[Updated April 21, 2020]
As the world unites against COVID-19, Canadians are putting in measures like social distancing to help prevent the spread of the virus and flatten the curve. For businesses, this means pressing pause on business-as-usual. Many are accommodating remote working, operating with reduced hours or services, or even closing the doors until this passes.
On March 18, 2020, Prime Minister Justin Trudeau announced additional support measures for employers and employees that the federal government is enacting in response to COVID-19. One such measure is the Canada Emergency Wage Subsidy which has been amended throughout April.
75% Canada Emergency Wage Subsidy
On April 1, details were announced for the proposed new Canada Emergency Wage Subsidy (CEWS). This subsidy of 75% of wages paid to employees will be available for 3 months. Here are the details:
- Eligible for businesses in all sectors, except public sector entities, that suffer a drop of revenue of at least 15% in March, and 30% in April and May. This is compared to either the same months in 2019 (year-over-year comparison) or to the average revenue of January and February of 2020.
- Applies at a rate of 75% for the first $58,700 of an employee’s salary, representing up to $847 per week.
- Effective for 12 weeks, from March 15 – June 6, 2020.
- Companies will have to reapply monthly to show they are still suffering a loss compared to the same month in 2019 or the average of January/February.
- Entitlement to this subsidy will be based entirely on the wages actually being paid to employees.
- Employers are expected to do their best to top up salaries with the remaining 25% of wages owed.
Note the eligibility periods are defined as March 15–April 11 ("March"), April 12–May 9 ("April"), and May 10–June 6 ("May").
Revenue can be calculated under the accrual method or the cash method, not a combination of both.
For registered charities and NPOs, it includes most forms of revenue, excluding revenues from non-arm’s length persons. Also, it's optional whether or not to include revenue from government sources as a part of the calculation.
Additionally, employers can claim 100% refund for the employer-paid portion of contributions made on behalf of employees under CEWS. This includes EI and CPP. Payments for employees that fall under the CEWS qualify as well as those who are furloughed (on leave with full or partial pay).
How do you apply for the Canada Emergency Wage Subsidy?
An application portal will open up through Canada Revenue Agency (CRA) on April 27, 2020. Further details, and a calculator to determine your eligibility, are available on the government's website.
10% Temporary Wage Subsidy
If you’re a small business, non-profit organization, or charity, the federal government announced a wage subsidy from March 18 – before June 20, equal to 10% of the remuneration paid during that period. The maximum amount a business can claim is $25,000 with a per employee maximum of $1,375.
How do you apply for the temporary wage subsidy?
To claim your subsidy, you would reduce your normal remittance by 10% of what the employee’s wages would be that month. Be sure to track how much is being claimed per employee and the total claim amount, so you don’t go over the maximum allotment.
Our primary payroll system provider, Payworks, has released a built-in calculator so we can easily track the running total for our eligible clients.
We recommend also reviewing the CEWS calculator as it includes this wage subsidy.
Managing Layoffs and Getting Your Staff Set-Up for EI Benefits
Unfortunately, not all companies will be able to weather this storm. They might not be able to pay workers through closures, and will have to consider the difficult decision to lay off staff, either temporarily or permanently.
So, the question becomes: “How do I best take care of my employees?”
If this is the situation you’re finding yourself to be in, we’re here to help. We’re going to break this down to ensure your staff have exactly what they need to receive employment insurance (EI) benefits, including when to prepare a record of employment (ROE) and final pay requirements.
EI Eligibility
Employees who experience an interruption of insurable earnings are eligible for EI (for more on what constitutes insurable earnings, see our blog post) . The general rule of thumb to qualify for EI benefits is the seven day rule. The seven day rule states that “when an employee has had or is anticipated to have seven consecutive calendar days with no work and no insurable earnings from the employer, an interruption of earnings occurs.”
There are also EI sickness benefits that provide up to 15 weeks of financial support to those who are unable to work because of illness, injury or quarantine. Canadians quarantined as a result of COVID-19 are eligible for these benefits right away (the waiting period is waived).
When is an ROE necessary?
In today’s climate, there are a number of situations in which you may need to issue an ROE:
- For staff who have returned from a trip and are under quarantine or are otherwise required to self-quarantine for 14 days
- For staff who are refusing to come to work for fear of their health during COVID-19
- Temporary layoff
- Permanent layoff
- For staff who are making a claim under the Canada Emergency Response Benefit
The definition of temporary layoff differs by province, so it’s important for you to know the jurisdiction for your province. For example, in BC the statutory limit is 13 weeks in a consecutive 20-week period, but in Alberta the maximum is 60 days in a 120 day period. In Ontario, temporary layoffs can’t exceed 13 weeks, but the time period is more complex.
If permanent layoffs are inevitable, the sooner you have the ROE and final payment issued, the sooner your staff can apply for EI and start receiving benefits.
Though an ROE is not necessary to make a claim to the Canada Emergency Response Benefit (CERB), we still recommend it as it constitutes a break in employment.
The CERB (announced March 25, 2020) replaces the previously announced Emergency Care Benefit and Emergency Support Benefit to streamline the application process. It is a special COVID-19 measure that will provide up to $2000 per month in income assistance for up to 4 months.
This benefit applies to individuals who are sick with COVID-19, caring for a family member who is sick with the virus, or parents with children who are not able to work due to school closures. It also includes those who wouldn't otherwise be eligible for EI benefits (contract workers, self-employed), or those who are still employed but are not receiving income due to COVID-19 disruptions.
Prepare Final Pay
On top of preparing the ROEs, you are also obligated to pay the terminated employee their final pay, including severance and all pay owing, within a “reasonable time period” which varies province to province. For example, in BC it’s within 48 hours, in Alberta it’s 3 days, and in Ontario it’s 7 days or the next pay period (whichever comes later).
If the layoff is temporary, severance pay is not required. However, it’s important to ensure you do not exceed the maximum days, otherwise it will be considered a permanent layoff and severance pay will be required.
Once the employee receives their ROE and final pay, they will be able to apply for EI benefits. It’s also good practice to prepare their T4 slip at the same time.
Our Payroll Team is Here to Support You
If COVID-19 is affecting your business operations, please reach out to our Payroll team to see how we can assist you in implementing government support measures or supporting your staff with ROEs and final payments. We’re here to help you through this challenging time and will continue to update this post as more information is released by the federal government.
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