Canadian Emergency Wage Subsidy (CEWS)

Updated May 19, 2020

The Department of Finance passed Bill C-14 this Easter weekend and released this website regarding the 75% Canadian Emergency Wage Subsidy (CEWS).

On April 15, 2020, we hosted a webinar about the CEWS, here’s a replay of the webinar:

*Note: some of the information in this webinar is out of date with the latest announcements of the CEWS extension by the government*.

Qualifying entity

  • The subsidy is available to individuals, taxable corporations, partnerships, NPOs, provincial, regional and national Registered Canadian Amateur Athletic Associations (RCAAAs), tax-exempt Registered Journalism Organizations, private colleges and private schools, and Charities who employ people.
  • It is not available to public bodies like municipalities, crown corporations, public universities, colleges, schools and hospitals. Publicly Traded Companies appear to be eligible.
  • Must have had a payroll account active on March 15, 2020, to be eligible.
  • The subsidy is available for wages paid between March 15, 2020, and June 6, 2020.
  • If employers received a subsidy under the 10% Wage subsidy for any period, such amounts received would reduce the amount of CEWS received for that period.
  • If you are not eligible for the CEWS, you may still qualify for the 10% Wage subsidy. Details about that subsidy can be found in our other blog by clicking here.
  • An employer cannot claim the CEWS for remuneration paid to an employee for any week that falls within a 4-week period in which the employee is eligible for the Canadian Emergency Response Benefit (CERB).
  • Employers who are not eligible for the Canada Emergency Wage Subsidy, could still furlough employees who may apply to receive $2,000 a month under the CERB.
  • Applications must be made before October 2020
  • Employers of employees that work for multiple non-arm’s length companies will only be entitled to a single wage subsidy for that employee.
  • Employees must not have been without pay from the eligible entity in consecutive days 14 days during the qualifying period (see below), presumably to ensure that the employee and employer don’t ‘double-up’ on government benefits, for example, the CERB. In cases where an employee was laid off and rehired with retroactive pay, they need to be paid for 14 consecutive days during the qualifying period in order to be eligible for that qualifying period’s CEWS. If that employee had received the CERB for the same period as the CEWS eligible income from their employer, it is the employee’s responsibility to repay the CERB amounts received.


Qualifying revenue

  • Companies will be able to choose from an average of January + February 2020 revenues, or revenues from the same month in 2019, as their prior reference period to measure the March-May declines. Once a comparative baseline period is chosen, the employer must stick with that method throughout the claim period.
  • March decline will only need to be at least a 15% drop in revenues as the ‘shut-down’ began in mid-March 15th (1/2 of the month = 1/2 of 30%), while the following two month’s declines need to be at least a 30% drop in revenues
  • NPOs & Charities will have the ability to include or exclude (at their option) revenue from government sources.
  • Cash or accrual methods are acceptable, but not a combination of both. Employers can select a method when they first apply for the benefit. They must continue to use that method throughout the claim period.
    • Using the cash method requires an election, and revenue must be computed in accordance with subsection 28(1), the same as for a Farming or Fishing business, with modifications allowed “that the circumstances require”
  • Revenues are referred to as cash, accounts receivable, or ‘other-considerations’.
  • Subsection 28(1) is a specialized section of the Income Tax Act designed for farming and fishing businesses.
  • The revenue numbers used in the calculation must be:
    • From business carried on in Canada and earned from arm’s length sources
    • Calculated using the employer’s normal accounting methods, with the exception noted in the bullet above regarding cash vs accrual accounting
    • Exclude revenues from extraordinary items and amounts on account of capital

Analysis: ‘Extraordinary items’ is not defined in the income tax act. Accounting principles would define ‘extraordinary items’ as any abnormal events or transactions which are not related to ordinary company activities, which are not likely to re-occur.

  • There are very detailed rules about how to deal with the computation of revenues within corporate groups. Affiliated groups will have the option to calculate revenues based on a consolidated basis or not.
  • Certain entities who receive all their revenues from related parties are allowed to determine their decline based on the decline of the group’s revenues.
  • There are details about how Partnerships whose partners have multiple sources of income can calculate their decline in revenues.


Qualifying periods

  • The qualifying periods are as follows

  Claiming Period Reference Period for Eligibility

  • Period 1: March 15 – April 11
    • Measured using March 2020 revenues over March 2019 or average of January + February 2020 revenues
  • Period 2: April 12 – May 9
    • Measured using April 2020 revenues over April 2019 or average of January + February 2020 revenues
  • Period 3: May 10 – June 6
    • Measured usingMay 2020 revenues over May 2019 or average of January + February 2020 revenues
  • Once an employer qualifies for the CEWS during an eligible period (below), they will automatically qualify for one subsequent period. 

Analysis: This is a welcome relief that was introduced in the legislation passed on Easter weekend. There was some concern that many private company employers would not be able to attest to their income levels on a monthly basis due to their accounting limitations and several other factors. Still, employers should work to maintain their accounting records in real-time. There has never been a better time to move your accounting to the cloud, and have us manage it remotely to ensure that your books are always up-to-date and accurate.

CEWS extension: Announced on May 15, 2020, the CEWS will be extended to August 29, 2020. More details are expected to be released in the coming month.



Amount of the benefit

  • For employees of the company, the amount is calculated as the greater of:
    • 75 % of the remuneration paid, up to a maximum of $847/week; and
    • The amount of remuneration paid, up to a maximum of $847/week OR 75% of the employees’ baseline, whichever is less.

Analysis: Employers who are ‘topping employees up’ to baseline income levels will be entitled to a 75% reimbursement (maximum of $847/week). Employers who otherwise can’t afford to pay their staff can pay them reduced pay (75% of baseline income, max $847/week – provided they have sufficient working capital to do so) and can expect to be fully reimbursed by the Government. The inherent problem in this is that these employers can’t afford to pay their staff anything, so many will not be able to bridge the gap until the government wage reimbursement comes through. This has and will continue to force layoffs, putting these companies at a competitive disadvantage to those who have more access to capital.

New employees hired during the crisis will not have ‘baseline remuneration’ and so 75% of their wages would be eligible for the CEWS (to a maximum of $847/week).

  • “Baseline remuneration” is based on the average remuneration paid between January 1 and March 15, excluding any seven day periods in respect of which the employee did not receive remuneration.
    • OR the employer could choose the comparative period between March 1 – May 31, 2019 (for cases where seasonal workers are employed).
  • Eligible remuneration:
    • Includes: Wages, Salaries, Commissions, and other pay that the employer would have had to withhold amounts from.
    • It does not include things like severance pay, stock option benefits, personal use of a corporate vehicle, etc.
  • There is no upper limit on the amount of subsidy that a single employer can claim. Meaning if your company has 2,000 employees – your company’s claim will not be capped at some upper limit (like the $25,000 limit on the 10% wage subsidy).
  • Employers must do their best to “top-up” employees’ salaries to baseline levels and must attest (monthly) that they are doing so.
  • Refund of employer’s portion of payroll withholdings
    • If an employee is on leave with pay for a week (i.e. they still employed but are not working at all during that week), employers will be reimbursed 100% of the employer’s portion of CPP and EI.

Analysis: What are ‘best efforts’ to top up salaries? How is this defined? How little effort is considered ‘too little effort’ and what are the penalties for not applying ‘best efforts.’


100% refund of employer’s portion of withholdings

  • If an employee is on leave and is still receiving remuneration for which the employer is receiving a subsidy, the Government will reimburse 100% of employer-paid CPP, EI, QPP, QPIP
  • The employer must not perform any work for the employer in that week (must be a full-week of NO work to qualify)
  • This refund is not subject to any limits, including the $847/week CEWS limit.
  • There is no overall limit that an eligible employer can claim


Non-arm’s length employees (including owner-managers)

  • Owner managers (and other non-arm’s length employees) who pay themselves remuneration are also eligible for the program. Their benefit is a maximum of the lesser of
    • $847/week
    • 75% of weekly baseline remuneration (below)
    • The amount of eligible remuneration that week
  • The subsidy would only be available for non-arm’s length parties (owners and some others) who were employed before March 15, 2020
  • Since employees must have been remunerated for 14 consecutive days, owner-managers who have forgone their pay during this crisis will not be eligible for the CEWS during that time – which is counter-intuitive, and unfortunate.

Analysis: This program excludes business owners who regularly pay themselves dividends. This is unfortunate because if dividends are your only source of income through 2019/2020, you will not be eligible for the CEWS, or EI. If your company doesn’t pay at least $20k / year in salaries to other employees, you will not be eligible for the CEBA ($40k government-backed loan).


Taxable income

The legislation includes the following wording in subsection (3): “…[the wage subsidy]… is assistance received by [the qualifying entity] from a government immediately before the end of the qualifying period to which it relates”. This means that any amount of the subsidy received will be taxable to the employer under paragraph 12(1)(x) of the Income Tax Act.


Possibility for the Government to extend the program

The Government has left language throughout the legislation that allows them to extend the program until the end of September, and change the following parameters during such an extension:

  • Change the percentage of the wage subsidy
  • Expand the companies eligible for the wage subsidy
  • Chose different ‘prior reference periods’


How to apply

Analysis: While this is a monster of a program, this time-frame is still far too long for many companies. Many employers do not have sufficient working capital available to pay their staff for the next 2-4-weeks, which will – unfortunately – lead to layoffs. 


Penalties for gaming the system

  • There is a special 25% penalty for those companies who artificially inflate or deflate revenues in order to become eligible for the program. This includes creating an ‘event’ or a ‘series of transactions’ where it is reasonable to conclude that the main purpose of the event or series was to cause Eligibility in the program.
  • Up to a 200% penalty and 5-years imprisonment for making a false or misleading statement, such as during the Attest process, noted above.
  • The Minister may communicate or otherwise make public (in whatever manner the Minister wants) the names of those who make an application to the CEWS. NOTE: receipt of benefit note required.


As always, please reach out if you’d like to talk about how these announcements will impact your business. We’re here to help.

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