New CEWS rules are complicated and CRA’s updated online calculator can help

On August 11, 2020, the Canada Revenue Agency ("CRA") launched an updated Canada Emergency Wage Subsidy (“CEWS”) online calculator, which is now available on its CEWS webpage.

The calculator is a helpful tool for businesses applying for the CEWS, especially given the recently enacted (and rather sweeping) legislative changes to the CEWS which were introduced on July 17.

In addition to extending the CEWS to December 19, 2020 and addressing various technical issues, these changes extend the CEWS to every eligible employer with any revenue drop (versus the previous general 30% threshold) and tie the subsidy amount to the revenue drop amount. Our previous article, found here, provides a comprehensive discussion of these changes.

The new variable-rate subsidy is certainly a welcome change for many employers. But it also makes calculating the subsidy much more complicated than before, because the new subsidy is actually composed of two, variable-rate, subsidies:

• the “base subsidy,” which is available to employers with any monthly revenue drop; and
• the “top-up subsidy,” which is only available to employers with a 3-month average revenue drop of over 50%.

The base subsidy is calculated as a multiple of the employer’s monthly revenue drop %, and the multiple varies depending on the Claim Period:

Both the base subsidy and the top-up subsidy are subject to a maximum threshold.

The new rules also provide additional flexibility by allowing employers to compare revenue based on the current month or the prior month, as well as a special “safe harbour rule” for Claim Periods 5 and 6 to ensure employers receive a subsidy at least equal to what they would have received under the previous flat-rate subsidy rules. These too are of course welcome measures, but also create additional complexity.

One advantage of the calculator is that, to account for the changes to the rules beginning in Claim Period 5, it will automatically apply the best available subsidy rate based on the information entered.

The calculator is designed to assist employers in navigating the new rules, as well as to enable them to:

• calculate (based on their particular circumstances) their base and/or top-up subsidy amounts to enter into their CEWS online application form;
• preview their total estimated subsidy; and
• print their results and save them to validate their claim.

For employers with under 20 employees, who are entering employee pay on a weekly basis, there is an online calculator option available, into which each employee’s data is entered directly. Employers with 20 or more employees, or who wish to enter pay on a bi-weekly basis, will need to download and complete a spreadsheet to calculate the total eligible remuneration, the base subsidy, and the top-up subsidy.

The current calculator can be used only for Claim Periods 1 to 5, with more periods to be added going forward.

Please contact any member of our National Tax Group or National Labour and Employment Group if you have any questions about the calculator or the CEWS generally.  

This article provides only general information about legal issues and developments, and is not intended to provide specific legal advice. Please see our disclaimer for more details.