The Benefits, Application Process, and Eligibility for CEWS Explained
Are you having difficulty meeting payroll during the pandemic? You may qualify for the Canadian Emergency Wage Subsidy (CEWS). Here’s CEWS explained.
The Canada Emergency Wage Subsidy (CEWS) is a government-funded subsidy for COVID-19 affected employers designed to help employers retain their workers by covering up to 75% of employee wages. Eligible employers include individuals, corporations, and organizations who have seen a significant reduction (30%) in revenue due to the COVID-19 pandemic.
In this article, you will find CEWS explained along with eligibility in more detail and the application process.
What are the benefits of CEWS?
CEWS is a federal subsidy that will pay 75% of employees’ wages for a period of up to three months. This benefit can be applied retroactively as far back as March 15, 2020.
An employer taking advantage of CEWS will be able to pay its employees a benefit of up to 75% of their normal wages, up to $847 per week. If employees’ wages or hours have been cut due to the current crisis, the CEWS benefit can be based on these employees’ pre-pandemic wages.
This benefit will enable employers to keep their employees or to re-hire them if they have been furloughed or laid off. Employers will also be able to retain current workers and will be better able to resume normal business post-crisis. However, CEWS is considered taxable income for the year 2020 and must be reported as such.
CEWS offers three remuneration periods: March 15 to April 11, April 12 to May 9, and May 10 to June 6. This means that any of these periods can be used to measure an eligible drop in income. Benefits can be paid for up to 12 weeks and can be applied retroactively.
Who Is eligible for CEWS benefits?
To be eligible for CEWS benefits, a business owner or corporation must not be a public institution, hospital, educational institution, government, municipality, or crown corporation. Eligible employers can be taxable corporations, individual business owners, charities (registered), and partnerships of eligible employers. Those businesses who are exempt from corporate tax are also eligible so long as they are boards of trade, chambers of commerce, labour organizations, non-profits (including those for research), agricultural organizations, and benevolent societies and orders.
Revenue Drop Eligibility
Provided an employer meets the conditions above, the next step is to determine if an employer’s drop in income is eligible. An eligible drop in income must occur during one of the three remuneration periods mentioned above. The income drop is calculated against earnings made during 1.) the same starting month in 2019 or 2.) average revenue earned in January and February 2020.
For example, a drop in income from March 15 to April 11, 2020, will be calculated against March 2019 or the average of January and February 2020. A drop in income from April 12 to May 9 will be calculated against April 2019 or the average of January and February 2020, and so on.
Eligible drops in revenue are at least 15% for the March 15 to April 11 period, and at least 30% for the next two periods.
Income must be calculated using a business’s normal accounting method and eligible revenue must have been earned in Canada from selling goods or services. Revenue created by others’ use of your resources is also eligible.
All eligible employees must be employed in Canada, be your employees, and have been employed during at least one of the remuneration periods unless there exists a 14-day period in which you didn’t pay them eligible remuneration. However, employees who were furloughed or laid off during one of these periods are also eligible so long as you rehire and pay them before you include them in your subsidy calculation.
Remuneration is eligible for CEWS so long as it does not fall under severance pay or stock option benefits. Employee salary, wages, benefits, commissions, and fees are all eligible remuneration so long as they take place during one of the three periods mentioned above.
How do I apply for CEWS?
To apply for CEWS, an employer must first determine its eligibility, calculate its drop in revenue using the guidelines above, determine employee eligibility, and determine employee remuneration eligibility. Examples can be found here. Once these steps are completed, an employer will then calculate their subsidy amount by following this link. An employer will be asked to include employee information such as weekly earnings as well as the remuneration period they are applying for.
The next step is to apply. Making sure all direct deposit information is up to date is a must, and an employer will need to get any payments of $25 million or more through the large value transfer system.
CEWS will be processed through the payroll program account, so a separate application must be done for each RP account.
Three application methods are available: My Business Account, Represent A Client, and the Web Forms application.
Once the application process is completed, an employer can expect to receive payment within 10 business days unless more information is needed by the CRA. Without direct deposit, the payment may take longer.
This article is provided by E&E Ltd. We are professional accountants who are here to assist small businesses with accurate information during the COVID-19 crisis and beyond. If you or your business have any questions, be sure to contact us today.