75% New Canada Emergency Wage Subsidy (“CEWS”)

Updated: April 14, 2020

The Government has made additional announcements on April 7 and April 11, 2020 to broaden the CEWS provisions and introduce new provisions to refund certain employer payroll contributions. The Draft legislation has been passed by Parliament on Saturday. It is surprisingly complex.


As previously advised, to support businesses affected by COVID-19, the government has proposed a new 75% CEWS in addition to the previously enacted 10% Temporary Wage Subsidy. Organizations that do not qualify for the 75% CEWS may continue to qualify for the 10% Temporary Wage Subsidy. There is no doubling up, the 10% Temporary Wage Subsidy will reduce the CEWS for the related period. Both subsidies are taxable to employers.

The CEWS is intended to expand support for businesses affected by COVID-19. The government has proposed a retroactive wage subsidy of up to 12 weeks for salaries paid between March 15, 2020 and June 6, 2020.
The subsidy is being provided to assist eligible employers to retain employees and hire back those previously laid off.

In addition, the government introduced a 100% refund of the employer’s portion of EI and CPP paid for certain eligible employees. This is designed to reimburse employers who have continued to pay employees who are not working.

Amount of Subsidy

The CEWS subsidy will generally be 75% of employees’ eligible salary and wages, paid between March 15 and June 6, 2020, to a maximum of $847 per employee, per week (effectively 75% of a $58,700 annualized salary). However, if wages are reduced during the crisis, an employer could apply the wage subsidy formula using pre-crisis remuneration levels.

Pre-crisis remuneration will be based upon the period that begins on January 1, 2020 and ends on March 15, 2020. For the purposes of this weekly average, any consecutive 7- day period for which the employee is not paid is omitted from the calculation. The result of this pre-crisis wage formula cannot exceed the amount of actual crisis wages paid.

The wage subsidy for each employee is determined by the following formula:

    • (i) 75% of the amount of crisis weekly remuneration paid, up to a maximum benefit of $847 per week; and
    • (ii) The lesser of:
      • (a) The amount of crisis weekly remuneration paid, up to a maximum benefit of $847 per week; or
      • (b) 75% of the employee’s pre-crisis weekly remuneration.

The wage subsidy formula can result in an employer fully recovering crisis wages paid, up to 75% of pre-crisis wages in certain instances. For example, if a given employee earns the weekly equivalent of $58,700 before the crisis and the post-crisis wages are reduced to the weekly equivalent of $40,000, the employer would be able to recover all of the crisis wages paid.

Employers will also be eligible for a subsidy of up to 75% of salaries and wages paid to new arm’s length employees.

The subsidy will only be available for non-arm’s length employees that were employed prior to March 15, 2020. For non-arm’s length employees, the subsidy is limited to the lesser of crisis wages, up to $847 per week, or 75% of pre-crisis wages. This is presumably to prevent a non-arm’s length employee from raising post-crisis salary to take advantage of the rules.

Note that there is no overall employer limit to the subsidy.

Eligible Remuneration

Eligible remuneration includes remuneration on which normal source deductions are withheld, including taxable benefits. Severance pay and taxable benefits such as use of an automobile or stock option benefits are excluded.


The proposed enhanced subsidy for a given eligible period, will be available to employers that have experienced a reduction in gross revenues.

Revenues can be calculated using either the employer’s normal accrual accounting method or on a cash basis. Whichever method is chosen must be consistently applied throughout the eligible periods.

In order to be eligible for the wage subsidy the reduction in revenue must be at least 15% for the month of March and 30% thereafter.

Two alternative methodologies are available to measure revenue reduction. Once a methodology is chosen it must be used consistently throughout the 12-week period. Here are the two methodologies:

  • comparison of prior year’s month in which the eligible period begins (e.g. March 2019 versus March 2020), or
  • comparison of an average of revenue earned in January and February 2020

Revenues qualifications:

  • includes the inflow of cash, receivables or other consideration arising from the sale of goods, rendering of services, and use of the eligible employer resources by others.
  • relates only to business carried on in Canada
  • excludes extraordinary items and amounts on account of capital.
  • excludes CEWS payments
  • excludes non-arm’s length revenues

In addition, charities and non-profit organizations will be allowed to choose to include or exclude government funding in their revenues for the revenue reduction test.

There are special rules for corporate groups, non-arm’s length entities and joint ventures. For example, if each member of an affiliated group jointly agrees, they may calculate qualifying revenue on a consolidated basis to be used for each member of the group.

An election is available to accommodate corporate structures that separate the payroll into a separate entity (i.e. a management company) from the revenue generating activities. Eligible entities that earn substantially all of their revenue from one or more non-arm’s length parties, can jointly elect to determine the revenue reduction test. The test can be calculated using the qualifying revenue of the non-arm’s length parties from whom they earn the income.

In the case of joint ventures, there is a relieving provision. The provision can apply to the situation where employees are paid from a jointly owned employer entity (i.e. corporation or partnership), but the revenue is earned through a joint venture. The qualifying revenues of the joint venture can be used instead of the employer entity’s qualifying revenues if certain conditions are met. All of the interests in the eligible employer entity must be owned by participants in the joint venture, and substantially all of the eligible employer entity’s qualifying revenue for a qualifying period must be in respect of the joint venture.

Eligible Employers

Eligible employers will include individuals, taxable corporations and partnerships consisting of eligible employers as well as non-profit organizations and charities. Public bodies will be excluded (i.e. Crown corporations, municipalities, public universities, schools and hospitals).

The employer must be a payroll registrant on March 15, 2020 and apply for the subsidy in respect of an eligible period, prior to October 2020.

The individual with principal responsibilities for the financial activities must attest that the application is complete and accurate in all material respects.

The employer must meet the revenue methodology criteria described above.

Eligible Employee(s)

The individual(s) must be employed in Canada during a week that falls within the qualifying period.

An employee is not eligible, in a particular eligible period, if the employee was not paid for 14 or more consecutive days in the period.

Eligible Periods

The chart below illustrates the wage subsidy eligible periods and the reference period for revenue reduction targets.

To provide employers with some level of comfort, once the revenue tests for eligibility are met for a 4-week eligible period, they will automatically be met for the following eligible period. This means that if the employer qualifies for Period 1 then they can expect the CEWS for period 1 and 2.

Eligible period Claiming period Required reduction in revenue Reference period for eligibility
Period 1 March 15 to April 11 15% March 2020 over:

  • March 2019 OR
  • Average of January & February 2020
Period 2 April 12 to May 9 30% Eligible for Period 1 OR April 2020 over:

  • April 2019 or
  • Average of January & February 2020
Period 3 May 10 to June 6 30% Eligible for Period 2 OR May 2020 over:

  • May 2019 or
  • Average of January & February 2020

Refund of Qualifying Employers paid EI and CPP

The CEWS calculation includes a refund to cover 100% of employer paid contributions for eligible employees. This additional CEWS refund applies for each full week eligible employees are on leave with pay.

Applications for Benefits

Employers will apply for benefits online through a Canada Revenue Agency My Business Account portal as well as a web-based application that will become available in the coming weeks.


There will be penalties in place for companies that attempt to take advantage of the program. The penalties would be calculated as 25% of the subsidy claimed. In addition, the subsidy would have to be repaid.

In circumstances amounting to gross negligence the penalties will be more severe.


Employers would have to keep records demonstrating:

  • their reduction in arm’s-length revenue
  • remuneration paid to employees in the eligible periods.

Employers will be required to repay amounts that do not meet the eligibility requirements.

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