Today, the federal government launched a CRA portal for Canadians to apply for a new key assistance program for employees, the Canada Emergency Response Benefit. In addition, further details were released last week about the Canada Emergency Wage Subsidy, a proposed assistance program for employers.
Canada Emergency Response Benefit
To assist employees who are no longer working for various reasons due to the Coronavirus (COVID-19), the Government of Canada has initiated a benefit intended to be more easily accessible than Employment Insurance (EI) benefits, called the Canada Emergency Response Benefit (CERB).
This benefit is not only for those who are quarantined and cannot work because they have been diagnosed with COVID-19, but also for those who have lost their job, are caring for someone who is sick with COVID-19, or who are caring for their children home from school or daycare. The CERB may also be available for contract/self-employed workers who are not eligible for EI. Further, employees who have continued to work, but have not received income due to financial disruptions within the business, are also eligible to apply.
Employees who are eligible for this benefit will receive $2,000 for a 4-week period for up to 16 weeks, up to $8,000 in total. Unlike EI regular benefits, this benefit is not determined by a sliding scale. This means that the amount a person receives will not be calculated based on their salary or wages. Rather, it will be $500 per week across-the-board for all individuals who are deemed eligible for the benefit. The benefit will apply retroactively to March 15, 2020. Payments will be made in fixed blocks of 4 weeks.
Who Can Apply?
Among other requirements to be eligible for the CERB, employees must have had an income of at least $5,000 in 2019 or in the 12 months prior to the date of their application and they must not have voluntarily quit their jobs. Further, employees must be unemployed for at least 14 consecutive days in the first 4-week period. Following this 4-week period, the employee must expect that they will have no income whatsoever.
A person does not necessarily need to be ‘laid off’ in order to be eligible for the CERB.
How to Apply?
Applications can be made through an online CRA portal or by phone starting today.
A medical certificate will not be necessary to apply. In an employee’s initial application, they will need to include their personal contact information, social insurance number and must be able to confirm the above-mentioned eligibility requirements. An employee may be asked to provide further documents at a later date to confirm eligibility requirements.
Once an employee becomes eligible for the CERB, an employee can expect to receive payments as soon as 3-5 days after the submission of their application.
If an employee is on maternity/parental leave, it is anticipated that this employee will return to work once their leave ends and they would be ineligible for the CERB. However, if an employee’s leave ends and work is not available to them, they are then eligible to apply for the CERB.
The CERB is taxable however tax deductions will not be deducted initially, and employees who receive payment must report CERB as income when filing their 2020 income tax return.
EI and CERB
Several questions have surfaced since the announcement of the CERB on March 25, 2020 about how this new benefit intersects with EI.
The Government of Canada’s website says the following:
Canadians who are eligible for Employment Insurance and who have lost their job can continue to apply for Employment Insurance.
If you became eligible for EI regular or sickness benefits on March 15, 2020 or later, your claim will be automatically processed through the Canada Emergency Response Benefit.
For other EI benefits, including maternity, parental, caregiving, fishing and worksharing, you should also continue to apply.
Canada Emergency Wage Subsidy
On April 1, 2020, the Government of Canada announced further details of the proposed Canada Emergency Wage Subsidy (CEWS), initially announced on March 27, 2020, by Prime Minister Justin Trudeau.
The intentions of this program are apparently to safeguard the jobs of a business’ employees and to prevent further job losses that have swept over Canada due to the COVID-19 pandemic. Further, the subsidy appears to be designed to assist businesses to ease back into their normal practices when the pandemic is over. If a business is deemed eligible, the CEWS would be retroactive to March 15, 2020. The amount of employees working for the business does not affect eligibility for this subsidy. Businesses who would be eligible for the CEWS include individual businesses, taxable corporations, partnerships, non-profit organizations and registered charities. Public bodies, including public universities, colleges, municipal/provincial and federal bodies, schools and hospitals would not be entitled to the CEWS.
Additionally, to be eligible for the subsidy, an employer would have to provide proof that they have had a 30% loss of revenue during March, April and May of 2020 compared to the revenues during the same months of 2019. Employers will have to reapply for each month that they experience a loss of 30% of their revenue.
For eligible businesses, up to 75% percent of an employee’s first $58,700 of their salary “normally earned”, would be covered by the subsidy. The maximum an employer can claim per employee is $847 per week. Calculations for the employee’s subsidy entitlement would be determined based on the salary or wages actually paid to employees. The CEWS would apply retroactively to the 12-week period from March 15, 2020 until June 6, 2020. If eligible, employers may expect to receive payments by direct deposit within 6 weeks.
Employers would not be eligible to claim the CEWS for employees who receive the CERB for the same period.
The Government of Canada would require employers to make best efforts to “top up” the remaining 25% of wages and salaries.
Prime Minister Justin Trudeau announced on April 1, 2020 that this program will be one of trust and if a business is found abusing the program, penalties will be “stiff and severe.”
75% Subsidy and 10% Subsidy
The 75% subsidy and the 10% wage subsidy announced previously are not the same program. Therefore, if a business is ineligible for the 75% subsidy, it still may qualify for the 10% subsidy. Businesses do not need to apply for the 10% subsidy. The subsidy is calculated when a business remits amounts including Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums from salary, wages, bonuses, or other remuneration paid to employees. For businesses that receive both subsidies, the amount received for the 10% wage subsidy would generally be deducted from the amount claimed under the CEWS.
Importantly, employers must be aware that the 10% subsidy is a three-month measure specific to small businesses, charities and non-profit organizations and a decline in revenue is not necessary for eligibility.
We will continue to monitor these and other COVID-19 related initiatives.
For further information on these and other COVID-19 related programs, contact Zubas Flett Law at 416-593-5844 or firstname.lastname@example.org.
*Editor’s Note – Update on the Canada Emergency Wage Subsidy
On April 11, 2020, Bill C-14 received Royal Assent, meaning that the new Canada Emergency Wage Subsidy is now legislated and employers will soon be able to apply for this assistance.
As stated in the April 6, 2020 blog, employers who are deemed eligible will be able to receive 75% wage subsidies up to a weekly maximum of $847 per eligible employee for up to 12 weeks. The wage subsidies will be retroactive to March 15, 2020 and will continue until June 6, 2020. The program may be extended as late as September 30, 2020, possibly with revised qualifying parameters and subsidy amounts.
Currently, the CEWS consists of three periods. To qualify for the first period, for the month of March 2020, employers will need to incur a 15% reduction in revenue in order to be eligible for the wage subsidy. For the months of April and May 2020, the employer will have to show a 30% reduction in revenue. If employers qualify for one period, they will automatically qualify for the following period.
To establish the necessary reduction in revenue, employers are permitted to compare their revenue for each of the months of March, April and May 2020 to either:
- their revenue for those same months of 2019 (e.g. revenue in March 2020 would be compared to revenue in March 2019); or
- their average monthly revenue in January and February 2020.
An employer’s participation in the Work-Sharing program will affect the amount of the wage subsidy for which the business will be eligible, however an employer can still apply for the subsidy.