Last updated: October 14, 2020
On July 20, the federal government introduced legislation that will substantially change the CEWS program starting July 5, 2020. Since the program has changed so significantly many are calling it CEWS 2.0 (and we are choosing to do the same). CEWS 2.0 is far more complex than its previous version. The government extended CEWS until June 2021 on October 9, 2021.
The intent of this article is to provide a simplified high-level discussion of the changes rather than to provide a complete guide to CEWS 2.0. Our article on CEWS 1.0 is available here.
Both subsidies are based around a maximum remuneration per employee of up to $1,129 per week. This is similar to the original CEWS formula where the maximum subsidy was $847 (75% of $1,129) per week per employee.
As many of the changes are referenced to claim periods, we have outlined the upcoming periods below:
The maximum base subsidy is a flat percentage for employers experiencing a revenue drop of 50% or more. Employers with a revenue drop of less than 50% will be eligible for a lower base subsidy based on a formula. Rather than describing the formula for each period in detail, we have included a chart below, provided by the Government of Canada, that illustrates the subsidy rate based on the decrease in revenue for each period.
For Period 5 and all subsequent periods, an employer can use the greater of its percentage revenue decline in the current period and that in the previous period for the purpose of determining its qualification for the base CEWS and its base CEWS rate in the current period. The intention of this rule is to mimic the original CEWS rules that stated once you qualify for one period you automatically qualify for the next period.
The top-up subsidy is available to employers who have experienced a 3-month average revenue drop of more than 50%. The 3-month average revenue drop will be determined by comparing the average revenue of the preceding 3 months to the same months in the prior year. An alternative approach considers the average revenue of the preceding 3 months to the average monthly revenue in January and February 2020.
Employers who have experienced a 3-month average revenue drop of more than 50% would receive a top-up subsidy equal to 1.25 times the average revenue drop that exceeds 50%, up to a maximum top-up of 25%, which is attained at a 70% revenue decline.
We have included a chart below, also provided by the Government of Canada, that illustrates the combined impact of the base + top-up subsidy.
October 9 Update – The government announced the maximum subsidy will remain at 65% until December 19, 2020. The chart provided by the government (below) previously reflected that the maximum subsidy would decrease to 45% starting in Period 9.
Please contact your Stern Cohen advisor to learn more about how CEWS 2.0 will apply to you.
Department of Finance’s Backgrounder on CEWS 2.0 – https://www.canada.ca/en/department-finance/news/2020/07/adapting-the-canada-emergency-wage-subsidy-to-protect-jobs-and-promote-growth.html
Tax Legislation governing CEWS 2.0 and related changes – https://parl.ca/DocumentViewer/en/43-1/bill/C-20/third-reading
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