Guest Column – Cameron Smith, articling student
The legislation governing the Canada Emergency Wage Subsidy (“CEWS”) was enacted on April 11 as part of Bill C-14. This subsidy is the most significant source of government support provided to help Canadian businesses struggling because of the COVID-19 pandemic so far. The subsidy will provide eligible employers who meet the revenue test with financial support amounting to 75% of their employee’s salaries up to $847 per week per employee for the period from March 15 until June 6, 2020. This blog post will serve as a starting point in determining if the CEWS is available to you.
Are you an eligible employer?
The definition of an eligible employer is quite broad and will include most Canadian employers except those that are public institutions. Eligible employers include individuals, taxable corporations, registered charities, non-profit organizations, labour organizations, and some boards of trade and chambers of commerce. The government intended to keep this definition broad to catch as many employers as possible. Support for those that meet the revenue test will be available to employers of any size operating in almost every sector except for municipalities, crown corporations, schools, and hospitals.
Do you meet the revenue test?
The more important question to determine eligibility for the CEWS is whether or not an employer meets the revenue test. In order to meet the test the employer must experience a decline in revenue of at least 15% in March 2020 or at least 30% in April or May 2020. To calculate that decline the employer will have to compare its revenue for March, April, or May 2020 to either their revenue for the corresponding March, April, or May of the previous year or to an average of the employer’s revenue in January and February of 2020.
Revenue should be calculated using the accrual or cash method of accounting, whichever method is used initially must be used for every subsequent application to this program. The revenue calculation should only include revenue earned in Canada from arm’s length sources and can exclude extraordinary items. Once an employer is determined to be eligible for the subsidy for one month, they automatically qualify for the following month.
How does it work?
Eligible employers can apply for the subsidy directly on the Canada Revenue Agency’s My Business Account portal. Once the application is accepted the federal government will provide employers with payments equal to 75% of each employee’s current renumeration or the weekly average of remuneration between January 1, 2020 to March 15, 2020 up to $847 per week. For the purposes of this calculation remuneration will include salaries, wages, and taxable benefits. If an employee does not receive any remuneration from the employer for a two week period then that employee will not be eligible for the subsidy. Additionally, if the employee is not arm’s length from the employer then it will only be eligible for the subsidy based on that employee’s