The Canada Emergency Wage Subsidy (CEWS) is a 75% wage subsidy designed to encourage employers to retain employees during the COVID-19 crisis. On July 17, 2020, following consultations with business and labour representatives, the federal government announced the following proposed changes to the CEWS:

• Extending CEWS from August 29, 2020 until December 19, 2020, including redesigned program details until November 21, 2020.
• Broadening access to CEWS to employers with a revenue decline of less than 30%.
• Providing a gradually decreasing base subsidy to employers that previously qualified for CEWS but no longer meet the 30% revenue decline threshold.
• Introducing a top-up subsidy of up to an additional 25% for employers most adversely affected by the pandemic, e.g., in more slowly recovering industries.
• Ensuring that employers that have already made business decisions for July and August would not receive a subsidy rate lower than they would have had under the previous rules.
• Addressing certain technical issues identified by stakeholders. 

In a Backgrounder, the government also announced that it would be proceeding with previously announced legislative changes, and making the following additional changes in response to stakeholder feedback:

• Making an appeal process available (i.e., based on the existing procedure for notices of determination) that allows for an appeal to the Tax Court of Canada;
• Providing continuity rules for the calculation of an employer’s drop in revenues in circumstances where an employer purchased all or substantially all the assets used in carrying on business from a seller;
• Allowing prescribed organizations that are registered charities or non-profit organizations to choose whether to include government-source revenue for the purpose of computing their reductions in qualifying revenue; and
• Allowing entities that use the cash method of accounting to elect to use accrual-based accounting to compute their revenues for the purpose of the CEWS.

Bottom Line for Employers

The objective of the CEWS is to prevent further job losses, encourage employers to re-hire workers who have been laid off due to the COVID-19 pandemic, and make it easier for Canadian employers to resume normal operations when the pandemic ends.  The proposed changes to CEWS will broaden its reach, better target support, and enhance the protection CEWS provides for Canadian jobs and Canadian businesses.  Employers need to work closely with their tax advisors to take full advantage of the CEWS program.