CEWS 2.1: Navigating the Changes to the Wage Subsidy

Aaron Schechter
| 11/12/2020
The Canadian government recently introduced measures that impact Periods 9 and 10 of the Canada Emergency Wage Subsidy (“CEWS”).  The measures result in changes to the CEWS calculations for Periods 9 and 10.

The attached infographic is designed to assist employers in determining and calculating the applicable CEWS rates for each qualifying period. 

Rate Changes

The base subsidy rate and top-up subsidy rate for Periods 9 and 10, from October 25 to November 21 and November 22 to December 19, respectively, will now be identical to the rates used under Period 8. This means that the maximum amount of wage subsidy per employee for Periods 8, 9 and 10 will be $734. For the moment, there are no details on the rates for subsequent periods.

In addition, for Periods 8, 9 and 10, the calculation of the base subsidy rate and the top-up rate will be harmonized. Instead of using the current three-month revenue decline test for the top-up subsidy, both rates will now be calculated using the change in the employer’s monthly revenues, year-over-year, or, where the alternative method has been elected, the average January/February 2020 revenues. There is a “safe harbour” rule for Periods 8, 9 and 10, so that eligible employers will still be able to calculate their top-up wage subsidy using the three-month revenue decline test should that provide a higher rate.  

In other words, for Periods 8, 9 and 10, eligible employers will calculate their top-up rate using the greater of:
  1. One month revenue decrease in current or previous month, or
  2. Three-month average revenue drop.

Furloughed Employees

For Periods 9 and 10, the wage subsidy for furloughed employees will be aligned with the benefits provided through Employment Insurance (EI).  
The wage subsidy calculation for a furloughed employee will be the lesser of:
  • the amount of eligible remuneration paid in respect of the week; and
  • the greater of:
    • $500, and
    • 55 per cent of pre-crisis remuneration for the employee, up to a maximum subsidy amount of $573. 
The employer portion of contributions in respect of the Canada Pension Plan and EI in respect of furloughed employees will continue to be refunded.

New Baseline Remuneration Calculation for Employees Returning from Leave

For Periods 5 to 10, the baseline remuneration for an eligible employee returning from a continuous maternity, parental, caregiver, or long-term sick leave that began before July 1, 2019 and ended after March 15, 2020 will be calculated as remuneration paid during the 90-day period ending immediately before the beginning of the employee’s leave period.

Due Date for Claims

The due date for a CEWS claim for a specific period will now be the later of:
  1. January 31, 2021, or
  2. 180 days after the end of the period.

How Can Crowe Soberman Support You?

In these uncertain times, it is essential to remain agile and proactive as the COVID-19 situation unfolds. Having timely access to financial experts, insights and news as quickly as possible is critical—and that’s where we can help.

We have established a dedicated COVID-19 Resource Hub, highlighting areas of business operations that will likely be impacted by coronavirus. Whether you need to discuss your current financial situation and learn what options are available to you, or you want to be guided through the appropriate cash flow management strategies for your business, our team of experts are ready to help you at every step of the way. Please do not hesitate to reach out to your Crowe Soberman professionals for support during these challenging times.

We are in this together.

This article has been prepared for the general information of our clients. Please note that this publication should not be considered a substitute for personalized advice related to your situation.

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Aaron Schechter Crowe Soberman Toronto
Aaron Schechter
Partner, Tax
Aaron Schechter Professional Corporation