CLIENT UPDATE April 9, 2020 Update to Canada Emergency Wage Subsidy

We are contacting you today to update you on the 75% enhanced Canada Emergency Wage Subsidy (CEWS) now that more details have been made available. “Briefly, the enhanced wage subsidy is available to employers that have suffered a 15% decrease in revenue in March, or a 30% decrease in revenue in April or May 2020.”   The subsidy will generally be 75% of the employee’s wages up to a maximum wage of $58,700, or $847 per week.

A number of changes have been made to the proposed program since the last announcement, mainly focusing on how to determine if there has been a decrease in revenue.

Due to the extent of the changes from the initial 10% wage subsidy program, Parliament will need to be recalled to approve this new program. As such, further amendments to these proposals could occur.

There are still important pieces of information to be provided, however the specific details we have available are as follows:


Eligible employers are individuals, taxable corporations, and partnerships consisting of eligible employers as well as non‑profit organizations and registered charities. These employers must have experienced a 15% drop in revenue in March and a 30% drop in revenue for April and May.  This can now be measured against the prior year or January and February 2020.

Public bodies such as municipalities, universities, hospitals and schools would not be eligible for this subsidy. 

There was significant concern that the 30% drop in revenue being measured against the prior year would limit the availability of the credit to many businesses that will be affected by COVID-19. New businesses, businesses that have expanded since last year or those that recognize income over a long period of time could have been excluded. The changes announced today  appear to increase the number of businesses that would be eligible although there are still those that will not qualify for the 75% subsidy.

Employers that do not qualify for this subsidy may still qualify for the 10% subsidy.


Employees are eligible if they are employed in Canada.  A new requirement has been added that an eligible employee must not have been without remuneration for more than 14 days in an eligibility period. This replaces the previous restriction that an employee is not eligible for a CEWS subsidy if they are also claiming the Canadian Emergency Response Benefit (CERB). 

If an employee is rehired during a period they received the CERB, the employer may still receive the CEWS if the employee repays the CERB.  This will be advantageous for many employees.


The subsidy amount for a given employee on eligible remuneration paid between March 15 and June 6, 2020 would be the greater of:

  • 75% of the wages paid, up to a maximum benefit of $847 per week; and
  • The lesser of:
    • Amount of the wages paid, up to a maximum benefit of $847 per week; or 
    • 75% of the employee’s pre-crisis weekly remuneration.

In simpler terms, the subsidy will be based on remuneration actually paid in the relevant period, but limited to 75% of pre-crisis weekly remuneration or $847 per week.  As such, employers cannot defer payment of wages until after the subsidy is received.

Eligible wages do not include severance pay and certain benefits like stock options and vehicles.  

“Pre-crisis weekly remuneration” is the average weekly remuneration for the period from January 1 to March 15, excluding any seven day period the employee did not receive remuneration.

The government has made it clear that employers are expected to pay the employee 100% of their pre-crisis wage if possible.

For new employees that do not have a pre-crisis wage, their subsidy will be based on the amounts actually paid. In addition, for non-arm’s length employees such as majority shareholders and their families, the subsidy will be limited to the remuneration paid in any pay period between March 15 and June 6, 2020, up to the lesser of (1) $847 per week and (2) 75 per cent of the employee’s pre-crisis weekly remuneration. The subsidy would only be available in respect of non-arm’s length employees employed prior to March 15, 2020.

Currently, there is no official statement saying that business owners that were paid by way of dividend can receive the benefit as was recently announced for the CERB program. It is uncertain whether corporate business owners could pay themselves salaries in lieu of historically paying themselves dividends during this period. We are awaiting further details from the government to determine if this would be allowable.

There is no per-employer limit for this subsidy like the $25,000 limit for the 10% subsidy.


A new additional refund was also announced. The Government is proposing to expand the CEWS by adding a 100% refund of employer-paid contributions to certain Employment Insurance programs, the Canada Pension Plan, the Quebec Pension Plan, and the Quebec Parental Insurance Plan. This refund would cover 100% of employer-paid contributions for eligible employees for each week throughout which those employees are on leave with pay and the employer can claim the CEWS for those employees.  

In general, an employee will be considered to be on leave with pay throughout a week if that employee is remunerated by the employer for an entire week but does not work in that week. 

This refund would not be subject to the weekly maximum benefit per employee of $847 that an eligible employer may claim in respect of the CEWS. 

Employers would still be required to continue to collect and remit employer and employee contributions to each program and then apply for a refund when they apply for the CEWS.


One of the more important questions we asked when this program was announced was what metrics would be used to determine if there was a qualifying drop in revenue and what was included in revenue? To a large extent, we now have answers to those questions.

To start, revenue is only revenue from arm’s length sources. Further, the revenue must be determined using the employer’s normal accounting method, or the cash method, and excludes revenue that results in capital gains or comes from extraordinary items. The addition of the cash method of accounting allows businesses to qualify if they are still earning revenue, but are not collecting it due to the COVID crisis. Once the cash or accrual method has been chosen, it must be used consistently.

Non-profit organizations and charities will also exclude non-arm’s length revenue and have the option of also excluding government funding from revenue.

The arm’s length criteria may limit the availability of this program for many common business structures. For instance, a company that manufactures component parts and only sells them to a related company will not be eligible as they have no arm’s length revenue.  

To determine whether or not there has been a decrease in the revenue for a “claiming period” as defined below, that month’s revenue will be compared to either the same month in the previous year or the average revenue for January and February 2020. The table below outlines each “claiming period” and the periods to compare to see if an employer is eligible for the subsidy:

For example, if revenues in March 2020 were down 20% compared to March 2019, the employer would be allowed to claim the Canadian Emergency Wage Subsidy (as calculated above) on remuneration paid between March 15 and April 11, 2020.


Eligible employers would be able to apply for the Canada Emergency Wage Subsidy through the Canada Revenue Agency’s My Business Account portal as well as a web-based application.  More details about the application process will be made available shortly.


Any benefit from the 10% wage subsidy for remuneration paid in a specific period would generally reduce the amount available to be claimed under the Canada Emergency Wage Subsidy in that same period.

Under the EI program, work sharing allows employees that have reduced hours to receive some compensation from EI if certain procedures are followed. This program has been temporarily expanded from a maximum 38 weeks to 76 weeks for employers affected by COVID-19. An employer’s CEWS subsidy will be reduced by the amount of any EI received by the employee under the work sharing program. 


Like most other government assistance, the subsidy is a taxable income for the employer.  It will also reduce the amount of an employee’s wage that is eligible for other tax credits such as research and development tax credits and apprenticeship tax credits.


Employers would be required to repay amounts paid under the Canada Emergency Wage Subsidy if they do not meet the eligibility requirements and pay their employees accordingly. The government is contemplating creating new offences that will apply to individuals, employers or business administrators who provide false or misleading information to obtain access to this benefit or who misuse any funds obtained under the program. The penalties may include fines or even imprisonment.

Employers that engage in artificial transactions to reduce revenue for the purpose of claiming the CEWS would be subject to a penalty equal to 25 per cent of the value of the subsidy claimed, in addition to the requirement to repay in full the subsidy that was improperly claimed.

You can read the Canadian government’s summary HERE.

Further updates will be provided once available.  We are happy to discuss any questions you may have about these matters. To review any of our previous updates on COVID-19 please see our website.

This summary deals with proposed matters that are complex and may not apply to particular facts and circumstances. As well, the material and the references contained therein reflect laws and practices which are subject to change. For these reasons, this material should not be relied upon as a substitute for specialized professional advice in connection with any particular matter.

Although this communication has been carefully prepared, Wilkinson & Company LLP does not accept any legal responsibility for its contents or for any consequences arising from its use.  No part of this document may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means (photocopying, electronic, mechanical, recording or otherwise).