Government Unveils COVID-19 Wage Subsidy Details

As April begins, more details were released on the federal government’s largest-ever economic program – the running tally for all recovery measures now exceeds $255 billion. Direct supports to Canadians now top $105 billion, with the lion’s share of that spend through two key mechanisms: $71 billion through the Canada Emergency Wage Subsidy and $24 billion via the Canada Emergency Response Benefit.

In launching these programs, public policy is being developed at a pace and a scale that has not been seen before. To launch programs and get funds where they are needed requires a high level of trust that the programs will be used as intended. The message being sent by government is that there will be severe consequences for bad actors that abuse the system and decisive action will be taken against those that break the trust.

Another symptom of this pace is that processes and costing estimates are constantly fluctuating in the face of ongoing uncertainty. Finance Minister Bill Morneau would not put a number on the expected deficit when asked this afternoon, saying that it was difficult to know where we would be in six or twelve months. In addition, Parliament will need to be recalled soon because the government has no legislative authority to enact the 75% wage subsidy, as it was not in the COVID-19 bill passed last week.

Across jurisdictions, the call to action for Canadians is to continue to stay home, practice physical distancing, and do what is necessary to reduce the risk of COVID-19. These actions are key to determining the duration of this crisis and whether further economic actions are required to support Canadians and businesses.

Canada Emergency Wage Subsidy

As previously announced, the 75% wage subsidy will apply to the first $58,700 of regular salary, up to $847 per week per employee. The program will be in place for 12 weeks, starting March 15 and ending on June 6, 2020. However, the online portal is not yet available, and funds will not be available for six weeks.

Additional broad eligibility and program details for the Canada Emergency Wage Subsidy include:

• Businesses will have to demonstrate a decline in revenues of at least 30% compared to the same month in 2019
  • For non-profit and registered charities, government will work to define revenue as appropriate to the circumstances
  • There may also be added flexibility required for start ups or other businesses that cannot compare revenues against the same month last year
• Applies to employers of all sizes and sectors of the economy, except public sector entities
• Employers will need to apply each month for the subsidy
• Employers are expected to at least make best efforts to top up salaries to 100% of the maximum wages covered, but government recognizes this will not always be possible
• Employers will apply for the program online through a Canada Revenue Agency Portal
  • The portal will launch in the next 3-6 weeks, with funds available in approximately six weeks
  • Businesses will receive the subsidy from CRA and are encouraged set up direct deposit with CRA to speed up payments

While the new wage subsidy will not be available immediately, other measures to support business liquidity are available to bridge this period, including:

• Deferring GST/HST payments until June and income tax payments until September
• Access to the Canada Emergency Business Account, providing access to interest-free loans of up to $40,000 for small businesses and non-profits
• Access to credit through the Small and Medium-sized Enterprise Loan and Guarantee, supported through Export Development Canada and Business Development Bank

Through the combination of access to credit and a wage subsidy, the goal is to protect as many jobs as possible and encourage Canadian businesses to rehire employees now. Additionally, ensuring employees remain on payroll enables Canadian firms to retain the talent needed for a swift economic recovery, and aligns with long-term strategies to get the economy back to normal after the pandemic subsides.

Canada Emergency Response Benefit

• Applications will open on Monday, April 6, with staggered applications by birth month:
  • April 6: January, February March
  • April 7: April, May, June
  • April 8: July, August, September
  • April 9: October, November, December
• Direct deposit will be made within 3-5 days of application, cheques within 10 days
• Targeted at workers who have lost income completely due to COVID-19
  • Canadians who have applied for EI on March 15 or after will automatically be enrolled in CERB and will receive payments shortly
• Jointly administered by Service Canada and the Canada Revenue Agency, leveraging the Government of Canada’s two largest payment systems
  • For those not normally eligible for Employment Insurance, register your CRA My Account and direct deposit in advance

The CERB provides a release valve to the already-strained Employment Insurance system. 2.1 million EI claims have been made since the start of the COVID-19 crisis, with more than 430,000 claims already processed. Service Canada has streamlined processes and will be able to process 400,000 applications per day and the backlog of COVID-related applications will be processed in the next week as the CERB is launched.

On the Horizon

Governments are also discussing how to recognize the work of essential workers – including health care workers, but also those in essential roles receiving a minimum wage – through measures such as wage top ups, and how to structure federal and provincial programs to address people who may not be covered by the wage subsidy or CERB, such as the self-employed whose hours have been reduced.

On the horizon, Finance Minister Bill Morneau is appearing before the House of Commons Finance Committee tomorrow to discuss the economic recovery plan, ahead of Parliament’s pending return. The federal government is also expected to announce a mental health digital toolkit in the coming days to support Canadians as they stay home and practice physical distancing during these uncertain times.