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Bryan Hubbell

Tax Principal at Manning Elliott Abbotsford
by Bryan Hubbell
April 9, 2020

Changes to the Canada Emergency Wage Subsidy Announced

On April 8, 2020, Canada’s Finance Minister, Bill Morneau announced changes and clarification on the Canada Emergency Wage Subsidy (the “75% Wage Subsidy” or “CEWS”). The legislation has not yet been released but background information can be found here

Please note that the information provided below is not based on legislation, as it has not yet been released, and is therefore subject to change.

The purpose of this blog post is to highlight changes to the CEWS. An overview of the program can be found here.

The changes announced today are in response to feedback from stakeholders and interested parties and are designed to improve access to the program. The main purpose of the 75% Wage Subsidy is to encourage businesses to retain employees.

Broadened Eligibility for the CEWS

Eligibility for the CEWS is based in part on a drop in revenue in the months of March, April and May 2020. The drop in revenue can now be calculated based on a comparison of the current month revenue with the same month in 2019 OR by comparison of the current month revenue with the average revenue in January and February 2020. This relief is intended to ensure companies that are growing or are startups can benefit from the CEWS.

The required decline in revenue for March 2020 has been reduced to 15% from the previously announced 30%.  Details are as follows:


Period 1

Claiming period

  • March 15 to April 11

Required reduction in revenue

  • 15%

Reference period for eligibility

  • March 2020 compared to:

    • March 2019 or

    • Average of January and February 2020

Period 2

Claiming period

  • April 12 to May 9

Required reduction in revenue

  • 30%

Reference period for eligibility

  • April 2020 compared to:

    • April 2019 or

    • Average of January and February 2020

Period 3

Claiming period

  • May 10 to June 6

Required reduction in revenue

  • 30%

Reference period for eligibility

  • May 2020 compared to:

    • May 2019 or

    • Average of January and February 2020


Calculating “Revenue” for the CEWS

An employer’s revenue for the CEWS is its revenue earned in Canada from arm’s-length sources. 

  • Revenue can be calculated under the accrual or the cash method (not a combination both).  The accounting method selected needs to be applied consistently for the entire program.

  • Charities and non-profits can include or exclude government funding in the calculation of revenue used to determine eligibility for CEWS

Eligible Employees and Eligible Remuneration

An Eligible Employee is an individual who is employed in Canada. 

Eligible remuneration for the CEWS does not include remuneration paid to an employee if that employee has been laid off for more than 14 consecutive days in the eligibility period (i.e. from March 15 to April 11, from April 12 to May 9, and from May 10 to June 6).  During those periods the employee may qualify for other benefits such as EI or the CERB.

Employers will be eligible for a subsidy of up to 75 per cent of salaries and wages paid to new employees.

For non-arm’s length (NAL) employees who were employed prior to March 15, 2020, the subsidy will be limited to eligible remuneration paid between March 15 and June 6, 2020.  The maximum benefit is the lesser of $847 per week and 75% of the NAL employee’s pre-crisis weekly remuneration.  Eligible remuneration does not include dividends (eligible or not).  

Refund of Employer Payroll Contributions

Eligible employers will be able to apply for a 100% refund of employer-paid contributions (EI, CPP, QPP, QPIP) in respect of eligible employees for each week that those employees are on leave with pay for the entire week (i.e. still remunerated by the employer but does not perform any work for the employer for that entire week).  This refund is on top of the maximum 75% Wage Subsidy of $847/week.

Employers who are paying staff who are not working can access this refund but if the employee is still working the refund of employer-paid contributions is not available.  This is an additional incentive for employers who can no longer operate to keep employees on payroll.

How to Apply

Eligible employers will be able to apply for the CEWS through the Canada Revenue Agency’s My Business Account portal as well as a web-based application. Details about the application process are still to come.

Penalties for Abuse

Employers who do not meet the eligibility requirements will be required to repay CEWS amounts received. Employers engaging in artificial transactions to reduce revenue will be required to repay the subsidy and will be subject to a penalty of 25% of the subsidy received.  

It is anticipated the legislation will include anti-abuse penalties. Bill Morneau mentioned a penalty of 225% of the subsidy and up to five years, imprisonment for employers caught abusing the CEWS.


The above content is believed to be accurate as of the date of posting. Canadian tax laws are complex and are subject to frequent changes. Professional tax advice should be sought before implementing any tax planning. Manning Elliott LLP cannot accept any liability for the tax consequences that may result from acting based on the information contained herein.