim period is January and February 2020.

An eligible employer must use the alternative approach if:

For claim periods 1 to 4:

  • on March 1, 2019, the eligible employer was not carrying on a business or otherwise carrying on its ordinary activities, or
  • the eligible employer elects (see note below) to use January and February 2020 as the prior reference period for all four of those claim periods.

Once an approach is chosen, the eligible employer would be required to use the same approach for all of claim periods 1 to 4.

For claim periods 5 to 13:

  • Where the eligible employer is using the general approach for the claim periods 1 to 4:
  • it can continue to use the same approach for all of claim periods 5 to 13; or
  • it can elect to apply the alternative approach for all of the claim periods 5 to 13.
  • Where the eligible employer is using the alternative approach for the claim periods 1 to 4:
  • it can elect to continue to use the alternative approach for all of the claim periods 5 to 13; or
  • it can apply the general approach for all of the claim periods 5 to 13.

Once an approach is chosen, the eligible employer would be required to use the same approach for all of claim periods 5 to 13 and the approach chosen must be used for both the base revenue reduction calculation and the top-up revenue reduction percentage calculation (see our section on Calculating the Wage Subsidy).

Determining Amount of Subsidy

An eligible employer would need to determine if it has experienced the required reduction in revenue to qualify for the wage subsidy for a claim period. However, the employer is under no obligation to prove that the decline in revenue is related to the COVID-19 crisis.

An eligible employer’s reduction in revenue for a particular claim period is the decline in revenue from the relevant prior reference period to the relevant current reference period, expressed as a percentage.

This information for each of the claim periods is discussed in further detail below.

Claim Periods 1 to 4

Table 1: Reduction in Revenue for Periods 1 to 4

  Claim periods  Required reduction in revenue  Reference periods for comparison under the general approach  Reference periods for comparison under the alternative approach 
Period 1  March 15 to April 11, 2020  15% 

March 2020 over March 2019

March 2020 over average of January and February 2020 
Period 2  April 12 to May 9, 2020   30%  April 2020 over April 2019  April 2020 over average of January and February 2020 
Period 3  May 10 to June 6, 2020  30%  May 2020 over May 2019  May 2020 over average of January and February 2020 
Period 4  June 7 to July 4, 2020  30%  June 2020 over June 2019  June 2020 over average of January and February 2020 

Once an eligible employer has determined that it has experienced the required reduction in revenue for a particular claim period that is one of the first three claim periods, it is automatically considered to have experienced the required reduction in revenue for the immediately following claim period (deeming rule for periods 1 to 4). As a result, the employer does not have to make this determination again for the immediately following claim period (see Table 2 below).

However, this deeming rule does not automatically extend to apply to the period after that next claim period. For example, if an eligible employer meets the condition for the reduction in respect of the first claim period - March 15 to April 11, 2020, the employer will be considered to have met the required reduction in revenue in respect of the second reference period - April 12 to May 9, 2020, without necessarily making a determination. But the eligible employer will have to make a determination for the third claim period - May 10 to June 6, 2020 (see Table 2 below).

In a situation where the eligible employer, subsequently determines that it actually experienced the required reduction in revenue, without applying the deeming rule, for the second claim period - April 12 to May 9, 2020, the eligible employer will be considered to have experienced the required reduction in revenue for that third claim period because of the deeming rule that can now be applied to the third period.

Table 2 below provides some generic scenarios to demonstrate how this deeming rule works.

Table 2: Deeming Rule Examples for Periods 1 to 4

Claim period 1

March 15 to April 11, 2020

Claim period 2

April 12 to May 9, 2020

Claim period 3

May 10 to June 6, 2020

Reduction of revenue of less than 15%

Does not qualify under the regular rule                                                                                                                                                           

Reduction of revenue of less than 30%

Does not qualify under the regular rule

Reduction of revenue of less than 30%

Does not qualify under the regular rule

Reduction of revenue of less than 15%

Does not qualify under the regular rule
Reduction of revenue of 30% or more

Qualifies under the regular rule

Reduction of revenue of less than 30%

Does not qualify under the regular rule but qualifies under the deeming rule (because the employer meets the 30% reduction of revenue in the claim period 2)

Reduction of revenue of 15% or more

Qualifies under the regular rule
Reduction of revenue of less than 30%

Does not qualify under the regular rule but qualifies under the deeming rule (because the employer meets the required 15% reduction of revenue in the claim period 1)

Reduction of revenue of less than 30%

Does not qualify under the regular rule

The deeming rule does not apply because the reduction of revenue during the claim period 2 was not  30% or more.

Reduction of revenue of 15% or more

Qualifies under the regular rule
Reduction of revenue of 30% or more

Qualifies under the regular rule as well as under the deeming rule (because the employer meet the 15% reduction of revenue in the claim period 1)
Reduction of revenue of less than 30%

Does not qualify under the regular rule but qualifies under the deeming rule (because the employer meets the 30% reduction of revenue in the claim period 2)
Reduction of revenue of 15% or more

Qualifies under the regular rule
Reduction of revenue of 30% or more

Qualifies under the regular rule as well as under the deeming rules (because the employer meet the 15% reduction of revenue in the claim period 1)
Reduction of revenue of 30% or more

Qualifies under the regular rule as well as under the deeming rules (because the employer meet the 30% reduction of revenue in the claim period 2)

General “Year-Over-Year” Approach

For an eligible employer that was carrying on business – or otherwise carrying on its ordinary activities- On March 1, 2019, and is using the general year-over-year approach, the reduction in revenue determination is made by comparing the change in qualifying revenue, year-over-year, using the relevant calendar month for the current and prior reference periods for the claim period.

If the qualifying revenue for the relevant month in the current year has declined when compared to the qualifying revenue for the relevant month in the prior year, by a percentage equal to or greater than the required reduction in revenue for the claim period (see Table 2 above), then the eligible employer has experienced the required reduction in revenue for the claim period and qualifies to claim the wage subsidy for that claim period, assuming the other qualifying conditions are met.

On the other hand, if the qualifying revenue for that current reference period has declined by a percentage less than the required reduction in revenue for the claim period, then the eligible employer has not experienced the required reduction in revenue when compared to that prior reference period and does not qualify to claim the wage subsidy for that claim period, absent the deeming rule applicable for periods 1 to 4.

Alternative Approach

For an eligible employer that was not carrying on business—or otherwise not carrying on its ordinary activities—on March 1, 2019, or that has elected to use this alternative approach for claim periods 1 to 4, the reduction in revenue determination is made by comparing the:

  • the qualifying revenue for the calendar month in which the claim period began; and
  • the average of the qualifying revenues earned in both January and February 2020.

If the qualifying revenue for the calendar month in which the claim period began has declined, when compared to the average of the qualifying revenues earned in both January and February 2020, by a percentage equal to or greater than the required reduction in revenue for the claim period (see Table 2 above), then the eligible employer has experienced the required reduction in revenue for the claim period and may qualify to claim the wage subsidy for that claim period, assuming the other qualifying conditions are met.

When the alternative approach is chosen, the average qualifying revenue will be calculated as follows:

Average qualifying revenue = 0.5xAx(B/C) where

A= qualifying revenues for the months of January and February of 2020

B= number of days in January and February 2020

C= number of days in January and February of 2020 during which the eligible employer was carrying on business —or otherwise carrying on its ordinary activities.

Where a business is carried on throughout January and February 2020, the factor (B/C) will be 1. Hence, there will be no adjustment to the average qualifying revenue.

In a situation where an eligible employer was not carrying on business—or otherwise not carrying on its ordinary activities— throughout the months of January or February 2020, for example, in the case of a new business that started mid-January, the qualifying revenues for the months of January and February 2020 will be grossed up by the factor (B/C), to make the comparison of the qualifying revenue in the prior reference period comparable to the qualifying revenue in the current period.

Generally, if operations began any time after February 2020, the employer would not be eligible for the wage subsidy.

If the qualifying revenue for that current reference period has declined by a percentage less than the required reduction in revenue when compared to that prior reference period (January and February 2020), then the eligible employer has not experienced the required reduction in revenue for the claim period and does not qualify to claim the wage subsidy for that claim period, absent the deeming rule applicable for periods 1 to 4.

Claim Periods 5 to 13

The two available approaches for the reduction in revenue determination (i.e., the general year-over-year approach and the alternative approach; continue to apply to claim periods 5 to 13.

For periods 5 to 13, an eligible employer is required to have a revenue reduction greater than 0% to be eligible for the wage subsidy, unless the deeming rules for claim periods 5 to 13 apply, or the employer is eligible for the top-up subsidy. An eligible employer’s revenue reduction percentage is relevant to determining its base wage subsidy amount in claim periods 5 to 13. There is also a top-up wage subsidy that may be available for these claim periods.

For claim periods 11 to 13 the top-up wage subsidy is calculated based on the one month revenue reduction test (see table 5)

Tables below summarize the relevant reference periods for the base wage subsidy and the top-up wage subsidy

Table 3: Relevant Reference Periods for the Base Wage Subsidy for Claim Periods 5 to 13

  Claim periods  Required reduction in revenue Reference periods for comparison under the general year-over-year approach  Reference periods for comparison under the alternative approach 
Period 5  July 5 to August 1, 2020  Greater than 0%  July 2020 over July 2019 or June 2020 over June 2019 * July 2020 or June 2020 * over average of January and February 2020 
Period 6 August 2 to August 29, 2020  Greater than 0%  August 2020 over August 2019 or July 2020 over July 2019 * August 2020 or July 2020 * over average of January and February 2020 
Period 7  August 30 to September 26, 2020  Greater than 0%  September 2020 over September 2019 or August 2020 over August 2019 * September 2020 or August 2020 * over average if January and February 2020 
Period 8  September 27 to October 24, 2020 Greater than 0%  October 2020 over October 2019 or September 2020 over September 2019 * October 2020 or September 2020 * over average of January and February 2020
Period 9  October 25 to November 21, 2020  Greater than 0%  November 2020 over November 2019 or October 2020 over October 2020 over October 2019 * November 2020 or October 2020 * over average of January and February 2020
Period 10 November 22 to December 19, 2020  Greater than 0%   December 2020 over December 2019 or November 2020 over November 2019 * December 2020 or November 2020 * over average of January and February 2020 
 Period 11 December 20, 2020 to January 16, 2021  Greater than 0%   December 2020 over December 2019 or November 2020 over November 2019 * December 2020 or November 2020 * over average of January and February 2020 
 Period 12 January 17 to February 13, 2021  Greater than 0%   January 2021 over January 2020 or December 2020 over December 2019 * January 2021 or December 2020 * over average of January and February 2020 
 Period 13 February 14 to March 13, 2021  Greater than 0%   February 2021 over February 2020 or  January 2021 over January 2020 * February 2021 or January 2021 * over average of January and February 2020 

* Under the deeming rule

The reference periods for comparison under the general year-over-year approach and the alternative approach for claim period 11 are the same as for claim period 10. This is to better align the reference periods with the claim periods.

 

Table 4: Relevant Reference Periods for the Top-Up Wage Subsidy

  Claim periods  Reference periods for comparison under the general year-over-year approach  Reference periods for comparison under the alternative approach 
Period 5  July 5 to August 1, 2020  April to June 2020 average over April to June 2019 average 

April to June 2020 average over January and February 2020 average

Period 6  August 2 to August 29, 2020  May to July average over May to July 2019 average  May to July average over January and February 2020 average
Period 7  August 30 to September 26, 2020  June to August 2020 average over June to August 2019 average  June to August 2020 average over January and February 2020 average 
Period 8  September 27 to October 24, 2020  July to September 2020 average over July to September 2019 average  July to September 2020 average over January and February 2020 average 
Period 9  October 25 to November 21, 2020  August to October 2020 average over August to October 2019 average  August to October 2020 average over January and February 2020 average 
Period 10  November 22 to December 19, 2020  September to November 2020 average over September to November 2019 average  September to November 2020 average over January and February 2020 average 

 

Table 5: Relevant Reference Periods (for the one month revenue reduction test) for the Top-Up Wage Subsidy for Claim Periods 8 to 13

  Claim periods  Reference periods for comparison under the general year-over-year approach  Reference periods for comparison under the alternative approach 
Period 8  September 27 to October 24, 2020  October 2020 over October 2019 or September 2020 over September 2019 * October 2020 or September 2020 * over average of January and February 2020 
Period 9  October 25 to November 21, 2020  November 2020 over November 2019 or October 2020 over October 2019 * November 2020 or October 2020 * over average of January and February 2020 
Period 10  November 22 to December 19, 2020   December 2020 over November 2019 or October 2020 over October 2019 * December 2020 or November 2020 * over average of January and February 2020 
Period 11  December 20, 2020 to January 16, 2021  December 2020 over December 2019 or November 2020 over November 2019 *  December 2020 or November 2020 * over average of January and February 2020
Period 12  January 17 to February 13, 2021  January 2021 over January 2020 or December 2020 over December 2019 December 2020 * over average of January and February 2020   
Period 13  February 14 to March 13, 2021  February 2021 over February 2020 or January 2021 over January 2020 *  February 2021 or January 2021 * over average of January and February 2020 

* Under the deeming rule 

The reference periods for comparison under the general year-over-year approach and the alternative approach for claim period 11 are the same as for claim period 10. This is to better align the reference periods with the claim periods.

 

For claim periods 5 to 13, if an eligible employer has not experienced a reduction in revenue for a particular claim period, it may still qualify to claim the wage subsidy in the particular claim period if the deeming rule applies, or if it is eligible for top-up portion of subsidy.

Deeming Rule for Claim Periods 5 to 13

The deeming rule that is applicable to claim periods 1 to 4 does not apply to claim period 5 and subsequent periods.

For period 5 and subsequent claim periods, if an eligible employer had a greater revenue reduction in the immediately preceding claim period than it has otherwise determined for the current claim period, the reduction in revenue for the immediately preceding period is deemed to be the eligible employer’s reduction in revenue for the purposes of determining its base wage subsidy amount for the current claim period (deeming rule for periods 5 to 13 – see Table 6 below). Note that claim period 11 is an exception to this rule.

This deeming rule for periods 5 to 13 applies in respect of each particular claim period subsequent to claim period 4, but a deemed reduction in revenue considered to be the current claim period’s reduction (as described above) cannot apply beyond the current claim period.

For example, an eligible employer’s actual reduction in revenue for claim period 5 (current claim period), was 35% while the actual reduction in revenue for period 4 (prior claim period) was 45%. Because of the deeming rule for periods 5 to 13, its reduction in revenue for the period 5 will be considered to be 45%, instead of 35%. However, if the eligible employer determines its actual reduction in revenue for claim period 6 to be less than 45%, then its reduction in revenue cannot be deemed to be 45%. It will be the greater of the actual reduction of revenue for period 5 (i.e. 35%) and the actual reduction of revenue for period 6.

In a situation where the eligible employer determines that its actual reduction in revenue for the current claim period is lower than its reduction in revenue from the immediately preceding claim period, that actual reduction in revenue for the current claim period will be available when applying this deeming rule to the immediately following claim period. Alternatively, in the above example, if the actual reduction in claim period 6 was 30%, the eligible employer’s deemed revenue reduction for period 6 will be 35%, which is the greater of the actual reduction of revenue in claim period 5 (35%) and the actual revenue reduction in claim period 6 (30%).

Similarly, where an eligible employer did not qualify for the wage subsidy for claim period 4 because its reduction in revenue was less than the required 30% for that period or it qualified for the wage subsidy due to the deeming rule that is applicable for claim periods 1 to 4, its actual reduction in revenue for claim period 4 will still be available when applying the deeming rule for periods 5 to 13, to claim period 5.

For example, an eligible employer’s actual reduction in revenue for claim period 5 (current claim period), was 20%. The deemed reduction in revenue for claim period 4 (prior claim period) was 40% because of the deeming rule for periods 1-4, and its actual reduction in revenue was 25%. Because of the deeming rule for periods 5 to 13, the eligible employer’s reduction in revenue for period 5 (current claim period), will be deemed to be 25%, being the greater of the actual reduction of revenue in claim period 4 (25%) and the actual revenue reduction in claim period 5 (20%).

The table below provides examples of some generic scenarios to further demonstrate how the deeming rule for periods 5 to 13 works.

Table 6: Deeming Rule Examples for Periods 5 to 13

 

Example A 

Eligible employer followed the general year-over-year approach

Example B 

Eligible employer elects to use the alternative approach after claim period 4

Claim period 4 June 7 to July 4, 2020  Reduction of revenue of 25% for claim period 4.  Reduction of revenue of 35% for claim period 4. 
Claim period 5 July 5 to August 1, 2020  Reduction of revenue - July 2020 over July 2019 is 15%. Since the prior claim period actual reduction (25%) is greater than the current claim period reduction (15%), deeming rule applies and the reduction in revenue is considered to be 25% for period 5.
Reduction of revenue - July 2020 over average of January and February 2020 is 30%. Since the prior claim period actual reduction (35%) is greater than the current claim period reduction (30%), deeming rule applies and the reduction in revenue is considered to be 35% for period 5. 
Claim period 6 August 2 to august 29, 2020 Reduction of revenue -August 2020 over August 2019 is 5%. Since the prior claim period actual reduction (15%) is greater than the current claim period reduction (5%), deeming rule applies and the reduction in revenue is considered to be 15% for claim period 6.
Reduction of revenue - August 2020 over average of January and February 2020 is 40%. Regular rule applies and the reduction in revenue is 40% for period 6 (since the prior claim period actual reduction (30%) is less than the current claim period reduction (40%), deeming rule does not apply).
Claim period 7 August 30 to September 26, 2020 Reduction of revenue - September 2020 over September 2019 is 25%. Regular rule applies and the reduction in revenue is 25% for period 7 (since the prior claim period actual reduction (5%) is less than the current claim period reduction (25%), deeming rules does not apply).
Reduction of revenue - September 2020 over the average of January and February 2020 is 20%. Since the prior claim period actual reduction (40%) is greater than the current claim period reduction (20%), deeming rule applies and the reduction in revenue is considered to be 40% for claim period 7.
Claim period 8 September 27 to October 24, 2020
No reduction of revenue of - October 2020 over October 2019. Since the prior claim period actual reduction (25%) is greater than the current claim period reduction (0%), deeming rule applies and the reduction in revenue is considered to be 25% for claim period 8.
Reduction of revenue - October 2020 over the average of January and February 2020 is 30%. Regular rule applies and the reduction in revenue is 30% for claim period 8 (since the prior claim period actual reduction (20%) is less than the current claim period reduction (30%), deeming rule does not apply).
Claim period 9 October 25 to November 21, 2020
Reduction of revenue - November 2020 over November 2019 is 2%. Regular rule applies and the reduction in revenue is 2% for claim period 9 (since the prior claim period reduction (0%), is less than the current claim period reduction (2%), deeming rules does not apply).
No reduction of revenue - November 2020 over the average of January and February 2020. Since the prior claim period actual reduction (30%) is greater than the current claim period reduction (0%), deeming rule applies and the reduction in revenue is considered to be 30% for claim period 9.
Claim period 10 November 22 to December 19, 2020  Reduction of revenue – December 2020 over December 2019 is 1% (since the prior claim period actual reduction (2%) is greater than the current claim period reduction (1%), the deeming rules applies and the reduction in revenue is considered to be 2% for claim period 10.  No reduction of revenue – December 2020 over the average of January and February 2020. Regular rule applies and there is no reduction in revenue for claim period 10 (since the prior claim period has not seen any reduction in revenue, the deeming rule does not apply). 
Claim period 11 December 20, 2020 to January 16, 2021  Reduction of revenue – December 2020 over December 2019 is 1% (the prior claim period for this period is period 9 (see Q5-03.2) and the actual reduction in revenue in that period (2%) is greater than the current claim period reduction (1%), the deeming rule applies and the reduction in revenue is considered to be 2% for claim period 11).  No reduction of revenue – December 2020 over the average of January and February 2020. Regular rule applies and there is no reduction in revenue for claim period 11 (the prior claim period for this period is period 9 (see Q5-03.2) and that period has not seen any reduction in revenue, the deeming rule does not apply). 
Claim period 12 January 17 to February 13, 2021  No reduction of revenue – January 2021 over January 2020 (since the prior claim period actual reduction (1%) is greater than the current claim period reduction (0%), the deeming rule applies and the reduction in revenue is considered to be 1% for claim period 12).  No reduction of revenue – January 2021 over the average of January and February 2020. Regular rule applies and there is no reduction in revenue for claim period 12 (since the prior claim period has not seen any reduction in revenue, the deeming rule does not apply). 
Claim period 13 February 14, to March 13, 2021  Reduction of revenue – February 2021 over February 2020 is 4%. Regular rule applies and the reduction in revenue is 4% for claim period 13 (since the prior claim period actual reduction (0%) is less than the current claim period reduction (4%), the deeming rule does not apply).  No reduction of revenue – February 2021 over the average of January and February 2020. Regular rule applies and there is no reduction in revenue for claim period 13 (since the prior claim period has not seen any reduction in revenue, the deeming rule does not apply).

Revenue Reduction Safe Harbour Rule for Periods 5 and 6

Under the safe harbour rule for periods 5 and 6, if an eligible employer that qualifies for the wage subsidy has a revenue reduction of 30% or more, then the employer would be entitled to a wage subsidy not lower than the amount calculated under the rules in place for periods 1 to 4 in respect of an eligible employee who is not on leave with pay for that week. This means that in claim periods 5 and 6, an eligible employer with a revenue decline of 30% or more (actual or deemed) would receive a wage subsidy rate of at least 75% (safe harbour rule). The eligible employer could qualify for an even higher wage subsidy rate (up to 85%) using the new rules used to calculate the wage subsidy for claim periods 5 to 13 for eligible employees who are not on leave with pay.

Under the safe harbour rule, for claim periods 5 and 6, when an eligible employee is not on leave with pay, the wage subsidy in respect of the employee for a week in the claim period will be the greater of:

  • wage subsidy amount calculated based on the rules for periods 1 to 4 if the revenue reduction percentage of the eligible employer is 30% or more for the relevant claim period; and
  • wage subsidy amount calculated based on the rules for periods 5 to 13, i.e., wage subsidy amount calculated using the rate that is the sum of the base rate and the top-up rate.

When an eligible employee is on leave with pay in respect of a week in claim period 5 or 6, if either the revenue reduction percentage or the top-up percentage of the eligible employer for the claim period is greater than 0%, then the eligible employer will be entitled to a wage subsidy amount calculated based on the rules for claim periods 1 to 4. Otherwise, if neither the revenue reduction percentage nor the top-up wage percentage of the eligible employer is greater than 0%, then the employer will not be entitled to a wage subsidy in respect of that employee.

Alternative Approach

An eligible employer cannot use a daily average instead of a monthly comparison when calculating the percentage decrease in revenue. The alternative approach provides for a comparison of qualifying revenue for the calendar month for the current reference period for the claim period to the average of the qualifying revenues earned in both January and February 2020.

Calculating Revenues

Qualifying Revenues

An eligible employer's qualifying revenue is used to determine the required reduction in revenue necessary to qualify for the Canada Emergency Wage Subsidy.

Qualifying revenue of an eligible employer means the inflow of cash, receivables, or other consideration arising during its ordinary activities in Canada in a particular period. These inflows are generally from the sale of goods, the rendering of services, and the use—by others—of the eligible employer's resources. To the extent that investment revenue, such as interest or dividends from investments in securities, arises in the course of an eligible employer’s ordinary activities in Canada in the particular period, is not an extraordinary item or on account of capital, and is included in revenue under its normal accounting practices, it would generally be included in qualifying revenue.

In the case of an eligible employer that is a registered charity (including a prescribed organization that is a public institution), qualifying revenue generally includes gifts and other amounts received during its ordinary activities. Where it operates a related business (as defined in subsection 149.1(1) of the Act), the revenue from that related business is also included in the registered charity's qualifying revenue.

In the case of an eligible employer that is a non-profit organization (including a prescribed organization that is a public institution), qualifying revenue generally includes membership fees and other amounts received during its ordinary activities.

Qualifying revenue excludes amounts from extraordinary items, amounts on account of capital and amounts from persons or partnerships that the eligible employer was not dealing with at arm's length. Amounts from the Canada Emergency Wage Subsidy and the 10% Temporary Wage Subsidy for Employers are ignored when calculating qualifying revenue. However, the CRA would not consider COVID-19 related government assistance to be extraordinary to the extent that it replaces or is meant to replace normal or recurring government assistance. The Canada Emergency Commercial Rent Assistance (CERCA) is an example of government assistance that would be included in qualifying revenue.

Methods of Accounting when Determining Qualifying Revenue

Generally, qualifying revenue of an eligible employer is to be determined in accordance with its normal accounting practices.  If the normal accounting practices of an eligible employer is the accrual method, the employer would be allowed to elect to calculate its qualifying revenue under the cash method instead of the accrual method.  Similarly, if the normal accounting practices of an eligible employer is the cash method, the employer would be allowed to elect to calculate its qualifying revenue under the accrual method, in accordance with generally accepted accounting principles.

However, an eligible employer cannot use a combination of both methods. The elections referred to above will apply for all claim periods.

An eligible employer that did not elect to use either the cash or accrual method (as applicable) when filing its initial application for the wage subsidy may later elect to do so. Since the election to use either a cash or accrual method will apply for all claim periods, the employer must amend all previously submitted applications to reflect this change.

Note: This election must be made and retained with the eligible employer's other books and records in support of its wage subsidy claim and eligibility, and the individual who has principal responsibility for the eligible employer's financial activities must attest that this is the case.

When using the accrual method in accordance with its normal accounting practices, an eligible employer should usually not be able to deduct its bad debts (or an allowance for bad debts), when determining its qualifying revenue.

Eligible Employees

An eligible employee, in respect of a week in a claim period, means an individual employed in Canada by the eligible employer in the claim period. For the claim periods 1 to 4, it does not include an employee who has been without remuneration from the eligible employer in respect of 14 or more consecutive days in the claim period (see note below).  For claim periods 5 to 13, individuals employed in Canada by the eligible employer in the claim period are no longer excluded if they are without remuneration in respect of 14 or more consecutive days in that claim period.

Note: Eligible employee status is determined in respect of each week in each claim period. So, an employee that is not an eligible employee in a preceding claim period (because, for example, the 14-day remuneration condition for claim periods 1 to 4 has not been met), may become eligible in a following claim period.

Eligible employers may hire back eligible employees and pay them retroactively in respect of a claim period to be able to qualify for the wage subsidy.  Further, if such an employee has received a Canada Emergency Response Benefit (CERB) payment from the CRA for a claim period, and it is later determined that they are no longer eligible for the CERB, whether due to the employment or otherwise the employee is required to repay the CERB payment. There are ways for the employee to return or repay the CERB amount.

A non-resident individual employed in Canada during a claim period may also qualify as an eligible employee as long as all other conditions to be an eligible employee are met.

Calculating the Wage Subsidy

How is the wage subsidy calculated for claim periods 1 to 4?

The amount of the wage subsidy for a claim period in periods 1 to 4 is the total of the following amounts in respect of the claim period (note that there is no overall limit on the wage subsidy amount that an eligible employer may claim):

I. Total of all amounts, each of which is for an eligible employee in respect of a week in the claim period, equal to the greater of

a. the least of

i. 75% of eligible remuneration paid to the eligible employee in respect of that week,

ii. $847, and

iii. if the eligible employee does not deal at arm's length with the eligible employer in the claim period, $0, and

b. the least of

i. the amount of eligible remuneration paid to the eligible employee in respect of that week,

ii. 75% of baseline remuneration in respect of the eligible employee determined for that week, and

iii. $847;

II. Total of the employer contributions to Employment Insurance (EI), the Canada Pension Plan (CPP), the Quebec Pension Plan (QPP), and the Quebec Parental Insurance Plan for an eligible employee for each week in the claim period throughout which week that employee is on leave with pay and for which claim period the employer is eligible for the wage subsidy for the employee (see Note 1 below)

Less:

III. Total of all amounts claimed or intended to be claimed under the 10% Temporary Wage Subsidy for Employers, by the eligible employer that qualifies for the Canada Emergency Wage Subsidy for the claim period; and

IV. Total of all amounts received by the eligible employee for each week in the claim period as a work-sharing benefit under the Employment Insurance Act (see Note 2 below).

Note 1: In general, for the amount in (II), an eligible employee will be considered to be on leave with pay throughout a week if that employee is remunerated by the eligible employer for that week but does not perform any work for the employer in that week. This amount in (II), would not be available for eligible employees that are on leave with pay for only a portion of a week. In addition, regular rules will apply in calculating the employer contributions in respect of that employee.

Note 2: On an administrative basis, the CRA will accept a reasonable estimate of work sharing benefits received by eligible employees if the eligible employer does not have the exact amount.

How is the wage subsidy calculated for claim periods 5 and 6?

The amount of the wage subsidy in respect of an eligible employee for claim periods 5 and 6, depends on three factors - the revenue reduction percentage in the claim period, the employer’s three-month average revenue drop (top-up revenue reduction percentage), and whether the eligible employee is on leave with pay in respect of that week in the claim period or is not on leave with pay.

Depending on whether the eligible employee is on leave with pay (see II below), or is not on leave with pay (see I below) in respect of a week in the claim period, the wage subsidy is the total of the following amounts in respect of the claim period (there is no overall limit on the wage subsidy amount that an eligible employer may claim):

I. Where an eligible employee is not on leave with pay in respect of a week in the claim period 5 or 6, the wage subsidy in respect of the week is the greater of 1. and 2. where:

1. is an amount equal to:

a. $0, if the revenue reduction percentage of the eligible employer for the claim period is less than 30%; and

b. if the revenue reduction percentage is equal to or greater than 30%, an amount equal to the greater of :

i. the least of

A. 75% of eligible remuneration paid to the eligible employee by the eligible employer in respect of that week,

B. $847, and

C. if the eligible employee does not deal at arm's length with the eligible employer in the claim period, $0, and

ii. the least of

A. the amount of eligible remuneration paid to the eligible employee by the eligible employer in respect of that week,

B. 75% of baseline remuneration in respect of the eligible employee determined for that week, and

C. $847;

2. is the amount determined by the result of:

the sum of the eligible employer’s base percentage for the claim period and the eligible employer’s top-up percentage for the claim period, multiplied by the least of the following amount:

a. the amount of eligible remuneration paid to the eligible employee by the eligible employer in respect of that week;

b. $1,129; and

c. if the eligible employee does not deal at arm’s length with the eligible employer in the claim period, the baseline remuneration in respect of the eligible employee determined for that week.

II. Where an eligible employee is on leave with pay in respect of a week in the claim periods 5 or 6, the amount of wage subsidy in respect of the week in the claim period is:

1. $0, unless:

a. the revenue reduction percentage of the eligible employer for the claim period is greater than 0%, or

b. the top-up percentage of the eligible employer for the claim period is greater than 0%, and

2. where any of the two conditions in 1. above are met, an amount equal to the greater of:

i. the least of

A. 75% of eligible remuneration paid to the eligible employee by the eligible employer in respect of that week,

B. $847, and

C. if the eligible employee does not deal at arm's length with the eligible employer in the claim period, $0, and

ii. the least of

A. the amount of eligible remuneration paid to the eligible employee by the eligible employer in respect of that week,

B. 75% of baseline remuneration in respect of the eligible employee determined for that week, and

C. $847;

III. In respect of each week in the claim period throughout which the employee is on leave with pay and for which claim period the employer is eligible for the wage subsidy for the employee:

1. $0, unless:

a. the revenue reduction percentage of the eligible employer for the claim period is greater than 0%, or

b. the top-up percentage of the eligible employer for the claim period is greater than 0%, and

2. where any of the two conditions in 1. above are met, the total of the employer contributions to Employment Insurance, the Canada Pension Plan, the Quebec Pension Plan, and the Quebec Parental Insurance Plan for an eligible employee.

Less:

IV. Total of all amounts claimed or intended to be claimed under the 10% Temporary Wage Subsidy for Employers, by the eligible employer that qualifies for the Canada Emergency Wage Subsidy for the claim period; and

V. Total of all amounts received by the eligible employee for each week in the claim period as a work-sharing benefit under the Employment Insurance Act (see Note below).

Note: On an administrative basis, the CRA will accept a reasonable estimate of work sharing benefits received by eligible employees if the eligible employer does not have the exact amount.

How is the wage subsidy calculated for claim periods 7 to 13?

The amount of the wage subsidy for a claim period in periods 7 to 13 is the total of the following amounts (note that there is no overall limit on the wage subsidy amount that an eligible employer may claim):

I. Where an eligible employee is not on leave with pay, in respect of a week in the claim period, the amount determined by the result of the sum of the eligible employer’s base percentage and the eligible employer’s top-up percentage for the claim period, multiplied by the least of the following amount:

a. the amount of eligible remuneration paid to the eligible employee by the eligible employer in respect of that week;

b. $1,129; and

c. if the eligible employee does not deal at arm’s length with the eligible employer in the claim period, the baseline remuneration in respect of the eligible employee determined for that week.

II. Where an eligible employee that is on leave with pay in respect of a week in the claim period, the least of:

a. the amount of eligible remuneration paid to the eligible employee by the eligible employer in respect of that week,

b. an amount determined by regulation in respect of the eligible employer for the claim period (there is no such amount currently),

c. $0, if

i. the eligible employee does not deal at arm’s length with the eligible employer in the claim period, and

ii. the baseline remuneration of the eligible employee for that week is $0, and

d. $0, unless

i. the revenue reduction percentage of the eligible employer for the claim period is greater than 0%, or

ii. the top-up percentage of the eligible employer for the claim period is greater than 0%;

III. For each week in the claim periods 7 or subsequent periods throughout which week the employee is on leave with pay and for which claim period the employer is eligible for the wage subsidy for the employee:

1. $0, unless:

i. the revenue reduction percentage of the eligible employer for the claim period is greater than 0%, or

ii. the top-up percentage of the eligible employer for the claim period is greater than 0%,

2. where any of the two conditions in 1. above are met, the amount equal to the total of the employer contributions to Employment Insurance, the Canada Pension Plan, the Quebec Pension Plan, and the Quebec Parental Insurance Plan for an eligible employee.

Less:

IV. Total of all amounts claimed or intended to be claimed under the 10% Temporary Wage Subsidy for Employers, by the eligible employer that qualifies for the Canada Emergency Wage Subsidy for the claim period; and

V.  Total of all amounts received by the eligible employee for each week in the claim period as a work-sharing benefit under the Employment Insurance Act*. 

Note

For Claim Periods 7 and 8 the amount is the greater of:

1. the least of:

a. 75% of eligible remuneration paid to the eligible employee by the eligible employer in respect of that week,

b. $847, and

c. If the eligible employee does not deal at arm’s length with the eligible employer in the claim period, nil, and

2. The least of:

a. The amount of eligible remuneration paid to the eligible employee by the eligible employer in respect of that week,

b. 75% if baseline remuneration in respect of the eligible employee determined for that week, and

c. $847

For Claim Periods 9 and 10 the amount is the greater of

1. $500, and

2. The lesser of

a. 55% of baseline remuneration in respect of the eligible employee determined for that week, and 

b. $573

For Claim Periods 11 to 13 the amount is the greater of

1. $500, and

2. The lesser of

a. 55% of baseline remuneration in respect of the eligible employee determined for that week, and

b. $595

*On an administrative basis, the CRA will accept a reasonable estimate of work sharing benefits received by eligible employees if the eligible employer does not have the exact amount.

When is an employee considered to be on leave with pay?

An eligible employee will generally be considered to be on leave with pay throughout a week if that employee is remunerated by the eligible employer for that week but does not perform any work for the employer in that week. Generally, this will only apply to employees on paid furlough (that is, employees that have been temporarily laid off with pay). An employee will not be considered to be on leave with pay for purposes of the wage subsidy if they are on a period of paid absence, such as vacation leave, sick leave, or a sabbatical. An employee would not be on leave with pay in situations where the employment relationship has been severed, such as when the employer pays wages in lieu of termination notice.

Additionally, an eligible employee will not be on leave with pay for a week if the employee continues to perform any of their employment duties during the week, including only minimal duties.

Amounts received that are funded by another government program

If an eligible employer has received or is reasonably expected to receive an amount as a subsidy or other assistance based on the salary, wages or other remuneration paid to an eligible employee that would otherwise be eligible for the wage subsidy, the amount of the government subsidy or assistance does not reduce the amount of the eligible remuneration used to calculate the wage subsidy for that employee.

However, if the government entity providing the subsidy pays the eligible employee directly, the eligible employer would only be able to claim, for the wage subsidy, the amount of eligible remuneration the employer actually paid to the employee.

The amount that may be claimed by an eligible employer for the wage subsidy is reduced by amounts claimed under the 10% Temporary Wage Subsidy for Employers and by amounts received by the employee as a work-sharing benefit under the Employment Insurance Act.

Base wage subsidy and top-up wage subsidy for the claim periods 5 to 13

Effective period 5 to 13 the wage subsidy calculation consists of two parts:

  • a base portion of the wage subsidy (base wage subsidy) available to all eligible employers that are experiencing a decline in qualifying revenues, with the wage subsidy amount varying depending on the scale of qualifying revenue decline; and
  • a top-up portion of the wage subsidy (top-up wage subsidy), for those eligible employers, of up to an additional 25% for claim periods 5 to 10 and of up to 35% for claim periods 11 to 13.

The base portion of the wage subsidy consists of a specified base percentage applicable to the amount of eligible remuneration paid to the eligible employee by the eligible employer for a claim period, on remuneration of up to $1,129 per week. The specified base percentage would vary depending on the level of decline in qualifying revenue (see Table below). The base percentage gradually reduces from a maximum of 60% in claim periods 5 and 6 (July 5 to August 29) to 50% in claim period 7 (August 30 to September 26) to 40% in claim periods 8 to 13 (September 27 to March 13).

While a maximum base wage subsidy applies to eligible employers with a revenue reduction percentage of 50% or more, eligible employers with a revenue reduction of less than 50% would be eligible for a lower base wage subsidy, with a phase-out measure when the decline in revenue is between a 50% revenue drop and no decline of revenue (see below).

For revenue reduction of less than 50%, the base percentage is determined for each of claim periods 5 to 13 by multiplying the revenue reduction percentage (described below) by a factor that declines during each claim period (except between periods 5 and 6).

Structure of the base wage subsidy

Periods 5 and 6

  • base percentage of 60%, if the employer’s revenue reduction percentage is greater than or equal to 50%; and
  • in any other case, 1.2 multiplied by the revenue reduction percentage;

Period 7

  • base percentage of 50%, if the employer’s revenue reduction percentage is greater than or equal to 50%; and
  • in any other case, 1 multiplied by the revenue reduction percentage;

Period 8 to 13

  • base percentage of 40%, if the employer’s revenue reduction percentage is greater than or equal to 50%; and
  • in any other case, 0.8 multiplied by the revenue reduction percentage;

Period 9

  • base percentage of 20%, if the employer’s revenue reduction percentage is greater than or equal to 50%; and
  • in any other case, 0.8 multiplied by the revenue reduction percentage; and
  • for a prescribed period after claim period 13, a percentage determined by regulation in respect of the eligible employer (currently there is no percentage determined by regulation after claim period 13).

Revenue reduction percentage

The revenue reduction percentage, of an eligible employer for a claim period, means the result (expressed as a percentage) of the formula (1 − A/B), where:

  • A is the eligible employer’s qualifying revenue for the current reference period for the claim period; and
  • B is the eligible employer’s qualifying revenue for the prior reference period for the claim period – or, if the prior reference period is January and February 2020, the amount determined by the formula (see note below), or a period prescribed by regulation in respect of the eligible employer for the claim period (currently there is no period prescribed by regulation).

If the above formula results in a lower revenue reduction percentage in respect of an eligible employer for a particular claim period than for the immediately preceding claim period, then the revenue reduction percentage in respect of the eligible employer for the particular claim period is deemed to be equal to its revenue reduction percentage for the immediately preceding claim period.

Note: the formula is: 0.5xAx(B/C) where

A= qualifying revenues for the months of January and February of 2020

B= number of days in January and February 2020

C= number of days in January and February of 2020 during which the eligible employer was carrying on business —or otherwise carrying on its ordinary activities.

  Period 5 (see note below)  Period 6 (see note below)  Period 7  Period 8  Period 9 
Maximum weekly benefit per employee  $677.40 (60%x$1,129)  $677.40 (60%x$1,129)  $564.50 (50%x$1,129)  $451.60 (40%x$1,129)  $225.80 (20%x$1,129) 
Revenue reduction (RR)  Base percentage  Base percentage  Base percentage  Base percentage  Base percentage 
50% and over 60%  60%  50%  40%  20% 
Less than 50%  1.2 x RR (e.g., 1.2 x 20% RR = 24%)
 1.2 x RR (e.g., 1.2 x 20% RR = 24%) 1.0 x RR (e.g., 1.0 x 20% RR = 20%)
0.8 x RR (e.g., 0.8 x 20% RR = 16%)
0.4 x RR (e.g., 0.4 x 20% RR = 8%)

Note: Transition rules- Under the safe harbour rule for claim periods 5 and 6, if the eligible employer has a revenue reduction of 30% or more, then the employer is entitled to a wage subsidy not lower than the amount calculated under the rules that were in place for periods 1 to 4 in respect of an eligible employee who is not on leave with pay (see Q20-03) for that week.

The overall wage subsidy percentage would be equal to the base percentage plus the top-up percentage.

Top-up wage subsidy for claim periods 5 to13

Under the general year-over-year approach, for claim periods 5 to 7, the top-up portion of the wage subsidy is calculated based on the revenue drop experienced when comparing the average monthly qualifying revenues of the eligible employer in the last three calendar months that ended prior to the current reference period for the claim period, to the average monthly qualifying revenues for the same months in the prior year. For claim periods 8 to 10, the top-up wage subsidy is based on the greater of the revenue reduction as calculated above (three month revenue reduction test) and the revenue reduction for the claim period (one month revenue reduction test). For claim periods 11 to 13, the top-up wage subsidy is based solely on the one month revenue reduction test for the claim period.

Under the alternative approach, for claim periods 5 to 7, an eligible employer’s top-up wage subsidy would be determined based on the revenue drop experienced when comparing average monthly qualifying revenue in the last three calendar months that ended prior to the current reference period for the claim period, to the average monthly revenue in January and February 2020. For claim periods 8 to 10, it will be based on the greater of the percentage calculated as above (three month revenue reduction test) and the revenue reduction percentage (one month revenue reduction test) of the eligible employer for the claim period. For claim periods 11 to 13, the top-up wage subsidy is based solely on the one-month revenue reduction test for the claim period.

Top-up revenue reduction percentage

For Claim Periods 5 to 7 (three month revenue reduction test)

The top-up revenue reduction percentage of an eligible employer for claim periods 5 to 7, means the result, expressed as a percentage, of:

(1 - A/B) where

  • A is the average monthly qualifying revenue of the eligible employer for the last three calendar months that ended prior to the current reference period for the claim period;
  • B is the average monthly qualifying revenue of the employer for:
  • (a) if the prior reference period for the claim period is January and February 2020, then January and February 2020, and
  • (b) in any other case, the last three calendar months that ended before the prior reference period for the claim period.

For Claim Periods 8 to 10 (safe harbour rule for top-up wage subsidy calculation)

The top-up revenue reduction percentage of an eligible employer for claim periods 8 to 10 is the greater of:

  • The result (expressed as a percentage) of the formula described above (three months revenue reduction test), and 
  • Its revenue reduction percentage for the claim period (one month revenue reduction test)

For Claim Periods 11 to 13 (one month revenue reduction test)

The top-up revenue reduction percentage of an eligible employer for claim periods 11 to 13 is equal to its revenue reduction percentage for each of those claim periods.

Top-up percentage

For claim periods 5 to 10, the top-up percentage, of an eligible employer for a claim period, means the percentage determined by regulation for the claim period (currently there is none) or, if there is no percentage determined by regulation for the claim period, the lesser of 25% and the percentage determined by the formula:

1.25 × (employer’s top-up revenue reduction percentage for the claim period − 50%)

If the top-up revenue reduction percentage of the eligible employer is equal to or less than 50%, the employer will not be eligible for the top-up wage subsidy.

As with the base percentage, the top-up percentage applies to eligible remuneration of up to $1,129 per week.

Table: To-up Percentage Examples for Claim Periods 5 to 10

Top-up revenue reduction percentage  Top-up percentage  Top-up percentage= 1.25 x (top-up revenue reduction percentage - 50%) 
70% and over  25%  1.25 x (70% - 50%) = 25%
65% 18.75% 1..25 x (65% - 50%) = 18.75%
60% 12.5% 1.25 x (60% - 50%) = 12.5%
55% 6.25% 1.25 x (55% - 50%) = 6.25%
50% and under 0.0% 1.25 x (50% - 50%) = 0%

The overall wage subsidy percentage would be equal to the top-up percentage plus the base percentage

For claim periods 11 to 13, the top-up percentage of an eligible employer for a claim period, means the lesser of 35% and the percentage determined by the formula:

1.75 × (employer’s top-up revenue reduction percentage for the claim period − 50%)

If the top-up revenue reduction percentage of the eligible employer is equal to or less than 50%, the employer will not be eligible for the top-up wage subsidy.

As with the base percentage, the top-up percentage applies to eligible remuneration of up to $1,129 per week.

Table: Top-up Percentage Examples for Claim Periods 11 to 13

Top-up revenue reduction percentage*   Top-up percentage  Top-up percentage= 1.75 x (top-up revenue reduction percentage* – 50%) 
 70% and over 35% 1.75 x (70% - 50%) = 35%
65%
26.25%
1.75 x (65% - 50%) = 26.25%
60%  17.5%  1.75 x (60% - 50%) = 17.5% 
55%
8.75%
1.75 x (55% - 50%) = 8.75%
50% and under
0.0% 1.75 x (50% - 50%) = 0%

The overall wage subsidy percentage would be equal to the top-up percentage plus the base percentage.

* For claim periods 11 to 13, an eligible employer’s top-up revenue reduction percentage is equal to its revenue reduction percentage for the period.

Table: Combined base portion (BP) and top-up portion of the wage subsidy percentages for claim periods 5 to 13

  Period 5 (see note below)  Period 6 (see note below)  Period 7  Period 8  Period 9 
Maximum weekly benefit per employee  $959.65 (85%x $1,129)
$959.65 (85%x $1,129)
$846.75 (75%x $1,129)
$733.85 (65%x $1,129)
$508.05 (45%x $1,129)
Revenue reduction (RR) in the current 1-month reference period          
50% and over 85% (60% BP + *6 25% top-up)
85% (60% BP + *6 25% top-up)
75% (60% BP + *6 25% top-up)
65% (60% BP + *6 25% top-up)
45% (60% BP + *6 25% top-up)
Less than 50% 1.2 x RR + *6 25% (e.g., 1.2 x *7 20% + 25% top-up = 49%) 1.2 x RR + *6 25% (e.g., 1.2 x *7 20% + 25% top-up = 49%)
1.0 x RR + *6 25% (e.g., 1.0 x *7 20% + 25% top-up = 45%)
0.8 x RR + *6 25% (e.g., 0.8 x *7 20% + 25% top-up = 41%)
0.4 x RR + *6 25% (e.g., 0.4 x *7 20% + 25% top-up = 33%)

*6 - Maximum top-up subsidy of 25% is available when the top-up revenue reduction percentage (see Q20-3) for the claim period is 70% or more.

*7 - Assumed an RR of 20% for illustrative purposes only.

Note: Transition rules- Under the safe harbour rule for claim periods 5 and 6, if the eligible employer has a revenue reduction of 30% or more, then the employer is entitled to a wage subsidy not lower than the amount calculated under the rules that were in place for periods 1 to 4 in respect of an eligible employee who is not on leave with pay for that week.

Application Process

Before You Apply

  • Make sure your business details and direct deposit information for your payroll accounts (RP) are up-to-date. This will ensure that any payments to you will be processed quickly and easily. Register your payroll accounts for direct deposit
  • If you are expecting a payment of $25 million or more, you will have to get your payment through the large value transfer system (LVTS). Learn more: LVTS registration process.

How You Apply

Businesses can apply online using one of the following methods:

  1. CRA MY Business Account (preferred method)
  2. Business representatives may apply using "Represent a Client" method
  3. Web Form

For an in-depth understanding of the CEWS application process refer to the Federal Government’s CEWS Application Guide.

After You Apply

When to Expect Your Payment

You can generally expect to receive your payment within 10 business days if you are registered for direct deposit on your payroll account. In some cases, the CRA may need to delay your payment if additional review is required or they need to contact you.

Include the Subsidy on Your Returns

The CEWS is taxable. You must include the amount of CEWS you receive on your Annual Return of Income (e.g. Corporation Income Tax Return, Partnership Return) when calculating your taxable income.

You will also be expected to report the amount of the CEWS that was used to pay each of your employees’ salaries by using a special code in the “other information” area at the bottom of the employees’ T4 slips. More information on the reporting requirements will be released before the end of the year.

Incorrect or Fraudulent Claims

If you do not meet the Canada Emergency Wage Subsidy eligibility requirements for a period, you will be required to repay any amounts you received for that period.

Penalties may apply in cases of fraudulent claims, including fines or even imprisonment.

If you artificially reduce your revenue for the purpose of claiming the wage subsidy, you will be required to repay any subsidy amounts you received, plus a penalty equal to 25% of the total value.

Read more on CEWS compliance

Keep Your Records

You must keep records demonstrating your reduction in revenues and remuneration paid to employees.

Read more on records you should keep

Contesting Denied Claims

If an employer disagrees with the decision made by the CRA regarding a wage subsidy claim, the suggested recourse procedures to be followed by an employer differ depending on when the employer is informed of that decision.

The CRA does have the discretion to reduce the amount of the wage subsidy payment if an applicant owes or is about to owe a debt and the CRA determines there is a risk of not collecting all or part of that tax debt.

For full or partial claim denials received before September 21, 2020

  • If an employer disagrees with the decision made by the CRA regarding the wage subsidy claim, the employer may request a second level review of the claim application. The request for a second level review must include all supporting documents, and be submitted within 30 days of the date of the letter that communicated CRA’s original decision. The second level review is conducted by someone other than the original decision-maker.
  • Employers should submit their request online by logging into My Business Account and selecting “Register a formal dispute”.
  • While the CRA’s Appeals Branch (“Appeals”) portal is being used to expedite receipt and processing of all second level review requests, the review itself will not be undertaken by Appeals. The results of the second level review will be communicated in writing, after which a Notice of Determination or Notice of Assessment will be issued for the claim period. If the employer disagrees with the second level review decision, formal recourse rights (Notice of Objection, and appeal to the Tax Court of Canada) will be available through Appeals once the Notice of Determination or Notice of Assessment is issued. A Notice of Objection must be filed within 90 days from the date of the Notice of Determination or Notice of Assessment.

For full or partial claim denials received on or after September 21, 2020

  • Going forward, a Notice of Determination or Notice of Assessment will be issued to inform an employer when a claim is fully or partially denied.
  • If an employer disagrees with the Notice of Determination or Notice of Assessment, the employer can file a Notice of Objection within 90 days from the date of its issuance.

In either case, the employer should submit their recourse request online by logging into My Business Account and selecting “Register a formal dispute”.

 
Government Assistance

The wage subsidy received by an eligible employer is considered assistance received from a government immediately before the end of the claim period to which it relates. The amount is taxable and is to be included in computing the income of the eligible employer. The eligible remuneration paid to the employee will be a deductible expense for the employer.

However, the wage subsidy received by the eligible employer will not be included in the calculation of its qualifying revenue.

Original Wage Subsidy Program

You may be eligible for both the Canada Emergency Wage Subsidy (CEWS) and the 10% Temporary Wage Subsidy for Employers (10% temporary wage subsidy). However, for an eligible employer that is eligible for both subsidies for a period, all amounts that the employer claims under the 10% temporary wage subsidy for remuneration paid in a specific claim period, reduce the amount available to be claimed under the CEWS in that same period.

The 10% temporary wage subsidy is equal to 10% (or a lower percentage that the employer elects - see note below), of the remuneration that an eligible employer pays from March 18 to June 19, 2020, up to $1,375 for each employee, to a maximum of $25,000 total per employer.

If the income taxes you deduct with respect to the remuneration you paid are not sufficient to offset the value of the subsidy in that period, you can reduce future payroll remittances to benefit from the subsidy. However, the entire amount claimed under the 10% temporary wage subsidy must be applied to reduce the CEWS for the claim period in which the remuneration is paid.

Note: If an eligible employer completes their CEWS application and does not enter any amount for the 10% temporary wage subsidy, the CEWS will be determined as if the employer is electing 0% as the prescribed percentage for calculating their 10% temporary wage subsidy and requesting the maximum CEWS. However, the eligible employer should indicate the 0% election on the self-identification form under the 10% temporary wage subsidy program.

Ensuring Compliance & Business Responsibilities

The CRA will use a combination of automated queries, validation within its data, follow-up phone calls to verify certain elements of the claim upon pre-payment review, and more comprehensive post-payment audits.

As a result of the review or audit, the CRA may at any time determine that any or no amount of a wage subsidy claim is an overpayment and send a Notice of Determination to the claimant. In the case of an audit, the wage subsidy claimant would be required to repay amounts previously paid as well as applicable interest. In regard to cases of serious non-compliance, significant penalties may be applicable.

Employers who engage in artificial transactions to reduce their revenues in order to meet CEWS eligibility will be liable to a penalty equal to 25% of the amount of wage subsidy that is claimed in its application, and will have to pay back any wage subsidy that it received. If an employer knowingly, or under circumstances amounting to gross negligence, generally makes, or is involved in the making of a false statement or omission in its wage subsidy application for a claim period, the employer is liable to a penalty (commonly referred to as the “gross negligence penalty”) of up to 50% of the difference between the amount of wage subsidy that it claimed in its application and the amount of wage subsidy to which it is actually entitled.

Penalties may apply in cases of fraudulent claims. The penalties may include fines or even imprisonment.

Publishing employers who apply for the subsidy

The CRA will publish the name of any eligible employer that makes an application for CEWS. The registry lists the legal name and operating/trade name of corporations who have received or will soon receive the wage subsidy. This list is updated daily as applications are received, cancelled, or withdrawn.

View registry of wage subsidy recipients

Read more about CEWS compliance