Government wage support in times of crisis

Due to the COVID-19 crisis, most social and economic engagement throughout Canada has been halted. As such, the government has announced that it will be introducing a wage support system called the Canada Emergency Wage Subsidy (CEWS).

The system is intended to prevent even more layoffs than have already occured as nearly every industry is crippled by the COVID-19 pandemic. It is also meant to encourage employers to put those they have already fired back on the payroll as they are ensured that a significant portion of wages will be covered by direct pay-outs from Ottawa for the next three months.  

In an interview with reporters, Prime Minister Justin Trudeau emphasized that the economy is facing unparalleled disruption. “Canada hasn’t seen this type of civil mobilization since the Second World War. These are the biggest economic measures in our lifetimes to defeat a threat to our health,” said Trudeau.

The federal government will offer a 75 per cent wage subsidy to all businesses that have lost 30 per cent of their revenue as a result of COVID-19 pandemic. To qualify, companies will have to show that their revenue in March 2020 was 30 per cent less than it was in March 2019 with possible exceptions for start-ups and new firms who were not around in March 2019.

The wage support program will be in effect for three months and companies will have to reapply each month, demonstrating each time that revenues in that month are 30 per cent less than they were in the same month the year prior.

The 75 per cent wage subsidy will cover annual earnings up to $58,700 or $1,129 a week in pre-crisis earnings. So the maximum subsidy for each employee would be $847 a week.

In an interview on April 1, Finance Minister Bill Morneau expressed Ottawa’s hope that employers “do the right thing” and pay the additional 25 per cent of pre-crisis wages to their workers. However, given the ongoing economic challenges, if an employer is unable to do that at this time they can simply pay the employee the amount they receive from Ottawa without an additional top-up.

It is important to note that the subsidies are not just for small and medium-sized businesses. All businesses, with the exception of non-taxable corporations and public sector entities like municipalities, public schools and hospitals, who have suffered a 30 per cent revenue loss can qualify.

The wage subsidy will be administered by the Canada Revenue Agency (CRA) through the My Business Account portal on the agency’s website.

Morneau approximated that the money will start to flow to businesses within the next three to six weeks, depending on how quickly the government can make the necessary technical and bureaucratic adjustments to get the money to them.

All businesses should register for direct deposit to ensure money can be sent electronically, the minister said, to avoid further delay.

Small businesses who also qualify for the 10 per cent wage subsidies previously announced by the government can still claim this benefit as the program is still in effect. However, if they also qualify for the larger 75 per cent subsidy, then the money Ottawa sends will be adjusted downward to account for any payments made through that separate program. This subsidy can be claimed without proving that the business has suffered a drop in revenue.

For more information on the CEWS and how to apply, visit www.canada.ca.

 

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