Sultan Lawyers is committed to “cutting through the noise” relating to COVID-19. Specifically, as employment lawyers (and counsel on related immigration matters) we are providing relevant information as it becomes available to help individuals and organizations manage through the current circumstances.
As mentioned in earlier posts, Canada’s federal government announced new measures to help businesses keep and return employees to the payroll and, by extension, avoid layoffs and terminations of employment and to re-hire workers during the COVID-19 pandemic.
A key part of this strategy is the Canada Emergency Wage Subsidy, which includes a temporary wage subsidy for employers designed to cover a significant portion of employee wages over the next three months.
While the program is complex, the following are what we believe to be the top 4 things all employers should know:
1. Employer eligibility will be determined by lost revenues due to COVID-19 from March through early June.
Eligible employers include sole proprietorships, partnerships, taxable corporations, and the Canadian subsidiaries of foreign-controlled companies, as well as non-profit organizations and registered charities.
To qualify, employers will need to demonstrate that their revenues in March 2020 were at least 15% less than they were for March 2019. Employers will then need to demonstrate a 30% reduction in revenues for the subsequent months to receive the wage subsidy.
There is some flexibility with the revenue comparisons, including an alternative benchmark approach as described below.
2. The federal government will offer a 75% wage subsidy, which will cover annual earnings for employees up to $847.00 per week.
The subsidy amount for any given employee will equal 75% of the amount of remuneration paid (pre-crisis), up to a maximum benefit of $847 per week.
Essentially, employers may be eligible for a wage subsidy that fully covers the first 75% of pre-crisis wages of existing employees. Employers are therefore expected to maintain existing employees’ pre-crisis employment earnings wherever possible.
Employers are expected to do everything they can to “top-up” the wages of the employees by an additional 25%, returning them to their pre-crisis wage. The current state of the program, however, seems to suggest that an employer will not automatically be ineligible for the program if they choose to simply pay employees the 75% wage subsidy received from the government.
Employers will also be eligible for a subsidy of up to 75% for salaries and wages paid to new employees.
3. More flexibility in calculating lost revenue
The government has announced more flexibility in terms of calculating the drop in revenue for the purpose of qualifying for the wage subsidy.
First, companies are permitted to calculate the revenue for determining qualification for the program on either the accrual method or the cash method. Whichever method a company chooses to follow when they first apply however will be the one applied for each of the following periods.
Second, companies/organizations can choose to compare March, April and May to the same month in 2019 or compare to the average revenue earned between January and February. This provides more flexibility for employers, particularly for high-growth firms, sectors that faced difficulties in 2019, non-profit organizations and registered charities, as well as newer businesses.
4. The program will be in effect for twelve weeks and employers must reapply each period.
Eligibility will generally be determined by the change in an employer’s monthly revenues, year-over-year, for the calendar month in which the period began.
The wage subsidy will be retroactive to March 15, 2020, and will extend to June 6, 2020. There will be three claiming periods:
- Period 1: March 15 – April 11
- Period 2: April 12 – May 9
- Period 3: May 10 – June 6
Eligible employers may apply for the Canada Emergency Wage Subsidy through the Canada Revenue Agency’s My Business Account portal.
As the law continues to rapidly evolve, we will continue to monitor the program and will provide an update once more information becomes available.
For further information on the wage subsidy program or how it relates to employment laws more generally including layoffs, wrongful dismissal, constructive dismissal, or otherwise, please contact Toronto employment lawyers Sultan Lawyers at firstname.lastname@example.org or 416-214-5111.
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