Canada Emergency Wage Subsidy (CEWS)

Alternatively, you may still qualify if:

1. Your business uses a third-party payroll provider; or
2. you acquired assets (such as a business) during the qualifying period (or before that) that were:
   
   1. Of fair market value,
   2. Used by the seller in the course of a business in Canada, and
   3. Not purchased to increase your CEWS.

You are an eligible employer if you are listed in any of the columns below:

To calculate your revenue drop, you must:

1. Determine your revenues for the applicable period(s) (see CEWS calculation)
2. Calculate your revenue reduction by choosing one of the following options:
   • General approach: compare your business eligible revenue for the claim period month in 2020 or 2021 you are applying for, with your eligible business revenue for the same month in 2019; OR
   • Alternative approach: compare your business eligible revenue for the claim period month in 2020 or 2021 you are applying for, with your average eligible business revenue for the months of January and February 2020.

Note: if you choose the Alternative Approach, you will need to file an election. Please see the FAQ for more information.

Important: The approach you use for period 5 must then be used for periods 5-20. Should you decide to change your approach at any other time, you will need to amend previous applications to reflect the change.

An eligible employee must be employed in Canada.

The eligible employees described below can be included in your subsidy if they are/were:

• Laid off: eligible if you pay them retroactively in order to include them in the application for the CEWS claim period for which their pay was earned. Please note payroll penalties and interest may apply and that this may affect the eligibility of an employee’s participation in any income support programs such as CERB/CRB/EI.
• Hired after March 15th, 2020:
  • Arm’s-length: eligible if they are being paid within the CEWS claim period.
  • Non-arm’s-length: not eligible to be included in the CEWS.
• On a work-sharing agreement during the CEWS claim period: eligible after asking each participating employee what they are receiving from EI-workshare and subtracting this amount from your CEWS claim.
• On an EI leave from July 1, 2019, to March 15, 2020:
  • For claim periods 5 and onwards, if an employee was on EI from July 1, 2019, to March 15, 2020, they can be included in your subsidy claim by averaging their wage from the 90 days prior to their leave date and using this as their Pre-crisis pay/Baseline Remuneration.
• Non-arm’s-length: eligible to be included in your subsidy claim if they have an average weekly wage (also known as Pre-crisis pay or Baseline Remuneration) within any of the Baseline Remuneration periods below:

If the employee meets the above eligibility requirements you will have to determine whether your employee is at arm’s length, and whether they are on leave with pay, as the subsidy is calculated differently for each situation. Please see the below FAQ for more details.

Once you have determined that you meet the eligibility criteria, you can start calculating each period’s subsidy. Each claim period you apply for will have its own calculation. To maximize your CEWS, you must determine:

1. Which of your revenues are eligible for the CEWS
2. Your preferred accounting method (to be used for all periods) to reflect your impacted revenues:
   • Cash method - recording income as it is received and expenses as they are paid.
   • Accrual method - recording income and expenses when they are billed.
3. Your preferred approach to reflect your impacted revenues:
   • General approach – Compare the claim month’s revenues from 2020 over the revenues from the same month in the previous year. For periods 14-16, compare the claim month’s revenues from 2021 to the same month in 2019.
   • Alternative approach – Compare the claim month’s revenues over the average revenues from Jan and Feb 2020
4. Which periods will you deem eligible. This will be based on the wages paid to eligible employees.

There is no maximum on the total amount of subsidy you receive, however, there is a limit on the amount of subsidy per employee. The maximum wages you can claim per employee is $1129/week.

Before using the calculator, you should prepare and have on hand the following:

• A direct deposit set up with CRA.
• Updated financial accounts for the last year and the current year. Determine what indicators prove that you deserve the subsidy. We strongly recommend that you consult your accountant for this step.
• Updated gross payroll information for each of your subsidy eligible employees.
• The amount of EI premiums and CPP contributions that you have paid on behalf of those employees.
• The amount you have deducted by using the 10% Temporary Wage Subsidy for employees (if applicable).
• The amount that you have received from ESDC's Work-Sharing program to pay your employees (if applicable).
• Calculate your subsidy amount using the CEWS calculator.

A revenue drop is the percentage of gross revenues lost in a month in comparison to a pre-COVID-19 reference period (known as a prior reference period).

Accounting

To calculate your gross revenues, you can choose between two accounting methods. You can choose to record your income as it is received and expenses as they are paid (Cash method) or you can choose to record income and expenses when they are billed (Accrual method). Once you have chosen your preferred accounting method, you will have to continue to use that same accounting method for all periods from 1 to 16. You can change from one accounting method to the other, but you will then have to amend the accounting method for all previous applications as well, so you are best to choose one method and stick with it for all your CEWS applications.

Approach

To calculate your amount of revenue drop you will need to choose between the General approach (compares revenue of current month to same month in 2019 or the Alternative approach (compares revenue of current month to average revenue in January and February of 2020). See below for more details.

Whatever approach you use, you will have to continue to use that same approach for all periods.

For period 8 onwards: the top-up is calculated based on the revenue reduction of the claim month.

Both the Base CEWS percentage and the Top-up CEWS percentage are comprised of a revenue drop calculation that is multiplied by a specific amount set by the government called a multiplier.

Base % = (Base multiplier) X (Base revenue drop)

Top-up% = (Top-up multiplier) X (Top-up revenue drop - 50%)

For periods 17 to 21, the calculation will change again, with those businesses who have less than a 10% revenue drop no longer able to access the subsidy from period 18 onwards.

When determining the amount of subsidy for which you are eligible, start with calculating the top-up CEWS rate for each period.

Once you determine which approach works best for your business you can add both your base CEWS revenue drop percentage and top-up CEWS revenue drop percentage (which will be zero if your revenue drop is less than 50%) to determine your CEWS percentage.

Deeming rule

For periods 5 to 21, a business can elect to use their current OR prior month’s revenue to compare with the previous year to determine which would provide them with the highest amount of subsidy.

Note: the reference periods for claim periods 10 and 11 are the same. Therefore, when using the deeming rule for claim period 11, use the revenue reduction from period 9.

Eligible employees must be employed in Canada to be eligible for the wage subsidy. You will then have to determine whether the employee is arm’s length or non-arm’s length (usually family members/owners), and if they are on a paid leave of absence or not.

Note: for period 7 onwards, the baseline remuneration (pre-crisis) pay is only required for employees who are on leave with pay, and employees who are non-arm's length.

The baseline remuneration is the average wage paid from a selected period prior to COVID-19. As shown below.

To maximize your employee’s Baseline Remuneration, you will need to determine which baseline period gives your employee the greatest average wage. Although it adds work to your calculations, we do recommend that you use the best baseline remuneration period for each employee depending on their CEWS period. To do this:

1. Total all the remuneration paid to the employee during the selected Baseline Remuneration period.
2. Divide the total pay by the number of days in the selected baseline period, subtracting all days within any period of 7 or more consecutive days the employee was not paid for
3. Multiply the result by 7 to get the average weekly Baseline Remuneration.

These steps can be expressed using this equation.

There are some differences between the two programs (see table below); however, applicants will be able to apply to the program that benefits them more. You will be able to alternate between the programs from period to period, but you cannot benefit from both programs for the same period, and the revenue approach must be consistent. The CRA will provide a calculator to help you determine which subsidy will benefit you more.

Please visit our CRHP page for more information on that program.

The My Business Account (MYBA) portal was recently updated and the CEWS application is now found under Payroll:

• Log into MyBA.
• On the overview page, select the “Payroll” option from the navigation menu on the left-hand side.
• Select the RP program account to apply for CEWS.
• On the RP Overview page, select the “Canada Emergency Wage Subsidy” link in the payroll section.
• The CEWS application form will display.

No, unfortunately this has not changed; however, we continue to advocate that government expand access. Eligible remuneration needs to be recorded on a T4.

The CEWS is being processed at the payroll program (RP) account level, but an exception is being made for certain affiliated businesses or entities. Some affiliated and/or amalgamated businesses or entities will be able to consolidate or separate their revenues.

No, unfortunately there are no alternative prior referencing periods alternative to Jan/Feb.

A business can elect to amalgamate with a predecessor as long as the main purpose of the amalgamation was not to cause the new corporation to qualify for the CEWS or increase their amount of the CEWS. This rule was backdated to April 11, 2020 and allows a business to use their amalgamated corporation to calculate a benchmark revenue for the revenue decline test.

For Periods 1-10, employers are expected to make their best effort to top-up salaries to 100%, and if requested, to provide proof. While topping up an employee’s salary is not a requirement for the CEWS, it’s important to review applicable statutes under your Provincial Employment Standards and take into consideration common law practices before reducing your employees’ wages. A reduction of wage can be grounds for a constructive dismissal complaint if not managed properly.

You may appeal CEWS decisions by filing an objection after having received your notice of determination.

The definition for arm's length can be found on CRA's website.

Simply put, a person at arm's length does not have a blood, trust or controlling relationship with the business entity. Persons not at arm's length can be more simply viewed as family, significant others, partnerships, or businesses where one partner has controlling interest/voting shares.

For example, an owner's daughter works for a business. She would be a "related person" not at arm's length. Whether the daughter's salary could be subsidized would depend on how her pay and decision making is structured within the business.

• Arm's length - Should the daughter be paid a salary reflected on a T4 and T4Sum, the business entity could subsidize her wage like other employees.
• Not arm's length - Should the daughter not be considered an employee under CRA employer/employee rules, the business entity would not be able to subsidize her wage.
• Should the daughter be hired after March 15th and given a salary that can be reflected on a T4 and T4Sum her wage would not be eligible for the subsidy. This would seem like the controlling partnership/family is creating a wage to subsidize.

Changes to previous wage subsidy claims can be made either though My Business Account or Represent a Client. If you applied using the web form application, you will need to call the CRA’s Business Enquiries Line at 1-800-959-5525.

The deadline to make adjustments to or increase the amount of your claim is 180 days after the end of the claim period. After the deadline you will be able to cancel or reduce the amount of your claim by calling the CRA’s Business Enquiries Line at 1-800-959-5525.

These elections are CRA’s way of confirming if you are calculating your CEWS revenues differently from the revenues that you regularly submit to CRA.

If in your CEWS application, you chose to change your revenues in one (or more) of the below ways please ensure to check “Yes.” correctly in your CEWS elections. If you have not made any changes to your revenue, then please select no in your CEWS elections.

Please consult our CEWS archive for information on calculating the subsidy, the deeming rule, the safe harbour rule, and other details for claim periods that are now closed to applications.