Government of Canada: Wage Subsidy
Updated: Apr 22, 2020
Financial Support for the Business Community
Financial Support for the Business Community
This is a difficult time, full of uncertainty. It’s hard to keep track of the information you need to run your business. With the ongoing COVID-19 pandemic, the businesses need the cash flow to keep their doors open and employees paid.
Here is how your business can benefit from the 75% temporary wage subsidy provided by the federal government.
Which entities are eligible?
· Businesses (regardless of the number of employees)
· Individual employers
· Not for profit organizations
· Charities that experienced a:
-15% reduction of their gross revenue in March; and/or
-30% reduction of their gross revenue in April or May.
How do I calculate a reduction in revenue?
You will have two options to calculate the 30% or 15% reduction:
Option 1: You can compare your revenue for the month you wish to receive the subsidy with your revenue for the same month last year to show a 30% decrease or a 15% decrease for March.
Option 2: You can compare your revenue for the month you wish to receive the subsidy with your revenue from January and February 2020.
Once you chose an option, you will have to keep using it for all the claiming periods you are applying for.
Regardless of the options you use, you will have the option to use cash accounting. Once you chose an accounting method, you will also have to keep using it for all the claiming periods you are applying for.
More details to come.
The subsidy is for salaries paid between March 15 and June 6. There are three claiming periods which are as follows:
Period 1 - March 15 to April 11: compare March 2020 over March 2019.
Period 2 - April 12 to May 9: compare April 2020 over April 2019
Period 3 - May 10 to June 6: compare May 2020 over May 2019
Whose wages can I subsidize?
The subsidy is applicable to employees' wages. The easiest way for CRA to determine if your worker is an employee is to check if their employee income is reflected on a T4 or T4Sum.
How much can I receive?
To calculate the amount of subsidy you will be eligible to receive on remuneration paid between March 15 and June 6, 2020:
· Determine which is less:
o 100% of your employee’s current weekly remuneration paid up to a maximum of $847/week; or
o 75% of the pre-crisis weekly remuneration
· Then determine the greater between the above two calculations and the below:
o 75% of the current remuneration paid to a maximum of $847/week
The maximum subsidy per employee is $847/week.
CRA will be providing a calculator in the coming weeks to help you determine the amount of subsidy you are eligible for.
More details to come on how to define pre-crisis weekly remuneration.
· If you have one employee hired in January with a pre-crisis weekly pay of $1000 and that this employee has now a weekly pay of $800, you will receive a subsidy of $750.
· If you have one employee hired in January with a pre-crisis weekly pay of $1000 and that this employee has now a weekly pay of $500, you will receive a subsidy of $500.
· If you hire a new employee in April, with a weekly pay of $500, you will receive $375.
Do I have to pay the remaining 25%?
All employers would be expected to at least make best efforts to top up salaries to 100%.
How can I apply?
Businesses will be able to apply through the CRA’s My Business Account portal as well as a web-based application.
Once an employer is approved for a specific period, they will automatically qualify for the next period of the program.
For example, an employer with a proved revenue drop of 15% or more in March would qualify for the 75% wage subsidy for the first and second period, covering remuneration paid between March 15 and May 9. Similarly, an employer with a revenue drop of 30% or more in April would qualify for the second and third periods of the program, covering remuneration paid between May 10 to June 6.
What if I am not eligible?
1. Use the 10% wage subsidy today (see details below). Using the 10% wage subsidy will reduce the amount you will be able to receive from the 75% wage subsidy.
2. Try applying for the 75% wage subsidy anyways. This is no promise that you will receive the wage, but exceptions may be made if proper evidence is demonstrated. When the portal is available, be ready by having:
o Your financial books/ledgers/journals up to date
o Proof based on your finances to show that your business did have a decrease in cashflow/revenue/gross revenue
o Determine your payroll (i.e. this could be by requesting your T4Sum from CRA)
Government is currently considering expanding the requirements for the 75% wage subsidy.
How does this work with CERB?
Your employees cannot receive CERB if they receive employment income. Businesses cannot subsidize an employee's wage if they have not paid for it.
Can I still receive the subsidy if I had to lay off my employees?
The subsidy is calculated on employee wages paid. Should you be eligible for the subsidy (able to show the drop in revenue) you will still receive the subsidy for the remunerations paid after March 15.
For example, if you are eligible for the first claiming period (from March 15 to April 11), but were required to lay off your employees on March 31, you will receive the subsidy for employee wages paid between March 15 and March 31. You will not be able to subsidize any wages that you have not paid to your employees. As long as your employees have no employment income for 14 consecutive days within a 4-week period they would be eligible to receive the CERB.
Do my employees still need to be present or working for their wage to be subsidized?
Technically no. If you no longer have work for your employee, you could decide to continue to pay them and benefit from the subsidy. In that case, you would not have to lay off your employee.
Please note: EI and CPP can be refunded for employees who are paid while on leave. The employee would still be required to pay their share of the EI and CPP. This can be applied for when applying for the 75% wage subsidy.
Does it cover the business owner, dividends or shareholder wage?
It depends on the structure of the business. Wages can only be subsidized if there is an employee/employer relationship. If an employee receives a T4 at the end of the year, the business would be able to subsidize their salary. To determine your payroll amount to be subsidized check your T4Sum. CFIB is lobbying the Ministry of Finance to expand this to other kinds of wages. Please note that should you make changes to your business structure now in order to include your wage in the T4Sum, you will likely be ineligible for the subsidy.
How does this affect employee's at arms length?
The definition for arm's length can be found on CRA's website.
Simply put, a person at arm's length does not have a blood, trust or controlling relationship with the business entity. Persons not at arm's length can be more simply viewed as family, significant others or partnerships where one partner has controlling interest/voting shares.
For example, an owner's daughter works for a business. She would be a "related person" not at arm's length. Whether the daughter's salary could be subsidized would depend on how her pay and decision making is structured within the business.
· Arm's length - Should the daughter be paid a salary reflected on a T4 and T4Sum, the business entity could subsidize her wage like other employees
· Not arm's length - Should the daughter not be considered an employee under CRA employer/employee rules, the business entity would not be able to subsidize her wage
· Should the daughter be hired after March 15th and given a salary that can be reflected on a T4 and T4Sum her wage would not be eligible for the subsidy. This would seem like the controlling partnership/family is creating a wage to subsidize.
When can I expect to receive the first payment?
It is expected to take 2 to 6 weeks. Take some time to prepare your account for the last year. It will save you some time when applying for the subsidy.
What should I prepare for when applications are being accepted?
· Have a direct deposit set up with CRA
· Have your T4Sum
· Update your financial accounts for the last year. Determine what indicators prove that you deserve the subsidy.