Canada’s Emergency Wage Subsidy Program

The Canadian flag against a blue sky

In our previous blog, we discussed Canada’s Temporary Wage Subsidy Program and mentioned a second program called the Canada Emergency Wage Subsidy (CEWS), which was still in draft at that time. As of April 11th, CEWS legislation became effective, so below we’ll provide an overview of how the program works. The basics are that it offers a 75% wage subsidy paid to eligible employers for a 12-week period that dates back to March 15th. The amount of subsidy paid is based on eligible work done by eligible employees.

The legislation defines Eligible Employers, provides information on the Revenue Test, and how much subsidy will be paid per employee. There are still many outstanding issues that the legislation has not yet covered but solutions are expected to be forthcoming.

If you are trying to help your employees economically survive the pandemic, it is very important to act now and apply for this subsidy. Your employees will use the money to buy goods and services now from other businesses which in turn will help stabilize the current economy and give it a foundation to recover from.

CEWS Eligibility

Eligible employers consist of individuals, taxable corporations, partnerships of eligible employers, NPOs and registered charities. Employers of all sizes and across all sectors qualify, with the exception of public bodies.

This subsidy will help companies that have incurred a decline in revenue of 15% in March 2020 and at least 30% in April and May of 2020. There are two benchmarks for this revenue test:

  1. Comparison to same months in 2019, or
  2. An average of their revenues in January and February of 2020; this was included to help start-up companies and high growth companies that may have experienced a dramatic incline in profit since the first half of 2019.

There are three periods for which the subsidy will be paid, and once the organization makes a decision on which eligibility benchmark that it’s going to use, it can’t switch. As some companies have complex business arrangements, they can choose between using the accrual or the cash basis method. To simplify the process, once a company qualifies as being eligible for the CEWS, they will automatically be renewed for the remaining periods. When measuring the revenue loss for a particular period, the CEWS amount received by the eligible entity in that period is excluded.

Canada’s Department of Finance table, reproduced below, shows the remuneration claiming periods, the required reduction in revenue for that period, and the reference period for determining whether the revenue test is met.


Claim Period Required Decline

in Revenue

Reference Period for Eligibility
Period 1 March 15 to April 11 15% March 2020 compared to either:

  • March 2019
  • Average of January and February 2020
Period 2 April 12 to May 9 30% Eligible for Period 1 OR April 2020 compared to either:

  • April 2019
  • Average of January and February 2020
Period 3 May 10 to June 6 30% Eligibility for Period 2 OR May 2020 compared to either:

  • May 2019
  • Average of January and February 2020


Revenue Test for Corporate Groups

The legislation originally excluded revenue from non-arms-length companies and after getting some feedback, it is allowing the following situations:

  1. Affiliated companies can use the revenue decrease calculations that would be determined for the consolidated entity.
  2. The affiliated company can use the sales decrease determined by its major arms-length company.

The subsidy is designed to encourage eligible entities to pay their regular eligible employees at least 75 percent of their pre-crisis wages because they can recover it through the subsidy. This encourages employers to maintain/rehire their employees through the virus period.

The remuneration paid between March 15 and June 6 is the maximum of:

  1. 75% of the amount of remuneration to a maximum of $847/week, or
  2. Remuneration paid, up to a maximum of $847/week or 75% of the employee’s baseline remuneration, whichever is less.

Baseline remuneration is defined as an employee’s pre-crisis remuneration based on an average weekly remuneration paid to the employee between January 1 and March 15, 2020.

Eligible remuneration consists of salaries, wages and taxable benefits that are paid. At this time, it is not clear how bonuses and commissions are going to be handled. Severance pay and stock options are not eligible.

Other points to consider:

  1. There is no cap on the amount of CEWS an employer can claim.
  2. The government has asked employers to do their best to top up employee’s salaries and return salaries to the pre-crisis levels.

The government has not yet provided guidance on how it will measure these best efforts or what the consequences will be for employers that do not provide a top-up, if any.

If you wish to become more familiar with the new legislation, have questions about your business’s eligibility or need assistance with applying for this subsidy, please contact the Chartered Professional Accountants at Edelkoort Smethurst CPAs LLP by calling 905-517-2297 or by contacting us online.