Federal Budget Changes to the Canada Emergency Wage Subsidy

The Canada Emergency Wage Subsidy (CEWS) often referred to as CEWS, is a program offered by the Government of Canada to business owners as part of the Economic Response Place to COVID-19, which provides a subsidy to eligible employers who have experienced a decline in monthly revenue compared to a baseline monthly revenue amount in 2019 or 2020.

New legislation has been introduced as part of the 2021 Federal Budget to extend the CEWS program for four additional four-week periods, beginning June 3, 2021 and ending September 25, 2021.

There are no significant changes to the overall calculations of the CEWS in these additional four periods; however, the percentages used to calculate the CEWS will result in a decline in the amount of government support over Periods 17 to 20.

The reduction in CEWS support reflects the expected recovery of the Canadian economy over the next few months.

Beginning in Period 18 (July 4 to July 31, 2021), a business must demonstrate a revenue decline of over 10 per cent to be eligible for the CEWS. This is a change from prior periods where any percentage decrease in monthly revenues meant a business may be eligible.

For Periods 17 to 20, the maximum remuneration eligible for active employees the CEWS remains the same as previous periods, $847* per employee per week; however, the maximum base subsidy per employee per week is scheduled to decrease to:

  • $677 per week for Period 18 (July 4 to July 31, 2021)
  • $452 per week for Period 19 (August 1 to August 28, 2021)
  • $226 per week for Period 20 (August 28, 2021, to September 25, 2021)

* The maximum weekly benefit per employee is equal to the maximum combined base subsidy and top-up wage subsidy for the qualifying period applied to the amount of eligible remuneration paid to the employee for the qualifying period, on remuneration of up to $1,129 per week.

The detailed changes in the proposed wage subsidy rate structures are set out in the tables included in the reference guide hyperlinked below.

Furthermore, to maintain consistency with the benefits under the Employment Insurance (EI) program, the amount of the CEWS in respect of furloughed (leave with pay) employees for Periods 17, 18 and 19 will continue to be equal to the lesser of:

  • The amount of eligible remuneration paid for the week; and
  • The greater of:
    • $500; and
    • 55 per cent of the baseline remuneration, up to a maximum of $595.

For Period 20, no CEWS may be claimed for furloughed employees.

Finally, the 2021 Federal Budget introduced a clawback of the CEWS directly replated to ‘Executive Compensation’ for publicly traded companies where the aggregate compensation for “specified executives” during the 2021 calendar year exceeds the aggregate compensation for “specified executives” in the 2019 calendar year. Specified executives include those whose names must be reported on the entity’s Statement of Executive Compensation under National Instrument 51-102. This may include executive officers of the publicly traded corporation as well as executive officers of controlled subsidiaries of the publicly traded parent company.

The clawback will apply to CEWS claims for periods that begin after June 5, 2021 (i.e. Period 17 and onward).

The amount of the CEWS clawback will be equal to the lesser of:

  • The total amount of the CEWS received with respect to active employees for periods beginning after June 5, 2021; and
  • The amount by which the aggregate specified executives’ compensation for 2021 exceeds the aggregate specified executives’ 2019 compensation (limited to the five highest grossing individuals).

The amount of the overpayment will be calculated on an aggregate basis and may be repaid by any one of the eligible entities in the group. For example, if there is an overpayment determined in respect of a publicly traded parent company and its subsidiary, either the parent or the subsidiary may make the repayment on behalf of the other party. This will be done by filing an agreement pursuant to a prescribed form, allocating the executive compensation repayment amount to each entity.

Where a company has an off-calendar year, the executive compensation will need to be calculated by prorating the aggregate specified executive compensation by the number of days that fall within the calendar year.

For detailed information on the changes to the Canada Emergency Wage Subsidy program from Period 17 – Period 20 please click here.

To view our detailed Canada Emergency Wage Subsidy program reference guide, please click here or view all of the Government of Canada COVID-19 support programs by visiting this section of our website.

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