On July 17, 2020, the Federal Government announced significant changes to the Canada Emergency Wage Subsidy (“CEWS”) program to extend the program to November 21, 2020, broaden its eligibility criteria, and modify the subsidy calculation.
This newsletter provides updated information on the CEWS based on Bill C-20: An Act respecting further COVID-19 measures (“Bill C-20”) which received Royal Assent on July 27, 2020.
Bill C-20 adds three qualifying periods:
For these new qualifying periods, the existing 75% subsidy is replaced by a two-part calculation:
The new subsidy calculation also applies to Period 5 (July 5, 2020 to August 1, 2020) and Period 6 (August 2, 2020 to August 29, 2020). A “safe harbour” rule ensures employers do not receive less under the new calculation than they would have under the existing program.
Bill C-20 also allows, at the Federal Government’s discretion, the addition of a Period 10, from November 22, 2020 to December 19, 2020. No details on the subsidy calculation for Period 10 have yet been announced.
Special rules apply to furloughed employees, beginning with Period 7, to align the subsidy with the Canada Emergency Response Benefit (CERB) and Employment Insurance (EI).
The per-employee base subsidy is determined on a sliding scale for employers experiencing a revenue drop between 0% and 50%. Employers experiencing a revenue drop of 50% or greater will receive the maximum base subsidy.
For example, an employer with a revenue drop of 50% or greater in Periods 5 and 6 would be eligible for a 60% base rate. If the employer had a revenue drop lower than 50%, the base rate would be calculated as 1.2 times the revenue drop expressed as a percentage.
The base rate is multiplied by each employee’s weekly earnings to determine the base subsidy. The maximum weekly benefit is $677 (60% of $1,129) per employee in Periods 5 and 6, which decreases in each Periods 7 through 9.
The following table summarizes the per-employee base subsidy calculations for qualifying periods 5 to 9.
The top-up subsidy provides an additional subsidy for employers with a revenue drop greater than 50%. The top-up rate is 1.25 multiplied by the percentage revenue drop greater than 50%, to a maximum top-up rate of 25%, which is achieved at a 70% revenue drop.
To calculate the top-up subsidy, the top-up rate is multiplied by each employee’s weekly earnings to a per-employee maximum of $282 per week.
The following table summarizes the top-up subsidy rate at specified revenue drop percentages:
| 3-month average revenue drop | Top-up rate | Top-up calculation = 1.25 x (3 month revenue drop – 50%) |
| 70% and greater | 25.00% | 1.25 x (70%-50%) = 25.00% |
| 65% | 18.75% | 1.25 x (65%-50%) = 18.75% |
| 60% | 12.50% | 1.25 x (60%-50%) = 12.50% |
| 55% | 6.25% | 1.25 x (55%-50%) = 6.25% |
| 50% and under | 0.00% | 1.25 x (50%-50%) = 0.00% |
The revenue drop calculations are different for the base subsidy and top-up subsidy.
| Period | Revenue drop comparison for base subsidy* | Revenue drop comparison for top-up subsidy |
| 5 | July 2020 compared to:
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Average of April to June 2020 compared to:
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| 6 | August 2020 compared to:
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Average of May to July 2020 compared to:
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| 7 | September 2020 compared to:
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Average of June to August 2020 compared to:
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| 8 | October 2020 compared to:
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Average of July to September 2020 compared to:
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| 9 | November 2020 compared to:
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Average of August to October 2020 compared to:
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* Where the revenue drop percentage applicable to the immediately preceding qualifying period is greater than the revenue drop percentage applicable to the current qualifying period, the greater of the two revenue drop percentages is to be used to calculate the base subsidy for the current qualifying period.
For example, if the revenue drop percentage for Period 8 is greater than the revenue drop percentage for Period 9, then the Period 8 revenue drop percentage is used to calculate Period 9’s base subsidy.
For Period 5 and subsequent periods, employers can choose to use either 2019’s applicable month or the average of January and February 2020 for the revenue drop test for the base subsidy and top-up subsidy (regardless of the method they used for periods 1 to 4). However, employers will have to apply the same method for subsequent periods for the calculation of the base subsidy and top-up subsidy.
Employers must continue to apply separately for each qualifying period. Applications must be made through the Canada Revenue Agency’s online portal.
The filing deadline for applications for all CEWS periods is extended to January 31, 2021.
Other changes to the CEWS, previously announced on May 15, 2020, were enacted by Bill C-20, including: