Tax Alert – Federal Government Announces Measures To Support Canadians Transitioning From The Canada Emergency Response Benefit

October 05, 2020

On August 20, 2020, Deputy Prime Minister and Finance Minister, Chrystia Freeland, along with Minister of Employment, Workforce Development and Disability Inclusion, Carla Qualtrough, announced changes intended to support Canadians while transitioning from the Canada Emergency Response Benefit (CERB) to Employment Insurance (EI). This announcement included a four-week extension of the CERB, along with updates to the EI program and the introduction of three new recovery benefits for those who do not qualify for EI. The federal government tabled draft legislation to create these new recovery benefits on September 28, 2020, and the proposed measures received royal assent on October 2, 2020.

Extension of the CERB

The CERB, which provided a taxable benefit of $500 per week to eligible applicants, was extended earlier this summer by an additional eight weeks—from a maximum of 16 weeks to 24 weeks—and then again on August 20, 2020, for a total maximum eligibility period of 28 weeks. According to the CRA’s website, the CERB program has now ended.

For more details regarding the CERB, please read our Tax Alert, The Canada Emergency Response Benefit (CERB) in Response to COVID-19.

Updates to the EI benefits program

In order to enhance EI benefits and make them more available to those who may require continued income support, the government announced the following changes, which became effective on September 27, 2020:

  • EI Premium Rate Freeze: The government announced that it is freezing the EI premium rate for employees at the 2020 level of $1.58 per $100 of insurable earnings for two years. The rate for employers, which is 1.4 times the employee rate, will also remain frozen at $2.21 per $100 of insurable earnings over the same period.
  • Minimum Benefit Rate: As of September 27, 2020, all new EI claimants will receive a minimum benefit of $500 per week (or $300 for extended parental benefits). Initially (on August 20, 2020) these amounts were set at $400 per week ($240 for extended parental benefits), but the government later increased the minimum benefit rate to align it with the weekly benefit rate for the new Canada Recovery Benefit (see below).
  • Hours Credits to Enhance Access to EI Benefits: The government is allowing a one-time insurable hours credit of 300 insurable hours for regular and work sharing benefits (job loss) and 480 insurable hours for special benefits (sickness, maternity/parental, compassionate care or family caregiver) to assist those prevented from accumulating the number of insurable hours normally required because of the COVID-19 pandemic. Hours credits will be made retroactive to March 15, 2020 for claimants who want to transition early from the CERB to EI maternity, parental, compassionate care, family caregiver, or work-sharing benefits, but were not able to satisfy the hours requirement. The qualifying period will also be extended for these claimants. This credit will be available for new EI claims, for the period of one year.
  • Minimum EI Unemployment Rate: In order to lower the hours required to qualify for EI regular benefits, the government is implementing a minimum unemployment rate of 13.1% for all EI economic regions. Fixing a minimum rate at 13.1% will set a uniform eligibility requirement for EI regular benefits at 420 hours of insurable employment (before the hours credit is applied), provide a minimum entitlement of 26 weeks of regular benefits, and set 14 as the number of best weeks of earnings used in the calculation of the weekly benefit rate. This measure will be in effect for one year, starting on August 9, 2020.
  • EI Fishing Benefits: The government is implementing certain temporary measures to benefit self-employed fish harvesters who rely on EI fishing benefits in the off-season.

New recovery benefits

To ensure that Canadians who do not qualify for EI benefits continue to receive income support as the COVID-19 pandemic persists, the government introduced three new recovery benefits:

1. Canada Recovery Benefit (CRB): Initially, the CRB was to provide a taxable benefit amount of $400 per week for up to 26 weeks to those workers who are ineligible for EI, including those who are self-employed or who work in the gig economy. Subsequently, the federal government increased this benefit to $500 per week to bring the amount in line the CERB.

The CRB is available to those that are resident and present in Canada, who:

  • are at least 15 years old and have a valid Social Insurance Number (SIN);
  • have stopped working due to the COVID-19 pandemic and are available and looking for work, or who are working and have had a 50% reduction in their average weekly income as a result of COVID-19;
  • did not apply for or receive the CRSB, CRCB, short-term disability benefits, worker’s compensation benefits, EI benefits, or Quebec Parental Insurance Plan (QPIP) benefits;
  • are not eligible for EI;
  • had earned income from employment or self-employment income and/or maternity or parental benefits (from EI or similar QPIP) of at least $5,000 in 2019, 2020, or in the 12 months before the date of application; and
  • have not quit their job or reduced their hours voluntarily.

Recipients of the CRB will be required to reapply every two weeks and attest that they continue to meet the requirements. Claimants will also need to look for and accept work when it is reasonable to do so in order to remain eligible. Claimants are permitted to earn income from employment and/or self-employment while receiving the CRB; however, they will be required to repay 50 cents of the benefit for each dollar of their annual net income above $38,000 in the calendar year, to a maximum of the amount of benefit they received.

2. Canada Recovery Sickness Benefit (CRSB): The CRSB will provide a taxable benefit of $500 per week for up to two weeks to eligible workers who are unable to work because they contracted COVID-19, have an underlying condition or other illness that would make them more vulnerable to COVID-19, or are required to self-isolate for reasons related to COVID-19.

This benefit is available to workers who:

  • reside and are present in Canada;
  • are at least 15 years old and have a valid SIN;
  • are employed or self-employed at the time of application;
  • did not apply for or receive the CRB, CRCB, short-term disability benefits, worker’s compensation benefits, EI benefits, or QPIP benefits; and
  • earned at least $5,000 of income from employment, self-employment, and/or maternity or parental benefits (from EI or similar QPIP) in 2019, 2020 or in the 12 months before the date of application.

Workers cannot claim the CRSB if they received other paid sick leave from their employer for the same benefit period. In addition to meeting the eligibility criteria for this benefit, workers will need to have missed a minimum of 50% of their scheduled work in the week for which they claim the benefit. A medical certificate will not be required to qualify.

3. Canada Recovery Caregiving Benefit (CRCB): The CRCB would provide a taxable benefit of $500 per week, for up to 26 weeks per household, to eligible Canadians unable to work because they need to provide care to children or support to other dependents who have to stay home because of COVID-19.

In order to be eligible for the CRCB, individuals must:

  • reside and be present in Canada;
  • be at least 15 years old on the first day of the period for which they apply for the benefit;
  • have a valid SIN;
  • have earned at least $5,000 of employment income, self-employment income, and/or maternity and parental benefits (from EI or QPIP) in 2019, 2020, or in the 12 months before the date of application;
  • have been unable to work for at least 50% of their normal scheduled work within a given week because they are caring for their child (under the age of 12 on the first day of the period for which the benefit is claimed), or a family member who requires supervised care, because of one of the following reasons:
    • their school, daycare, or care facility is closed or unavailable due to COVID-19;
    • they contracted COVID-19 (or are experiencing symptoms of COVID-19), are required to isolate, or have been advised by a medical professional that they are at high risk if they contract COVID-19; or
    • their regular caregiver is not available due to reasons related to COVID-19;
  • not be in receipt of paid leave from an employer in respect of the same week; and
  • not have applied for or received the CRB, CRSB, short-term disability benefits, worker’s compensation benefits, EI benefits, or QPIP benefits in respect of the same period.

Two members residing in the same household cannot be in receipt of the benefit for the same period. Workers would apply after the period in which they are seeking income support and would attest that they meet the requirements.

The CRB, CRSB, and CRCB are effective for the period beginning on September 27, 2020 and ending on September 25, 2021.

The CRA is administering these new recovery benefits and Canadians will be able to apply through the CRA’s My Account. Applications for the CRSB and CRCB opened on October 5, 2020 and applications for the CRB will open on October 12, 2020. Note that, unlike the CERB, the CRA will withhold 10% tax at source from all recovery benefit payments. Each period must be applied for separately. Applications must be made within 60 days after the end of the period to which the benefit relates and are subject to verification by the CRA. Verification may result in an increase in processing time by up to 4 weeks.

Individuals who knowingly make a false or misleading representation while applying for a recovery benefit, or who knowingly apply for and receive a benefit that they know they are not eligible for, may be subject to penalties. Specific repayment procedures are in place for those individuals who applied for and received a benefit by mistake. In such cases, it is encouraged that payments received in 2020 that they were not eligible for be repaid before December 31, 2020.

More information about these benefits can be found on the government’s COVID-19 Benefits and Services hub.

Transitioning from CERB to EI benefits

Canadians who received CERB benefits through Service Canada, who are eligible for EI and continue to need income support, were automatically transitioned (as of October 3, 2020) to the EI program once the CERB program ended. Those who received the CERB from the CRA, who believe that they are entitled to EI benefits after exhausting their CERB benefits, are able to apply for EI benefits through Service Canada (after September 26, 2020).

Summary

These changes may impact you if you expect to transition from the CERB to other forms of income support after September 26, 2020. Contact your BDO advisor if you have any questions about applying for EI benefits, or for the new Canada Recovery Benefits.


The information in this publication is current as of October 5, 2020.

This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.

This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our privacy statement for more information on the cookies we use and how to delete or block them.