On July 30, 2021, the Federal Government announced its proposal to extend certain COVID-19 support programs, including the Canada Emergency Wage Subsidy (“CEWS”), Canada Recovery Benefit (“CRB”), the Canada Recovery Sickness Benefit, and the Canada Recovery Caregiving Benefit until October 23, 2021.
Summary of Key Changes in the Federal Government’s Announcement
The key changes from the Federal Government’s announcement are summarized below:
- Further Extension of CEWS: The CEWS was previously set to expire in June 2021. Bill C-30, the Budget Implementation Act (No.1), 2021, (“Bill C-30” or “Budget Bill”) formally extended the CEWS until September 25, 2021. Bill C-30 also provided the Government with the authority to further extend the programs through regulations if warranted. The Government announced that it is proposing to use its authority to extend the CEWS until October 23, 2021.
- Increase in the Maximum CEWS Subsidy Rate: The Federal Government is proposing to increase the wage and rent subsidy rates between August 29 and September 25, 2021. The maximum rate for the wage and rent subsidies would be set at 40% in Period 20 (August 29th to September 25th), instead of being reduced to 20% as previously announced in the Budget Bill. This means that the maximum weekly benefit per employee would be $452. The Federal Government is also proposing to extend these programs by an additional period, Period 21 from September 26th to October 23rd, with a maximum rate of 20% during this time. Eligible employers can still apply for the new Canada Recovery Hiring Program, which will be in place until November 20, 2021.
- Increase in the Maximum Number of Weeks under the CRB: The maximum number of weeks available under the CRB would be increased by an additional 4 weeks, to a total of 54 weeks, at a rate of $300 per week. The Government has indicated that this will ensure it is available to those who have exhausted their Employment Insurance benefits.
- Support for Furloughed Employees: The Federal Government previously extended the CEWS subsidy applicable to payments made to employees on leave with pay (furloughed employees) until August 28, 2021. The Government has confirmed that the CEWS will no longer be available for payments made to furloughed employees after August 28, 2021. The Government has published draft amendments to the Income Tax Act (“ITA”) to provide clarity on these changes.
- Calculation of Revenue Decline: Generally, an employer’s decline in revenues is determined by comparing the employer’s revenues in a current calendar month with its revenues in the same calendar month before the COVID-19 pandemic for the purposes of the rent subsidy, the Canada Recovery Hiring Program, and the wage subsidy. This is known as the general approach. Employers can also use an alternative approach, which will compare the employer’s monthly revenues relative to the average of its January and February 2020 revenues. Employers are required to use the same approach for all qualifying periods once an approach is chosen.
The Federal Government is proposing to allow an eligible organization to elect to use the alternative approach to calculate its revenue decline for Periods 14 to 17 (March 14 to July 3, 2021), if it was not carrying on a business or otherwise carrying on ordinary activities on March 1, 2019. If approved by the Governor in Council, the Government has noted that these changes would align the rules for Periods 14 to 17 (March 14 to July 3, 2021) with those for periods 1 to 4 (Period 15 to July 4, 2020) for organizations that began operating between March 1, 2019 and the start of the pandemic. This is intended to address situations where an employer used the general approach to calculate its revenue decline, however was not yet operating in early 2019 and would not have any revenue during the prior reference period that was required to be used under the general approach. This proposal means that these organizations would be eligible for continued support under these programs.
COVID-19 continues to affect employment and economic life in Canada. Emergency measures and supports for businesses are frequently being amended and extended. Employers should review the Government’s announcement and proposed changes to the supports and extensions. Employers should also review the changes to the supports available for furloughed employees as the Federal Government has now confirmed that the CEWS will not be available for payments made to furloughed employees after August 28, 2021. We continue to monitor for further information about the Government’s proposed changes and extensions of COVID-19 supports.