On October 20, 2020, the Canadian government chose to continue to adjust the CEWS, including simplifying the revenue-decline test and changing the treatment of furloughed employees.
Particular proposed changes to the CEWS from Finance say it will harmonize the revenue-decline test for the base subsidy and the top-up subsidy starting September 27, 2020, and will align the wage subsidy for furloughed employees with Employment Insurance (EI) benefits, beginning October 25, 2020.
Finance also announced that the CEWS would be extended to June 2021, however further details of the CEWS for these additional periods, including details on eligibility, are not yet available.
In its announcement, Finance also advises that the 40% base and 25% maximum top-up that applies for the period September 27 to October 24, 2020, will continue to apply from October 25 to December 19, 2020.
This confirms the previous announcement that the current maximum 65% subsidy would be retained for this period.
Revenue-decline test
Employers will be allowed to determine the base subsidy and the top-up subsidy by the change in the eligible employer’s monthly revenues, year-over-year, for either the current or previous calendar month, rather than the current three-month revenue decline test for the top-up subsidy.
For employers using the alternative revenue-decline test, both the base subsidy and top-up subsidy would be determined by the change in the eligible employer’s monthly revenues compared to the average of its January and February 2020 revenues. This harmonization of the revenue-decline test for the base subsidy and the top-up subsidy would apply starting September 27, 2020, onward. As a result of this change, an employer with a 70% or greater revenue decline would be eligible for a 65% CEWS.
Finance says that this change will be subject to a “safe harbour” rule that will apply from September 27, 2020, to December 19, 2020, and will entitle an eligible employer to an amount that is not less than the top-up subsidy it would have received under the three-month revenue decline test.
Furloughed employees
Finance states that it will align the wage subsidy for furloughed employees with EI benefits, as of October 25, 2020. As a result, the subsidy per week for an arm’s length employee (or a non-arm’s length employee who received pre-crisis remuneration for the relevant period) would be:
- The amount of eligible remuneration paid for the week; or,
- If the employee receives remuneration of $500 or more for the week, the greater of $500 and 55% of pre-crisis remuneration for the employee, up to a maximum subsidy amount of $573.