The Government of Canada is taking immediate, significant and decisive action to support Canadians and employers across the country who are struggling as a result of the global outbreak of COVID-19.
Today, Finance Minister Bill Morneau provided further details on the eligibility criteria for companies to apply for the Canada Emergency Wage Subsidy (the Subsidy). In this way, the proposed Grant will achieve the government’s goal of supporting employers most affected by the COVID-19 pandemic, and protecting the jobs Canadians depend on during this difficult time.
The proposed subsidy would provide employers with a powerful incentive to pay employees who have been sent home for health and safety reasons or due to lack of work. It would also allow employers to retain employees who are still part of their workforce, and to rehire workers who have been laid off.
The proposed subsidy would cover 75% of the first $58,700 normally earned by employees, representing a maximum of $847 per week per employee. The program would run for 12 weeks, from March 15 to June 6, 2020. Employers of all sizes and in all sectors of the economy would be eligible, with a few exceptions, notably public sector entities. An eligible employer’s entitlement to this wage subsidy will be determined solely on the basis of wages or salaries actually paid to employees. All employers are expected to make every effort to bring employee salaries back to pre-crisis levels.
In addition, the government is proposing that employers eligible for the subsidy be entitled to a full refund of certain employer contributions to Employment Insurance, the Canada Pension Plan, the Quebec Pension Plan and the Quebec Parental Insurance Plan. This reimbursement would apply to the full amount of contributions paid by the employer in respect of remuneration paid to employees temporarily laid off during a period when the employer is eligible for the subsidy. This will make it easier and less costly for employers to rehire previously laid-off employees.
Given the realities facing the not-for-profit sector, high-growth companies and new businesses, the government is proposing the following flexibility measures:
- With regard to the measurement of their loss of income, it is proposed that all employers be able to compare their income for March, April and May 2020 with either that of the same month in 2019, or the average income earned in January and February 2020.
- For the month of March, the government is proposing to broaden eligibility for the Grant from what it had originally announced by reducing the percentage of reference income from 30% to 15%, in recognition of the fact that many businesses only began to feel the effects of the crisis after part of the month had passed.
- In recognition of the wide variation in the time lag between when income is earned and when it is received in certain sectors of the economy, it is proposed to allow employers to measure income either on an accrual basis (recording when income is earned) or on a cash basis (recording when income is received). Special rules would also be provided for specific issues concerning corporate groups, non-arm’s-length entities and joint ventures.
- Registered charities and non-profit organizations could also take advantage of the flexibility offered to employers in calculating lost income. Furthermore, in recognition of the fact that different types of organizations experience different types of financial pressures, it is proposed to allow charities and non-profit organizations to choose whether to include in their income or exclude public funds they have received for the purposes of the income reduction test.
The government will continue to closely monitor the evolution of the COVID-19 outbreak and take additional measures to protect Canada’s population and economy.
Quick facts
- The government has taken steps to help Canadian businesses throughout the COVID-19 outbreak, with the following new targeted initiatives:
- Launch the new Canadian Business Emergency Account. This program will provide a total of $25 billion in interest-free loans of up to $40,000, with conditional partial write-offs, for small businesses and not-for-profit organizations in all sectors of the economy and all regions. To qualify, these organizations will need to demonstrate that they paid a total of between $50,000 and $1 million in salaries in 2019. Thanks to these loans, which are guaranteed and financed by the Government of Canada, small businesses will have access to the capital they need to pay rent and cover other important expenses over the coming months.
- Launch the new Loan and Guarantee Program for small and medium-sized enterprises (SMEs). This program will provide up to $40 billion in loans, funded by Export Development Canada and the Business Development Bank of Canada, to small businesses to help them withstand the impact of COVID-19. This measure is aimed at SMEs that need extra help to meet their operational cash flow requirements. It will provide eligible companies with up to $12.5 million in additional financial support.
- Increase credit available to farmers and the agri-food sector through Farm Credit Canada.
- Extend the maximum duration of Work-Sharing agreements from 38 weeks to 76 weeks, to support workers who agree to reduce their normal working hours due to new circumstances beyond their employer’s control.
- Postpone income tax payment deadline. The government is authorizing all taxpayers to defer until after August 31, 2020, the payment of tax amounts that become due on or after March 18 and before September 2020. This relief will apply to new balances owing as well as instalments under Part I of the Income Tax Act. No interest or penalties will accrue on these amounts during this period.
- Allow businesses, including the self-employed, to defer all Goods and Services Tax and Harmonized Sales Tax (GST/HST) payments until June. They will also be able to defer payments of GST and customs import duties until June. This measure is equivalent to providing up to $30 billion in interest-free loans to Canadian companies. It will help businesses continue to pay their employees and bills, and help limit the liquidity problems faced by businesses across the country.
