3 Types of Wage Subsidies Available to Employers

SUBSIDY #1: Canada Emergency Wage Subsidy

The Canada Emergency Wage Subsidy is a 75% wages subsidy available to all businesses, except for public sector entities, who have experienced a loss in gross revenues due to COVID-19. The subsidy runs for a period of 12 weeks, retroactive to March 15, 2020.

Eligibility

Persons who are using the Canada Emergency Response Benefits cannot also utilize the Canada Emergency Wage Subsidy.

There are three periods to note.

Period 1: March 15, 2020 to April 11, 2020 Period 2: April 12, 2020 to May 9, 2020 Period 3: May 10, 2020 to June 6, 2020

The Employer would need to apply separately to the Canada Revenue Agency’s My Business Account Portal for each individual period and would need to be able to demonstrate a loss in gross revenue in the amount of 15% for Period 1, and 30% for both Period 2 and Period 3.

The decrease in revenue would be in comparison with

March 2019 – for Period 1; April 2019 – for Period 2; and May 2019 – for Period 3.

The Employer would also be eligible if it could demonstrate that there was a reduction in gross revenue that satisfied the 15% or 30% requirement (depending on period), when comparing to the average gross revenue of January and February 2020.

For example, if an employer wanted to determine whether it was eligible for Period 2 (which requires a 30% reduction in gross revenue), the Employer could compare either the average of its gross revenue in January and February 2020 against its gross revenue from April 12, 2020 to May 9, 2020; OR, it could compare its gross revenue from April 2019 against its gross revenue from April 12, 2020 to May 9, 2020, and if in either case there was a reduction of at least 30% the Employer would be eligible to apply.

How to apply

To apply for the Canada Emergency Wage Subsidy the Employer will need to submit an application through the Canada Revenue Agency’s My Business Account portal.

What would this Wage Subsidy cover?

Eligible Employers would be able to recover the greater of:

  • 75% of the amount of remuneration paid (up to a maximum of $847/week); and
  • The lesser of either
    • the amount of remuneration paid, up to a maximum benefit of $847 per week; or
    • 75% of the employee’s pre-crisis weekly remuneration

Meaning, that while the government of Canada encourages employers to use their best efforts to pay employees 100% of what they were being paid before, it may be possible for an Employer to reduce the amount of money being paid to the Employee and fully recover those wages paid during the period of March 15 – June 6, 2020.

For example, if an employee was being paid $1,000 per week prior to the crisis, and if, due to the reduction in gross revenue, it is not reasonably possible to continue paying the employee $1,000 during this period, an eligible Employer could elect to pay the Employee $750/week rather than lay the employee off, and recover the full amount of those wages through this subsidy.

Additionally, this Wage Subsidy has been expanded to now include a 100% refund for certain employer-paid contributions, including EI and CPP. All such employer-paid contributions would be refundable for each week that Employees are either on leave with pay, or during such weeks that the Employer is qualifying under this Canada Emergency Wage Subsidy program.

SUBSIDY #2: The Temporary Wage Subsidy

The Temporary Wage Subsidy is different from the Canada Emergency Wage Subsidy. The Temporary Wage Subsidy is a 10% subsidy which can be deducted from the total payroll remuneration spent on Employee wages for up to 12 weeks between March 18, 2020 to June 19, 2020, provided the Employer is eligible.

Eligible Employers:

Unlike the Canada Emergency Wage Subsidy, the Temporary Wage Subsidy does not require a reduction in revenue in comparison to last year, and will apply to

  • individuals (other than trusts);
  • most partnerships;
  • non-profit organizations;
  • registered charities; and
  • eligible Canadian-controlled private corporations

provided the business has an existing business number and payroll program account with CRA, and pays salary, wages or other remuneration to individuals employed within Canada.

How much could an Employer receive:

The Employer must calculate the subsidy themselves by:

  1. first calculating the total remuneration spent on Employee wages for the period of March 18, 2020 to June 19,2020
  2. 75% of that number represents the eligible subsidy {this number would be capped at the lesser of $1,375 X (the # of eligible employees) per week; or $25,000)

What do Employers need to keep a record of:

  1. the total remuneration paid from March 18, 2020 to June 19, 2020;
  2. the federal, provincial, or territorial income tax that was deducted from that remuneration; and
  3. the number of eligible employees paid in that period.

How do I apply?

Provided the above records are kept, you or your accountant will deduct 10% of the payroll remittance of federal or provincial income tax when submitting your payroll remittance to CRA.

Can an Employer receive both the 10% and the 75% benefit?

Typically, if an Employer is eligible for both benefits, any benefit received from the 10% wage subsidy will reduce, or be off-set by the amount that the Employer will be eligible to claim through the Canada Emergency Wage Subsidy.

Other FAQs:

Is the subsidy considered taxable income?

Yes. You will have to report this as income in the year that the subsidy is received.

What if my business is closed during the period of March 18, 2020 to June 19, 2020?

This subsidy is only available to Eligible Employers who are paying Employees during said period. You would not be able to receive the subsidy.

SUBSIDY #3: Canada Summer Jobs Subsidy

The federal government recently announced that they would re-open the Canada Summer Jobs program, to incentivize hiring students amidst the current pandemic. It is expected that these approved jobs will be opened as early as May 2020, but the Prime Minister has announced that 100% of the wages paid by Employers to students through this Canada Summer Jobs Program will be subsidized by the federal government.

More information on this is expected to be released within the next few weeks.