Federal budget announces further extension and changes to the Canada emergency wage subsidy program

June 01, 2021

When the federal government tabled its budget on April 19, 2021, the Canada Emergency Wage Subsidy (CEWS) program has been in place for more than 12 months. The CEWS program was initially introduced in March 2020 for a period of 12 weeks. Since then, the federal government has made adjustments to extend the reach and duration of the program. Most recently, in the budget, the government announced a further extension of the CEWS program and some new restrictions to limit access during the extension period.

The proposed extension is from June 6, 2021 to Sept. 25, 2021, accomplished by adding four more four-week qualifying periods. A further extension of the program is possible until Nov. 20, 2021. The proposed extension and new restrictions will need to be legislated and to receive royal assent before they become law.

For further details of the CEWS program, please see our Tax Alert Final details announced for the Canada Emergency Wage Subsidy program to June 5, 2021.

Public companies and access to CEWS after June 5

A new restriction would apply to public companies, or any eligible entity controlled by a public company, where certain executives were paid more in calendar 2021 than in calendar 2019 and where they have claimed CEWS for any period after June 5, 2021. Any CEWS claims made by such entities after that date are subject to repayment to the extent of the increase in executive compensation. This proposal is in response to reports that businesses that didn't need the CEWS were applying and receiving CEWS, even as they remained profitable.

The executive remuneration to be measured in calendar year 2019 and calendar year 2021 is generally defined to be that of the five “Named Executive Officers” whose compensation is required to be reported to shareholders under securities law. Named Executive Officers will generally be the CEO, CFO, and the three other most highly compensated executives of the company.

This requirement will not affect Canadian Controlled Private Corporations (CCPCs), or non-profit or charitable corporations who have qualified for and received CEWS.

Changes to revenue reduction benchmarks

For any qualifying period starting after July 3, 2021, any entity claiming CEWS must have experienced a greater than 10% revenue decline in order to be eligible to claim CEWS. This applies if the entity is using either of the general method, which compares the current month revenue to the same month in 2019, or the alternate method, which compares the current month revenue to the average qualifying revenue received in January and February 2020.

Maximum subsidy rates by qualifying period

The proposed rate of CEWS claims will decrease from a maximum of 75% in the qualifying period from June 6 to July 3, 2021 to a maximum of 20% in the qualifying period from Aug. 29 to Sept. 25, 2021. The maximum rate will only be available to those entities who have experienced a revenue decline of 70% or more in the qualifying period. The subsidy rate for entities with less than 70% revenue decline in the qualifying period will depend on the actual rate of revenue decline, and whether they experienced a revenue decline of 50% or greater in the qualifying period. Entities with a revenue decline of more than 50% will be entitled to a top-up to the CEWS base rate. Entities with a rate of revenue decline of 50% or less will not be entitled to a top-up in the CEWS rate.

Table 1 in the Appendix shows the significant characteristics of the program in each of the proposed qualifying periods

Table 2 in the Appendix shows the maximum weekly CEWS claims in different claim periods for three different revenue drop rates.

Choice between Canada Recovery Hiring Benefit and CEWS

The 2021 budget also proposed a new COVID-19 support that will apply to many eligible entities that qualify for CEWS. This is the Canada Recovery Hiring Benefit. This benefit is described in our Tax Alert New wage support program to support increased employment. An entity that qualifies for both benefits in a qualifying period, can choose to claim the higher of the two benefits, but cannot claim both.

How BDO can help

Our BDO Tax professionals understand the uncertainty and challenges your business is facing during the COVID-19 crisis. We can help you assess how the new extensions and enhancements of the government relief programs will affect your organization and determine next steps.

If you have any questions as to how the CEWS program applies to your organization, please contact your BDO advisor.

Dave Walsh, Partner, Tax Service Line Leader

Bruce Sprague, Partner, Western Canada Tax Leader

Greg London, Partner, Eastern Canada Tax Leader

Rachel Gervais, Partner, GTA Tax Leader


The information in this publication is current as of May 17, 2021.

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.


 
Table 1
CEWS Stage Time Period Variable Base CEWS Rate (Note 1) Variable Top-Up Rate (Note 2) Total CEWS Rate (Note 3)
Periods
8 - 10
Sept. 27 to Dec. 19, 2020
Revenue decline rate at least 50% 40% 0 - 25% Sum of variable base plus top-up rate
Revenue decline rate lower than 50% 0.8 x revenue decline rate 0 - 25%
Periods
11- 16
Dec. 20, 2020 - June 5, 2021
Revenue decline rate at least 50% 40% 0 - 35% Sum of variable base plus top-up rate
Revenue decline rate lower than 50% 0.8 x revenue decline rate 0
Period 17 June 6, 2021 – July 3, 2021
Revenue decline rate at least 50% 40% 0 - 35% Sum of base plus top-up rate
Revenue decline rate lower than 50% 0.8 x revenue decline rate 0
Period 18 July 4, 2021 – July 31, 2021
Revenue decline rate at least 50% 35% 0 - 25% Sum of base plus top-up rate
Revenue decline rate lower than 50% (Revenue decline – 10%) x 0.875 0
Period 19 Aug. 1, 2021 – Aug. 28, 2021
Revenue decline rate at least 50% 25% 0 – 15% Sum of base plus top-up rate
Revenue decline rate lower than 50% (Revenue decline – 10%) x 0.625 0
Period 20 Aug. 29, 2021 – Sept. 25, 2021
Revenue decline rate at least 50% 10% 0 – 10% Sum of base plus top-up rate
Revenue decline rate lower than 50% (Revenue decline – 10%) x 0.25  

Note 1 — Variable Base CEWS rate is a fixed amount if revenue decline rate is greater than 50%

Note 2 — Top up rate only applicable for a top-up revenue decline of more than 50%

Note 3 — Total CEWS rate applies to maximum weekly wage of $1,129

 
Table 2
CEWS Stage 70% Revenue Drop CEWS rate Maximum Subsidy Amount per Week 50% Revenue Drop CEWS rate Maximum Subsidy Amount per Week 20% Revenue Drop CEWS rate Maximum Subsidy Amount per Week
    (Note 1)   (Note 1)   (Note 1)
             
Periods 11-16 75% $847 40% $452 16% $181
Period 17 75% $847 40% $452 16% $181
Period 18 60% $677
 
35% $395
 
9% $99
Period 19 40% $452
 
25% $282
 
6% $71
Period 20 20% $226
 
10% $113
 
3% $28
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