COVID-19 Update for April 8, 2020 – 3:00pm
Canada Emergency Wage Subsidy Update
Federal Finance Minister Bill Morneau provided another update on the Canada Emergency Wage Subsidy (CEWS), with a number of changes to increase flexibility for employers facing hardship. These changes are currently going through the legislative process in the House of Commons, with the opposition reviewing the draft legislation today and Cabinet discussing it this afternoon.
Changes to the eligibility criteria include (see the Department of Finance Extended News Release for complete details):
- To measure their revenue loss, employers will have the flexibility to compare their revenue of March, April and May 2020 to that of the same month of 2019, or employers can choose to compare to an average of their revenue earned in January and February 2020.
- For March, the government will reduce the 30 per cent benchmark to 15 per cent. The government recognizes that many businesses did not begin to be affected by the crisis until partway through the month.
- Employers will be allowed to measure revenues either on the basis of accrual accounting (as they are earned) or cash accounting (as they are received).
- As Trudeau noted earlier this morning, registered charities and non-profit organizations will be allowed to choose to include or exclude government funding in their revenue calculations for the purpose of applying the revenue reduction test.
- Special rules would also be provided to address issues for corporate groups, non-arm’s length entities and joint ventures.
To support a simple and smooth rehiring process, the government is proposing to refund employer contributions to Employment Insurance, Canada Pension Plan, Quebec Parental Insurance Plan and the Quebec Pension Plan. According to the government, this refund would apply to the entire amount of employer-paid contributions in respect of remuneration paid to furloughed employees in a period where the employer is eligible for the CEWS. This will make it easy and cost effective for employers to rehire people previously laid off.
This proposal increases the total cost of the CEWS program from $71 billion to $73 billion, bringing the total costs of direct support measures in the Economic Response Plan to $107 billion.
In addition to direct response measures, the government is providing $85 billion in tax deferral support and more than $500 billion in credit and liquidity measures.
Consequences for Fraud
Applicant businesses will have to designate someone with control over their finances to attest to the company’s application. Any business that receives the benefit and is discovered to be ineligible will be required to repay it in full.
Organizations that are caught abusing the CEWS will face additional fines based on amounts received and up to five years in prison.
If you have any questions about this update, please let us know.
The Enterprise Team