The government introduced the Canada Emergency Wage Subsidy to prevent further job losses and encourage employers to quickly rehire workers already laid off as a result of COVID-19. The measure provides eligible employers who have experienced a drop in revenues with a wage subsidy for eligible compensation paid to their employees.
Support for active employees
The wage subsidy for active employees comprises a basic subsidy for all employers who have experienced a drop in earnings, as well as a complementary wage subsidy available to employers who have experienced a drop in earnings of at least 50%. The maximum combined rate of the basic subsidy and the complementary wage subsidy is set at 75% over the eligibility period ending June 5, 2021.
The 2021 budget proposes the wage subsidy rate structures shown in Table 2 for the period from June 6, 2021 to September 25, 2021. As shown in the table, the subsidy rates would be phased out as of July 4, 2021. In addition, an employer would only be eligible for the wage subsidy as of this date if it had a revenue decline greater than 10%.
| Period 17 June 6 to July 3 | Period 18 July 4 to July 31 | Period 19 August1 to August 28 | Period 20 August 29 to September 25 | |
|---|---|---|---|---|
| Maximum weekly subsidy per employee | 847 $ | 677 $ | 452 $ | 226 $ |
| Decline in income : | ||||
| 70% and over | 75% (i.e., prime rate: 40% + Complement: 35%) | 60% (i.e., base rate: 35% + Complement: 25%) | 40% (i.e., base rate: 25% + Complement: 15%) | 20% (i.e., prime rate: 10% + Complement: 10%) |
| 50 à 69 % | prime rate: 40% + top-up: (income drop – 50%) x 1.75 (e.g., 40% + (60% income drop – 50%) x 1.75 = 57.5% subsidy rate) | base rate: 35% + top-up: (income drop – 50%) x 1.25 (e.g. 35% + (60% income drop – 50%) x 1.25 = 47.5% subsidy rate) | prime rate: 25% + Supplement: drop in income – 50%) x 0.75 (e.g., 25% + (60% drop in income – 50%) x 0.75 = 32.5% subsidy rate) | prime rate: 10% + top-up: (income drop – 50%) x 0.5 (e.g., 10% + (60% income drop – 50%) x 0.5 = 15% subsidy rate) |
| >10 à 50 % | Base rate: drop in income x 0.8 (e.g., 30% drop in income x 0.8 = 24% subsidy rate) | Base rate: (decrease in income – 10%) x 0.875 (e.g., (30% decrease in income – 10%) x 0.875 = 17.5% subsidy rate) | Base rate: (decrease in income – 10%) x 0.625 (e.g., (30% decrease in income – 10%) x 0.625 = 12.5% subsidy rate) | Base rate: (decrease in income – 10%) x 0.25 (e.g., (30% decrease in income – 10%) x 0.25 = 5% subsidy rate) |
| 0 à 10 % | Base rate: drop in income x 0.8 (e.g. 5% drop in income x 0.8 = 4% subsidy rate) | 0 % | 0 % | 0 % |
| * The maximum weekly subsidy per employee is equal to the combined maximum basic subsidy and complementary wage subsidy for the eligibility period applied to the amount of eligible earnings paid to the employee for the eligibility period, on earnings up to a maximum of $1,129 per week. | ||||
Obligation to repay the wage subsidy
The 2021 Budget proposes to require a publicly traded company to repay wage subsidy amounts paid for an eligibility period beginning after June 5, 2021 if its total specified executive compensation in calendar year 2021 exceeded its total specified executive compensation in calendar year 2019.
For the purposes of this rule, the specified executives of a publicly traded company will be its named executive officers whose compensation is required to be disclosed under Canadian securities law in its Statement of Executive Compensation delivered to shareholders, or equivalent executive officers in the case of a publicly traded company in another jurisdiction. These members are generally composed of the CEO, CFO and three other highest-paid executives. A company’s executive compensation for a calendar year will be prorated based on the total compensation paid to its named executive officers for each of its taxation years that straddle the calendar year.
The amount of the wage subsidy reimbursement would be equal to the lesser of the following amounts :
- total wage subsidy amounts paid in respect of active employees for eligibility periods starting after June 5, 2021;
- the amount of the Company’s total executive compensation for 2021 that exceeds its total executive compensation for 2019.
This repayment obligation would be applied at group level and would apply to the wage subsidy received by each group entity.
Support for employees on paid leave
A separate wage subsidy rate structure applies to employees on paid leave. The wage subsidy paid to employees on paid leave is harmonized with Employment Insurance (EI) benefits until June 5, 2021, to ensure equitable treatment by both programs for these employees.
To ensure that the wage subsidy paid to employees on paid leave remains harmonized with EI benefits, the 2021 budget proposes that the weekly wage subsidy for an employee on paid leave from June 6, 2021 to August 28, 2021 be the lesser of the following amounts:
- the eligible remuneration paid for the week in question;
- the higher of the following amounts :
- 500 $;
- 55% of the employee’s pre-crisis remuneration, up to a maximum of $595.
The wage subsidy for employees on paid leave would continue to be available to employers eligible for the wage subsidy for active employees for the period applicable until August 28, 2021. Employers will also continue to be entitled, under the wage subsidy, to claim their Canada Pension Plan, EI, Quebec Pension Plan and Quebec Parental Insurance Plan contributions in respect of employees on paid leave.
Reference periods
For wage subsidy purposes, the decline in an employer’s earnings is generally determined by comparing the employer’s earnings in the current calendar month with its earnings in the same calendar month, prior to the pandemic. Alternatively, an employer may choose to use another approach, which compares its monthly revenues against its average revenues for January and February 2020. A deeming rule states that an employer’s revenue decline for a given eligibility period is the greater of its revenue decline for the given eligibility period and the previous eligibility period.
The 2021 budget proposes the reference periods shown in Table 3 to determine the decline in revenues of an eligible employer for the eligibility periods from June 6, 2021 to September 25, 2021.
| Calendar | Period 17 June 6 to July 3 | Period 18 July 4 to July 31 | Period 19 August 1 to August 28 | Period 20 August 29 to September 25 |
|---|---|---|---|---|
| General approach | June 2021 vs. June 2019 or May 2021 vs. May 2019 | July 2021 vs. July 2019 or June 2021 vs. June 2019 | August 2021 compared with August 2019 or July 2021 compared with July 2019 | September 2021 compared with September 2019 or August 2021 compared with August 2019 |
| Alternative approach | June 2021 or May 2021 vs. average for January and February 2020 | July 2021 or June 2021 compared with the average for January and February 2020 | August 2021 or July 2021 compared with the average for January and February 2020 | September 2021 or August 2021 compared with the average for January and February 2020 |
Employers who had chosen to use the general approach for prior periods should continue to use this approach. The same principle applies to employers who had chosen to use the alternative approach.
Basic remuneration
Under the general rules, an eligible employer’s entitlement to the wage subsidy for an employee on paid leave, and for an active employee in certain circumstances, is determined by a calculation that takes into account both the employee’s current and base (pre-crisis) compensation.
Base earnings means the average weekly eligible earnings paid by an eligible employer to an eligible employee during the period from January 1, 2020 to March 15, 2020. Any period of at least seven consecutive days during which the employee was not paid is excluded from the calculation. However, the eligible employer may choose, for each eligibility period in respect of an employee, an alternative base period for calculating average weekly eligible earnings.
To ensure that the alternative base pay periods for a given eligibility period continue to reflect the corresponding calendar months covered by the eligibility period, Budget 2021 proposes to allow an eligible employer to elect to use the following alternative base pay periods:
- March 1 to June 30, 2019 or July 1 to December 31, 2019, for the eligibility period between June 6, 2021 and July 3, 2021;
- July 1 to December 31, 2019, for eligibility periods starting after July 3, 2021.
For questions about existing programs for businesses, and for emergency financial assistance, you can contact our expert, Gustave Legault-Brousseau, CPA, CMA, Senior Financial Analyst at Amyot Gélinas at 819 326-3400, ext. 3472 or at glegault-brousseau@amyotgelinas.com.
