Further to our recent article on Bill C-20, and its proposed amendments to the Canada Emergency Wage Subsidy (“CEWS”), the Federal Government is introducing substantive amendments to the CEWS that will have a significant impact on many employers. As a general overview, Bill C-20 proposes to:
Bill C-20’s proposed amendments to the Income Tax Act are quite detailed and will affect employers differently based on their financial circumstances. In this article, we summarize the implications of Bill C-20 for employers.
Prior to Bill C-20’s proposed changes, employers experiencing less than a 30% decline in revenue were ineligible for the CEWS. The proposed amendments forego this 30% requirement. Instead, employers who have experienced any decline in their revenue during the qualifying periods are eligible for relief. However, the relief will be proportionate to their revenue decline.
For the purposes of calculating the available wage subsidy after August 29, 2020, Bill C-20 distinguishes between employees “not on leave with pay” (i.e., active employees) and employees “on leave with pay.”
For active employees, the wage subsidy will be calculated as a combination of a base wage subsidy amount and a top-up wage subsidy amount (for eligible employers), against a maximum eligible remuneration amount of $1,129. More specifically:
Base Wage Subsidy
Top-Up Wage Subsidy
The following table outlines the maximum wage subsidies available to employers in periods 5 to 9:
[table id=1 /]
Alternative Calculation for Periods 5 and 6
For employers experiencing a decline in revenue of 30% or more in periods 5 and 6, Bill C-20 permits such employers to utilize the prior CEWS formula if doing so would result in a greater wage subsidy amount. Under the prior CEWS formula, for employers experiencing a decline in revenue of 30% within the qualifying period, as compared to the same period in 2019, the maximum wage subsidy payable would be calculated under (i) or (ii) below, whichever is greater:
(i) 75% of the eligible remuneration paid to an eligible employee, up to $847 per week; or,
(ii) the lesser of:
a) 100% of eligible remuneration paid to an eligible employee, up to $847 per week
b) 75% of an eligible employee’s pre-crisis remuneration, up to $847 per week.
For purposes of this formula, an employee’s pre-crisis remuneration is based upon the average weekly remuneration paid (excluding any 7-day period during which the employee did not receive remuneration) during the following periods:
Between January 1, 2020 and March 15, 2020, or
At the employer’s election:
Between March 1, 2019 and May 31, 2019, for purposes of qualifying periods 1-3;
Between March 1, 2019 and June 30, 2019, for purposes of qualifying period 4; and
Between July 1, 2019 and December 31, 2019, for purposes of qualifying periods 5-9.
The maximum wage subsidy of $847 under the old CEWS formula is greater than the maximum base wage subsidy of $677 for periods 5 and 6 under the new CEWS formula. Thus, employers who have been eligible for the maximum wage subsidy under the current CEWS formula, and are continuing to experience at least a 30% decline in revenue but less than 50% (i.e., are not eligible for the top-up subsidy), are likely to benefit from utilizing the old CEWS formula for periods 5 and 6.
For periods 5 and 6, the calculation of the wage subsidy for non-active employees (i.e., employees on leave with pay) will be the same as that calculated for periods 1-4 under the prior CEWS formula. That is, employers will receive:
(a) 75% of the eligible remuneration paid to an eligible employee, up to $847 per week; or
(b) 100% of eligible remuneration paid to an eligible employee, up to $847 per week, if the employee’s remuneration has decreased by 25% or more from pre-crisis levels.
For periods 7 and onwards, the calculation of the wage subsidy for non-active employees will depend on the maximum eligible remuneration amount to be passed by government by regulation. According to the explanatory note accompanying Bill C-20, the intention is that the wage subsidy for these employees be calculated to align with amounts provided as CERB or EI.
Beginning in period 5 (July 5 – August 1), employees who were without remuneration for 14 days during the qualifying periods will no longer be excluded from the definition of “eligible employees”. Employees will simply need to be employed in Canada by the eligible entity in the qualifying period to meet the definition of an “eligible employee” for the fifth and subsequent periods.
Bill C-20 passed third reading on July 21, 2020, and we will continue to monitor any potential changes to its contents as it progresses through the Senate, before it comes into force.
If you have any questions about this article, please contact Sari Wiens, Ilan Burkes, Nicole Toye or Jessica Fairbairn.
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