July 17, 2020 CEWS Update

On July 17, 2020, the Federal government proposed significant changes to the Canadian Emergency Wage Subsidy (CEWS), including extending the CEWS until at least November 21, 2020. Draft legislation was released and if passed, these new rules will come into effect for the periods noted below.

Beginning July 5, 2020, the 30% revenue decline criteria will be eliminated and the CEWS will be available to any eligible employer that has experienced a revenue decline.  The amount of the CEWS will vary depending on the amount of an eligible employer’s revenue decline.  There is a special rule for periods 5 and 6 that allow employers who would be better off under the old CEWS rule, to use the old CEWS rules for these 2 periods only.

The CEWS will now have two components:

1. The base subsidy will be available to all eligible employers who have a revenue decline based on the percent of their revenue decline; and
2. A top up subsidy will be available for eligible employers who have experienced more than a 50% revenue decline.

Base Subsidy

The base CEWS is calculated on remuneration of up to $1,129 per week and the percentage of the CEWS will be based on the amount of an eligible employer’s revenue decline for either the current or previous month (whichever is greater) compared to the same month in 2019 (or the average of January and February 2020 revenue if that method is chosen) as outlined in the below chart:

 

Timing	Period 5 * Jul. 5 – Aug. 1	Period 6 * Aug. 2 – Aug. 29	Period 7 Aug. 30 – Sep. 26	Period 8 Sep. 27- Oct. 24	Period 9 Oct. 25 – Nov. 21
Maximum weekly benefit per employee	Up to $677	Up to $677	Up to $565	Up to $452	Up to $226
Revenue Drop (Greater of):	Jul. 2020 or Jun. 2020	Aug. 2020 or Jul. 2020	Sep. 2020 or Aug. 2020	Oct. 2020 or Sep. 2020	Nov. 2020 or Oct. 2020
50% or more	60%	60%	50%	40%	20%
0% to 49%	1.2 x revenue drop (e.g. 1.2 x 30% revenue drop = 36% base CEWS rate)	1.2 x revenue drop (e.g. 1.2 x 30% revenue drop = 36% base CEWS rate)	1 x revenue drop (e.g. 1 x 30% revenue drop = 30% base CEWS rate)	0.8 x revenue drop (e.g. 0 .8 x 30% revenue drop = 24% base CEWS rate)	0.4 x revenue drop (e.g. 0.4 x 30% revenue drop = 12% base CEWS rate)

* Employers that have experienced a revenue decline of 30% or more and that are better off under the old CEWS rules can claim the 75% CEWS for periods 5 and 6 (i.e. still claim CEWS under the old rules for those periods).

 

Top-up Subsidy

The maximum top-up subsidy is 25% and will be available to eligible employers who have a three month average revenue decline of 70% or more compared to the same 3 month average for the same months in 2019 (or the average of January and February 2020 if that is the method chosen).  The top-up subsidy is only available to employers that have experienced more than a 50% decline in revenue for the relevant period as summarized in the below chart:

 

3-month avg. revenue decline	Top up CEWS Rate	Top up calculation = 1.25 x (3-month revenue drop – 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

 

 Other Changes

 Eligible remuneration – Will no longer be based on baseline remuneration except for non-arms length employees.  Non-arms length employees can use periods in 2019 to determine their base line remuneration if the eligible employer elect to do so.

• Eligible employees – Beginning in period 5, employees without remuneration in respect of 14 or more consecutive days are considered to be eligible employees.
• Furloughed Employees – Beginning in period 7, CEWS support for furloughed employee’s will be adjusted to align with the benefits provided under Employment Insurance and / or the Canada Emergency Response Benefit (CERB).
• Revenue decline –Employers who elected to use the average of their January and February revenue for purposes of determining their revenue decline can re-elect to use this method for periods 5 onwards or change to use the revenue for the same month in 2019 to determine their revenue decline.  Conversely, employers that used the month in 2019 to determine their revenue decline can continue to use this method or elect to use the average of their January and February 2020 revenue to determine their revenue decline for periods 5 onwards.
• Filing due date – The filing due date for all CEWS claims is January 31, 2021

 You can read more about the proposed change to the CEWS here:  https://www.canada.ca/en/department-finance/news/2020/07/adapting-the-canada-emergency-wage-subsidy-to-protect-jobs-and-promote-growth.html

Please contact your Fruitman Kates LLP advisor if you have any questions about CEWS or need assistance with claiming it.