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CEWS Extension – Details and Takeaways

by | Nov 16, 2020 | Accounting

Backgrounder:

CEWS Extension – Speech from the Throne: Commitment to extend the Canada Emergency Wage Subsidy (CEWS)

  1. The government’s Speech from the Throne confirmed its intention to extend the CEWS until June 2021;
  2. On October 14, 2020, It provided details on the proposed parameters of CEWS that would apply until December 19, 2020. In addition, other enhancements were proposed to the program to ensure that it provides continued support to employers and responds to the health and economic situation as it evolves.

Details on the CEWS Extension

On November 5, 2020, the government provided some clarity on the upcoming periods until December. Here are the main the changes:

  • Base Subsidy Rate – to stay at its current level till December
    • The base subsidy rate component of the CEWS for Periods 9 (October 25 – November 21) and 10 (November 22 – December 19) would remain same as Period 8.
    • Revenue drop of 50% and over would qualify for maximum Base Subsidy of 40%.
    • Revenue drop of < 50% would qualify for a reduced Base Subsidy of 0.8 times the percentage revenue drop.
    • Note the previously announced base subsidy rate for P9 would be replaced with the new rate structure.

Chart 1: Base Subsidy – New Rate Structure for Periods 8 to 10

PeriodsPeriod 8:Period 9:Period 10:
TimingsSep 27 – Oct 24Oct 25 – Nov 21Nov 22 – Dec 19
Max weekly benefit (per employee)Up to max. $452Up to max. $452Up to max. $452
    
Revenue-decline Test   
 50% and overMax Base Subsidy – 40%Max Base Subsidy – 40%Max Base Subsidy – 40%
0% to 49%0.8 X % Revenue Decline0.8 X % Revenue Decline0.8 X % Revenue Decline

  • Top-up Subsidy Rate – to be made more responsive
    • Currently the top-up subsidy is set up to 25%
    • The revenue decline test to be change from the current method.
    • The revenue-decline test for the base subsidy and the top-up subsidy is being harmonized from Period 8 onwards.
      • That is – both the base and top-up wage subsidy would NOW be determined by the change in monthly revenues year over year,  for  the current month or previous calendar month,
      • This method to be used instead of the current three month revenue-decline test for the top-up subsidy        

Chart 2: Combined Base Subsidy and Top-Up Subsidy – New Rate Structure for Periods 8 to 10

PeriodsPeriod 8:Period 9:Period 10:
TimingsSep 27 – Oct 24Oct 25 – Nov 21Nov 22 – Dec 19
Max weekly benefit (per employee)Up to max. $734Up to max. $734Up to max. $734
    
Revenue-decline Test   
70% and overMax Combined Subsidy – 65%Max Combined Subsidy – 65%Max Combined Subsidy – 65%
50% to 69%40% + 1.25 X (Revenue Decline % – 50%)40% + 1.25 X (Revenue Decline % – 50%)40% + 1.25 X (Revenue Decline % – 50%)
0% to 49%0.8 X % Revenue Decline i.e. Only Base Subsidy0.8 X % Revenue Decline i.e. Only Base Subsidy0.8 X % Revenue Decline i.e. Only Base Subsidy

Our Takeaways

  1. Base Subsidy Rate – to stay at its current level till December, up to maximum of 40%
  2. Base subsidy rate for P9 would be replaced with the new rate structure.
  3. Top-up subsidy – Revenue-decline test for the base subsidy and the top-up subsidy is being harmonized from Period 8 onwards.
  4. This harmonization is especially going to help employers who are again suffering revenue declines after a temporary revenue improvement in summer – something many of our clients are experiencing with renewed restrictions.

Additionally, there are other interesting points on safe harbour rules, employees retuning from leave, furloughed employees, new businesses that were purchased and don’t have a corresponding last year reference period and other changes that may apply to some businesses – For more details please refer to: CEWS Extension, dated November 5, 2020.

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