Canada Emergency Wage Subsidy (CEWS) Extended to December 2020

The Federal government announced that it is extending the Canada Emergency Wage Subsidy (the “CEWS”) program to December, 2020. The CEWS enables eligible Canadian employers whom have been impacted by COVID-19 to a subsidy of up to 75% of employee wages. As of July 13, at the time of this announcement, the CEWS had approved 667,400 applications and paid out $20.38 billion in subsidies.

Applying for CEWS

Employers may apply using the CRA’s My Business Account or a separate online application form.

The Government has now released an online resource, available here, which employers can use to determine their eligibility for the CEWS as well to obtain an estimate of the subsidy value which they may be entitled to.


To receive the wage subsidy, an employer must be an eligible employer, have experienced an eligible reduction in revenue, and have had a CRA payroll account on March 15, 2020.

Eligible employers include:

  • Individuals (including trusts)
  • Taxable corporations
  • persons that are exempt from corporate tax (Part I of the Income Tax Act), other than public institutions:
    • non-profit organizations
    • agricultural organizations
    • boards of trade
    • chambers of commerce
    • non-profit corporations for scientific research and experimental development
    • labour organizations or societies
    • benevolent or fraternal benefit societies or orders
  • registered charities
  • certain Indigenous government-owned corporations that carry on a business
  • partnerships consisting of eligible employers and certain Indigenous governments
  • registered Canadian amateur athletic associations
  • registered journalism organizations
  • private schools or private colleges, and
  • partnerships consisting of eligible employers (including partnerships where at least 50% of the interests in the partnership are held by eligible employers)

Public institutions, such as municipalities, local governments, Crown corporations, publicly funded universities, colleges, schools and hospitals, are not eligible for the subsidy.

Employees who have been laid off or furloughed can become retroactively eligible if the employer rehires them and their retroactive pay and status meet the eligibility criteria for the claim period. Employers must rehire and pay these employees before including them in the calculation for the subsidy.

Eligibility for employees is limited to individuals employed in Canada, and employees that have not been without remuneration for 14 or more consecutive days in the eligibility period. The eligibility periods currently include: March 15 to April 11, April 12 to May 9, May 10 to June 6, and June 7 to July 4.

This rule replaces the previously announced restriction that an employer would not be eligible to claim the CEWS for remuneration paid to an employee in a week that falls within a 4-week period for which the employee is eligible for the Canadian Emergency Response Benefit.

In certain situations, an eligible employer may claim the wage subsidy in respect of an eligible employee who has received payments under the Canada Emergency Response Benefit (CERB). However, where an individual has not been paid any remuneration from the eligible employer in respect of a period of 14 or more consecutive days in a claim period, the individual will not qualify as an eligible employee for that period of employment, and the wage subsidy will not be available in respect of that employee for that claim period.

The onus is on the eligible employer to ensure that only eligible employees are included for each claim period.

Revenue Reduction Criteria

Only Employers whom have experienced an eligible decrease in revenue during the eligibility periods will be eligible for the CEWS during those periods.

Eligible revenue includes revenue earned in Canada from the selling of goods, the rendering of services, and others’ use of your goods and services.

Employers may opt to calculate revenue through either cash or accrual accounting.  However, the same approach must be used for each eligibility period.

What time periods are compared to establish revenue loss? 

Eligible employers who suffer a drop in gross revenues of at least 15% in March, and 30% in April, May, June and July when compared to their “baseline revenue” for those same months.     

To calculate “baseline revenue” for each period employers may choose to use:

  • revenue earned in the corresponding month in 2019; or
  • the average of revenue earned in January and February 2020.

Once an employer chooses a method of revenue comparison, it cannot be changed for subsequent calculations in later claim periods. 

Notably, if an employer qualifies for the CEWS for a claim period, they automatically qualify for the following claim period.

How much does it cover?

An employer’s entitlement will be based entirely on the salary or wages actually paid to employees. Eligible employers will be able to access the CEWS by applying through the Canada Revenue Agency’s My Business Account online portal, and are required to keep records demonstrating their reduction in arm’s length revenues and remuneration paid to employees.

The subsidy will cover up to 75% of wages on the first $58,700 that an employee earns, up to a maximum of $847 a week. There is no overall limit on the subsidy amount that an eligible employer may claim.

For employees that do not deal at arm’s length with the employer, the maximum weekly subsidy is the lesser of 100% of their weekly gross pay during the claim period; 75% of their average weekly pay from the period of January 1 to March 15, 2020; or the maximum benefit of $847 per week. The subsidy would only be available in respect of non-arm’s length employees employed prior to March 15, 2020.

Those organizations that do not qualify for the CEWS may continue to qualify for the previously announced temporary wage subsidy of 10% of remuneration from March 18 to June 19, 2020, up to a maximum subsidy of $1375 per employee and $25,000 per employer.

If an employer is eligible for both the CEWS and the 10% wage subsidy for a period, any benefit from the 10% temporary wage subsidy for remuneration paid in a specific period should be expected to generally reduce the amount available under the CEWS in the same period. Similarly, if an employer is utilizing a Work-Sharing program, the EI benefits received through that program will reduce the benefit that the employer is entitled to receive under CEWS.

The Federal Government indicated that it hoped these developments would help employers re-hire workers who had previously been laid off, and encouraged employers utilizing the program pay employees the remaining 25% of wages not covered by the subsidy and ensuring all funds through the program go directly to employees. It appears that businesses taking advantage of the subsidy do not need to pay the remaining 25% if unable to do so, as a condition of eligibility, but are expected to make best efforts to bring employees’ wages to their pre-crisis levels.

The pre-crisis remuneration for an employee would be based on the average weekly remuneration paid between January 1 and March 15 exclusively, excluding any seven-day periods where the employee did not receive remuneration. Eligible employers will also be able to apply for the subsidy for new employees.

Employers eligible for the CEWS may be entitled to a 100% refund for certain employer-paid contributions to the Employment Insurance, the Canada Pension Plan, the Quebec Pension Plan, and the Quebec Parental Insurance Plan. This refund would be applicable to the entire amount of employer-paid contributions in respect of remuneration paid to employees while the employer is eligible for the CEWS.

Employers will be required to repay amounts that have been paid out under CEWS if eligibility requirements are not met. Penalties may apply in cases of fraudulent claims, including fines or imprisonment. Additionally, anti-abuse rules would be put into place. Employers that engage in artificial transactions to reduce revenue for the purpose of claiming CEWS would be subject to a penalty equal to 25% of the value of the subsidy claimed, in addition to repaying the full subsidy. 

We recommend employers consult with their accountants with respect to determining their eligibility to apply for the CEWS given the potential significant penalties contained in the legislation.

We will continue to update our clients with information as soon as it becomes available. If you have any questions about this topic, other COVID-19 related questions, or would like assistance with developing and/or reviewing pandemic plans, please do not hesitate to contact a Mathews Dinsdale lawyer, or refer to the Firm’s COVID-19 website resources.

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