Canada Emergency Wage Subsidy (CEWS) – Deep Dive

The Canada Emergency Wage Subsidy (CEWS) is a 75% wage subsidy that the Government of Canada is offering to eligible businesses that have been affected by COVID-19.  This article will cover in detail how to apply for the CEWS.

First off, lets see if you are eligible for the subsidy

You must meet all three of the following criterias:

  1. CRA Payroll Account – Your organization must have had a CRA payroll account on March 15, 2020
  2. Eligible employer – Your organization must be classified as eligible employer

Eligible employers include:

  • Individuals (sole proprietors)
  • 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
  • Partnerships that are made up of eligible employers
  1. Eligible Reduction in revenue – Your organization must have experienced an eligible reduction in revenue when compared to a “baseline revenue period”.  
  • March 2020’s revenue must have decreased by at least 15% 
  • April 2020’s revenue must have decreased by at least 30%
  • May 2020’s revenue must have decreased by at least 30%

To determine if a business has experienced an eligible reduction in revenue it must compare monthly revenue in the current year to a baseline revenue period.  The baseline revenue period can be either:

  • The corresponding month in 2019, or
  • The average revenue earned in January and February 2020 (Jan 2020 + Feb 2020 divided by 2)
  • Compare it to March 2019’s revenue, or
  • Compare it to the average revenue earned in January and February 2020.  

If you have established that you do qualify, then the next step is to determine if you have eligible employees

Employees are eligible as long as they meet the following two requirements:

  1. Must have been employed during the claim period – Eligible employees are individuals that are employed by your business in Canada during the claim period.
  2. Must not have been without pay for 14 days during the claim period – If there was a period of 14 or more consecutive days during a claim period where the employee did not receive pay, then they are not eligible. 

Now the fun part – calculating the Subsidy Amount!

The wage subsidy amount that you will receive is calculated based on:

  • The number and type of eligible employees that you have, and
  • The amount and type of pay they received

In general, the wage subsidy received will be 75% of eligible remuneration actually paid, up to a maximum of $847/week per employee.

This online calculator can be used to calculate the amount of the wage subsidy.  https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-wage-subsidy/cews-calculate-subsidy-amount.html#h-1

There are some restrictions to this for employees who earned less than $1,129.33 per week as well as employees who are not dealing at arm’s length (family members of the employer for example).

Employees Who Earn $1,129/week or More

The maximum subsidy is $847 per week. For employees earning $1,129.33 (or more) for each week in the claim period, the maximum weekly subsidy is ($1,129.33 x 75% = $847).

Non-arm’s Length Employees

The maximum weekly subsidy for these employees is the lesser of:

  • 100% of their weekly gross pay during the claim period
  • 75% of their average weekly pay from the period January 1 to March 15, 2020; or
  • The maximum subsidy of $847 ($1,129.33 x 75% = $847)

Employees Earning Less than $1,129.33 per Week

For employees earning less than $1,129.33 per week, the subsidy is equal to 75% of their weekly gross pay during the claim period.

Now you are finally ready to apply for the Wage Subsidy

You can apply for the subsidy by using one of these methods:

  1. CRA My Business Account – for business owners
  2. CRA Represent a Client – for authorized representatives
  3. CRA Web Forms for business owners who do not have My Business Account set up. Requires a web access code.

Here are basic instructions that should work for the majority of employers.

  1. Payroll Account Number – Enter your payroll account number.
  2. Web Access Code (if applicable) – If you’re using CRA Web Forms, you’ll need to enter your web access code.  If you don’t have one, you can obtain it via this service or by calling 1-800-959-5525.
  3. Claim Period – Choose the claim period in question.
    1. Mar 15 to Apr 11
    2. Apr 12 to May 9
    3. May 10 to Jun 6
  4. Line A – Number of Eligible Employees – Enter the number of eligible employees that you had on payroll during the period covered by the claim.
  5. Line B – Total Eligible Remuneration Paid – Enter the total eligible remuneration paid during the period.  This includes salary, wages, fees, commissions or other amounts for services rendered.
  6. Line C – Basic Canada Emergency Wage Subsidy – Enter the amount of wage subsidy that you calculated in the previous section.
  7. Line D – EI and QPIP Paid to Furloughed Employees – If you have furloughed employees (on leave with full or partial pay), enter the employer’s portion of EI or QPIP that was paid for the relevant period. You will need to get this directly from your payroll data or see “Step 3 Premiums and Contributions” on the online calculator to get help with this figure.  This step only applies if you have furloughed employees.
  8. Line E – CPP and QPP Paid to Furloughed Employees – If you have furloughed employees (on leave with full or partial pay), enter the employer’s portion of CPP or QPP that was paid for the relevant period. You will need to get this directly from your payroll data or see “Step 3 Premiums and Contributions” on the online calculator to get help with this figure.  This step only applies if you have furloughed employees.
  9. Line F – 10% Temporary Wage Subsidy Reduction – If you have claimed the 10% temporary wage subsidy for employers, enter the amount of the 10% wage subsidy that you received or will receive for this period. Enter $0 if not applicable.
  10. Line G – Amount Received under ESDC Work Sharing Benefit – If you participated in the ESDC Work Sharing Benefit program, enter the total amount received by your eligible employees during the claim period.  Enter $0 if not applicable.  This step only applies to those who participated in the ESDC work sharing program.
  11. Line H – Canada Emergency Wage Subsidy – Line H will calculate the CEWS amount that you can receive once you click “Next”.  
  12. Attestation – The last step is to complete and submit the attestation stating that the information included in the application is true and complete to the best of your knowledge. If you’re the business owner, complete and submit the “Attestation for Business owners”

Last but not least, please please keep good records as this will definitely be audited by CRA. In fact some clients have reported that they have started receiving calls from CRA auditors to confirm attestation.

Don’t forget that if you are found abusing the system, you will be penalized severely. In addition to paying back all of the subsidy, there will be a 25% penalty, and you could face imprisonment.