5 key questions answered for employers
In response to the COVID-19 pandemic, the federal government recently announced changes to the Canada Emergency Wage Subsidy (CEWS) so employers may have a few questions on how the program works:
Does the subsidy require all staff to be paid their normal hours?
Generally, no, in the sense that the CEWS covers up to 75 per cent of an eligible employee’s wages and employers are not legally obligated to pay the remaining 25 per cent. However, prior to the new CEWS legislation coming into force, the government clearly stated that employers are expected to make their best efforts to pay the remaining 25 per cent to bring the salary to pre-crisis levels. Unfortunately, the legislation has not provided us with clarity on this aspect of the CEWS or how the government will assess compliance with this requirement. However, employers should ensure that they have carefully assessed whether or not it would be possible to provide employees with a top-up on the CEWS amounts and keep written records of same.
Importantly, eligible remuneration includes amounts paid to an employee as salary, wages and other taxable benefits, fees, and commissions. These are amounts employers would be required to make payroll deductions on to be remitted to the CRA. Severance pay and items such as stock option benefits or the personal use of a corporate vehicle are not part of eligible remuneration.
When calculating the CEWS, employers will need to determine an employee's baseline remuneration. Baseline remuneration is considered to be the average weekly eligible remuneration paid to an employee during the period of Jan.1, 2020 to March 15, 2020. However, they may exclude from the calculation any period of seven or more consecutive days for which the employee was not paid. In that sense, the CEWS is essentially calculated based on the eligible employee’s “normal hours”.
Does every employee get paid by the CEWS or just the ones who are still working?
If you are an eligible employer, then you can get the CEWS with respect to “eligible remuneration” paid to “eligible employees”. There is no active work requirement to be an eligible employee. Accordingly, eligible employees may still be working or may not be working but still remain on payroll.
Under the CEWS program, an eligible employee is an individual employed in Canada by the eligible employer during the claim period, except if there was a period of 14 or more consecutive days in that period where they did not receive any pay (eligible remuneration). Thus, the legislation is clear that an employer cannot receive benefits under the CEWS during any period of time where an employee would otherwise qualify for the Canada Emergency Response Benefit (CERB).
Employee eligibility is based on whether the person is employed in Canada, not where they live.
To be clear, an employer would not be able to claim the CEWS for employees who are not in receipt of wages of any kind in an applicable qualifying period (e.g. employees who are on a temporary layoff or on a leave of absence). Employers who want to take advantage of the CEWS in these circumstances will need to recall employees from layoff or offer to pay their employees even where they are unable to work.
How does the CEWS work for employees who have already applied for employment insurance (EI)?
Under CEWS, employees are not eligible if they have been without remuneration for 14 or more consecutive days in the applicable eligibility period.
One of the eligibility criteria for EI is that the employee must have been without work and without pay for at least seven consecutive days in the last 52 weeks. Accordingly, employees who have applied for EI benefits and are eligible to receive the same, but have been without remuneration for 14 or more consecutive days in the eligibility period, would not be an eligible employee under the
CEWS program for that claim period.
Significantly, if employees have been laid off or furloughed, they can become eligible for CEWS retroactively, as long as the employer rehires those employees and their retroactive pay and status meet the eligibility criteria for the claim period. The employee must be rehired and paid before they are included in the calculation for the CEWS.
Rehired individuals may have received, or continue to receive, the CERB. Depending on the specific situation, these individuals may be required to repay some or all of the amounts they received. More information to come on this shortly. CERB recipients who already know they will need to repay their CERB payment can access the steps needed to return or repay the benefit.
With the wage subsidy, do employers wait for the government’s money before paying employees?
No. Employers can pay employees with the money they have, which could come from company revenues, a loan or some other source. They will then apply to the government for the CEWS (i.e. you will be reimbursed for salaries already paid by you to eligible employees). When they receive the money from the government through the CEWS, they can use that to pay future salaries or on something else.
Employers will be able to apply for the CEWS through the CRA’s My Business Account portal as well as a web based application, which opened on Monday, April 27th.
If an office is completely closed, can the employer apply for the CEWS?
Yes, as long as the eligible employees remain on payroll. Employers who want to take advantage of the CEWS in these circumstances will need to recall employees from layoff or offer to pay employees even where they are unable to work (e.g. if the physical location is closed or there is no work available for them). Should they decide to do that, then those employees can continue to remain at home while being reinstated to the payroll.