Government Adjusts the Canada Emergency Wage Subsidy

A key plank of the federal government’s economic response to COVID-19, the Canada Emergency Wage Subsidy (CEWS), received adjustments to address program gaps and opened the program to private sector employers, not-for-profits, and charities.

The Prime Minister stated he is hoping to have the program open for application within three weeks, if not sooner. For employers, the measure likely can’t come soon enough to protect jobs.

However, the biggest hurdle remaining for CEWS is Parliamentary approval. With a revised cost of $73 billion, the CEWS is one of the largest federal programs ever implemented and the government recognizes that Parliamentary oversight of the legislation will be required.

Draft legislation was shared with the opposition parties on Monday. However, negotiations for the House of Commons to return to pass the legislation are still on-going. With the holiday weekend ahead, it is highly likely that this legislation will have to wait until next week to be passed.

Canada Emergency Wage Subsidy

Since announcing the emergency wage subsidy last week, the federal government has received significant feedback on the program and is proposing new details to relax the conditions for program eligibility:

• Employers will have to demonstrate a 15 per cent decrease in revenues for March 2020 to qualify for CEWS and a 30 per cent decline in April and May to qualify for the subsidy
• Employers will have to apply for the subsidy each month and demonstrate the required decrease in revenues
• New metrics for demonstrating a reduction in revenues include:
  • A comparison to the same month in 2019
  • Create an average for January/February 2020 in comparison to March, April, and May
• Revenues can be calculated using either the accrual or cash method
• Not-for-profits and charities can choose whether to include government funding in calculating their revenue reductions

Newly announced is a proposal to provide a 100 per cent refund of employer-paid contributions to Employment Insurance, the Canada Pension Plan, the Quebec Pension Plan, and the Quebec Parental Insurance Plan for the weeks where employees are on leave with pay.  Employers will still be required to collect and remit employer and employee contributions and would then apply for a refund of the employer-paid contributions when applying for CEWS.

The program is premised on a very high trust that employers will use the program as intended to ensure that employees remain on payroll, rehire employees who have been let go, and where possible, top up wages to pre-crisis levels. Employers who are found to be ineligible will have to repay the full amount of the subsidy and abuse of the program will be subject to significant monetary penalties and up to five years in prison.

Supporting Student Summer Employment

Through temporary changes to the Canada Summer Jobs Program, the federal government is increasing supports to ensure that students have access to summer employment, including:

• Up to 100 per cent wage subsidy of the provincial or territorial minimum hourly wage for private and public sector employers
• Extending the end date for employment to February 28, 2021
• Allowing employers to adapt projects and job activities to support essential services
• Allowing employers to hire staff on a part-time basis

Importantly, the student wage subsidy is available to public sector employers (unlike the CEWS). The program is expected to create up to 70,000 jobs for youth between the ages of 15 and 30 and help students stay connected to the labour market in the coming months.  Efforts are also being made to reach out to critical community services to identify how students can contribute to efforts in response to the crisis.

Nimble, Quick, and Constantly Evolving

In rolling out these unprecedented support programs, the federal government has undertaken policy development and delivery at breakneck speed, opting to get broad measures in place as quickly as possible to help as many Canadians as possible.  The tradeoff is that programs are imperfect in their first iteration.

As the CEWS demonstrates, the government continues to make policy changes addressing the challenges and gaps to ensure that broad measures do not unintentionally shut out the recipients for whom the measures are intended.  As the response continues to develop, both new and existing government programs can be expected to continue to evolve in the days and weeks ahead to ensure that measures are not only implemented quickly, but also inclusively.