Canada Emergency Wage Subsidy (CEWS)

July 20 Update – The government completely redesigned CEWS (now referred to as CEWS 2.0) which applies for July 5 and onward. Please see our separate article on CEWS 2.0 here.

This article below, last updated May 20, 2020: Please note that tax policies are changing rapidly. We are updating this article as details are made available.

Canada Emergency Wage SubsidyWhat is it?

A wage subsidy by the federal government equal to 75% of wages paid (subject to maximums described below) between March 15 to August 29, 2020. For an employer to qualify for the CEWS they must be an eligible entity and meet a decrease in revenue test for each period they apply for. The government is requiring an employer to use their “best efforts” to top-up employees to their “pre-crisis” wages.

What type of employers qualify?

  • Corporations;
  • Individuals;
  • Registered charities, other than a public institutions;
  • Not-for-profits; and
  • Partnerships where the partners are made up only of the above entities.

How is the decrease in revenue test determined?

For an employer to be eligible they must have at least a certain percentage decrease in revenue relative to a “reference period.” The reference period is either the same month of the prior year (e.g. compare March 2019 revenue to March 2020 revenue) or the average of January and February 2020 revenue (e.g. compare the average of January and February 2020 revenue to March 2020 revenue).

The required reduction in revenue for March is 15% while it is 30% for the remaining months. Once an employer meets the test for one period, the employer automatically meets the criteria for the following period. This means an employer can qualify for two periods by meetings the 15% decline test in March.

The government has divided the eligibility period into 4-week periods, called claim periods. The claim period refers to the period that the wages are “in respect of” (i.e. when they were earned). The chart below outlines the claim period, the required reduction in revenue, and the reference period to determine eligibility for the first three periods.

CEWS Eligibility Chart

How is revenue calculated for purposes of the CEWS?

Revenue is to be calculated based on “normal accounting practises” or an employer can elect to calculate revenue, for purposes of the CEWS, on a cash basis. The method selected to calculate revenue for purposes of the CEWS must be used consistently for each period.

Revenue from non-arm’s length persons (e.g. related companies) must be excluded from revenue for purposes of the CEWS. In certain situations, a group of companies may be able to elect to calculate their revenue on a consolidated basis if it is beneficial for them. These rules are complex and beyond the scope of this article.

Note for NPOs and Charities

NPOs and charities can choose whether to include or exclude revenue received from government sources when calculating revenue for purposes of the CEWS. The method selected to calculate revenue for purposes of the CEWS must be used consistently for each period.

How is the wage subsidy calculated per employee?

The subsidy is calculated on an employee by employee basis and there is no maximum per employer. The formula is described below but the maximum of $847 per week is equal to 75% of an annual salary of $58,700.

The subsidy for a given week is calculated as being greatest of two formulas (A) and (B):

A) The least of the following:

  • $847;
  • 75% of “baseline remuneration” in respect of the employee; and
  • 100% of eligible remuneration paid to the employee in respect of that week.

B) The least of the following:

  • 75% of the eligible remuneration; and
  • $847.

Baseline remuneration is what was previously called “pre-crisis” earnings. Baseline remuneration is the average weekly eligible remuneration paid to the employee by the employer during the period of January 1, 2020 and March 15, 2020, excluding any period of seven or more consecutive days for which the employee was not remunerated.

For new employees (excluding non-arm’s length persons) hired after March 15 the wage subsidy will be the wage subsidy will be calculated per formula (B) above as they won’t have any baseline remuneration. For non-arm’s length persons (e.g. related persons) the amount can only be calculated using (A) above meaning if they have no baseline remuneration they aren’t entitled to the wage subsidy.

Amounts decreasing the CEWS Claim – 10% Temporary Wage Subsidy (TWS) and Work Sharing Benefit

An employer must reduce their claim for the CEWS by any amount they received under the ESDC’s Work Sharing Benefit program and any amount they were eligible, even if not claimed, to receive under the TWS. Please see more details on the TWS here. Please note the TWS is based on when wages are paid (i.e. in cash terms) rather than the week the wages are “in respect of” which can complicate the calculation.

May 20 Update – CRA has indicated in question 21 of their CEWS FAQ that there will now be an election to elect out of the TWS or to elect to receive a lessor amount (i.e. the amount claimed). This will make the CEWS application simpler for employers that are eligible for both the CEWS and TWS.

Amounts increasing the CEWS Claim – Refund of employer CPP and EI

The government will provide a 100% refund of the employer portion of CPP and EI premiums for eligible employees for each week throughout which those employees are on leave with pay and for which the employer is eligible to claim for the CEWS for those employees.

Topping up an employee to 100% of pre-crisis wages

The Government has said they will require an employer to attest that they will use their “best efforts” to top-up their employees to 100% of their pre-crisis wages. The requirement for an employer to use their best efforts to top-up employees to pre-crisis wages is not contained in the tax legislation and the Canada Revenue Agency (CRA) has not provided any guidance on how this will be interpreted or applied. We believe this will need to be evaluated on a case by case basis for each employer.

Technical Changes

The federal government announced a series of technical changes in a May 15th announcement that are not covered in this article. These changes cover eligibility for certain partnerships, Indigenous government-owned businesses, Registered Canadian Amateur Athletic Associations (RCAAAs), registered journalism organizations, and non-public education and training institutions. The announcement also contains special rules for seasonal employees and employees returning to work after an extended leave. The announcement includes discussion on how to address amalgamated corporations and certain tax-exempt trusts.

Additional changes expected in the future

On May 15, 2020 the federal government said that they plan to consult stakeholders over the next month on potential adjustments to the CEWS, including the 30% revenue decline threshold.  We anticipate the government will continue to adjust the CEWS in coming months.

How to apply?

Employers can apply through CRA’s My Business Account  or through the CRA’s online application portal. Please visit the following page on the CRA’s website for more details. We strongly recommend employers register for direct deposit if you haven’t already.

We would like to note that the CEWS application process can be far more complex to calculate than it might initially appear. Please contact your Stern Cohen advisor for assistance.


CEWS Application Guide


Department of Finance Backgrounder

Tax Templates Inc.’s Free CEWS Calculator


The Government of Canada announced its COVID-19 economic response plan on March 18, 2020.  The Government of Ontario’s action plan was announced on March 25, 2020.  Since both programs were released there have been numerous changes, additions and updates. Tax policies are still changing rapidly. We are updating this general resource as details are made available. Still, we strongly recommend that you speak with your advisor about your unique situation before taking any action.

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*Photo Credit: Thanks to Scott Webb from Pexels