The Canada Emergency Wage Subsidy

April 16, 2020

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Original article posted April 2, 2020.

The new Canada Emergency Wage Subsidy was introduced by the Government of Canada as a way to keep Canadian businesses working and enable them to continue to employ Canadian workers. This wage subsidy is in addition to the 10% wage subsidy previously introduced and will provide a 75% wage subsidy to eligible employers for up to 12 weeks, retroactive to March 15, 2020.

Who is an Eligible Employer?

Eligible employers include individuals (sole proprietors), partnerships, taxable corporations, and nonprofit organizations and registered charities.

Public bodies are not eligible for this subsidy. Public bodies include municipalities and local governments, Crown corporations, public universities, colleges, schools and hospitals.

This subsidy is available to eligible employers that see a drop in revenues of at least 15% in March and 30% in April and May which they will have to attest to when they apply. This means to qualify, the employer will have to show that their revenue in March 2020, for example, was 15% less than it was in March 2019 or than the average revenue in January and February 2020.

How do I calculate revenues?

An employer’s revenue for this purpose would be its “revenue from its business carried on in Canada earned from arm’s-length sources”. This means revenue that was earned from non-related parties.

Revenue would be calculated using normal accounting methods and would exclude revenues that are not part of the normal course of business.

Employers are allowed to calculate their revenues under the accrual method or the cash method. Once a method is chosen, it must be used consistently for the duration of the program (you cannot switch from accrual to cash or vice versa during the program).

Non-profit organizations and charities can include/exclude government funding in calculating revenues.

Affiliated groups are able to calculate their revenue on a consolidated basis as well if they choose. This must be done consistently throughout the program.

Special rules were introduced for the calculation of revenue to take into account transactions with related parties (non-arm’s length transactions). This includes where an employer sells all of its products to a related company.

How much is the subsidy?

As defined by the Government of Canada, the subsidy amount for each employee paid between March 15 and June 6, 2020 would be the greater of:

  • 75 per cent of the amount of remuneration (wages) paid, up to a maximum benefit of $847 per week; and
  • the amount of remuneration paid, up to a maximum benefit of $847 per week or 75 per cent of the employee’s pre-crisis weekly remuneration, whichever is less.
    • Pre-crises remunerations are based on the average weekly wages/salary paid between January 1 and March 15 (excluding any seven-day periods in which the employee did not receive any wages or salary).

Eligible remuneration includes salary, wages, and other remuneration. These amounts do not include severance pay, bonuses, or items such as stock option benefits or the personal use of a corporate vehicle.

There would be NO maximum limit on the subsidy amount that an eligible employer may claim.

Employers must make their best effort to top-up employees’ salaries to bring them to pre-crisis levels.

Employers are also eligible for a subsidy of up to 75% of salaries and wages paid to new employees.

Special rules apply to employees that are related to the employer (non-arm’s length employees). The subsidy, in this case, is only available to related individuals who were employed and paid prior to March 15, 2020 and is limited to the eligible remuneration paid between March 15 and June 6, 2020 (to a maximum of $847 per week) and 75% of the pre-crises weekly remuneration.

Refund for Certain Payroll Contributions

There will be a 100% refund for certain employer-paid contributions to Employment Insurance (EI) and the Canada Pension Plan (CPP) (also to QPP and QPIP in Quebec).

This covers 100% of the employer-paid contributions for eligible employees for each week that they are on paid leave and the employer is eligible to claim the CEWS for those employees.  They are considered to be on leave if they are paid for that week but do not perform any work during that time.  It will not apply if you are on leave with pay for only a portion of the week.

This refund is not subject to the $847 maximum and there is no overall limit on the refund amount.

At this time, employers are required to continue to collect and remit both employer and employee contributions for CPP and EI as usual and apply for a refund at the same time as applying for CEWS.

What is an Eligible Period?

An eligible period is one in which an employer’s monthly revenues declined 15% in March and 30% in April and May compared to the same month of the previous year or the average of January and February of 2020.  Whichever approach is adopted, employers must be consistent in its use over the duration of the program.  So if you choose to use the average of January and February instead of the same month of the previous year (March 2019 to March 2020 for example), you must continue to do so for the following periods.

As a way to provide more certainty for employers, once an employer is considered eligible for a specific period, they will automatically qualify for the next period.

For example, if you qualify in March because your revenues have declined more than 15% (from either March of 2019 or the average of January and February 2020 depending on which method you choose), you would be eligible for the first and second claiming period.  To be eligible for the third claiming period, revenues would have to decline by at least 30% in the month of April or May.

The amount of the subsidy received in a month is not included in the calculation of revenues for purposes of eligibility in the next period.

See the table below or an outline of each claiming period, the required reductions in revenue and the reference period for eligibility:

Claiming period Required reduction in revenueReference period for eligibility
Period 1March 15 – April 1115%March 2020 over:

  • March 2019 or
  • Average of January and February 2020
Period 2April 12 – May 930%Eligible for Period 1


  • Average 2019 or
  • Average of January and February 2020
Period 3May 10 – June 630%Eligible for Period 2


  • May 2019 or
  • Average of January and February 2020


Who is an eligible employee?

An eligible employee is an individual who is employed in Canada.

Eligible employees must not have been without remuneration (wages/salaries) for 14 or more consecutive days in the eligibility period (March 15 to April 11, April 12 to May 9, May 10 to June 6).

How do I apply?

Eligible employers can apply through their My Business Account portal on the Canada Revenue Agency’s website.

Employers would have to keep records demonstrating their reduction in revenues from non-related parties and remuneration (wages) paid to employees.

More details about the application process will be made available shortly.

How is CRA ensuring compliance?

If an employer does not meet the eligibility requirements and pay their employees accordingly, The Government of Canada has stated that the employer would be required to repay amounts paid under the Canada Emergency Wage Subsidy.

Penalties may also apply in cases for fraudulent claims including fines or even imprisonment.

Can I claim both the 75% wage subsidy and the 10% wage subsidy?

If employers are utilizing the 10% wage subsidy in addition to the 75% wage subsidy, any benefit from the 10% wage subsidy would reduce the amount available to be claimed under the 75% wage subsidy in that same period.

Can I claim the Wage Subsidy if my employee is claiming the Canadian Emergency Response Benefit?

If an employee is eligible for the Canadian Emergency Response Benefit, the employer would not be eligible to claim the Canada Emergency Wage Subsidy for remuneration paid to that employee during that period.

Is the wage subsidy considered a taxable benefit?

Per the Government of Canada, the usual treatment of tax credits and other benefits provided by the government would apply. As a result, the wage subsidy received by an employer would be considered government assistance and be included in the employer’s taxable income.

Information Source: Government of Canada Website – Economic Response Plan – Wage Subsidy Information

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