Once again I am talking about the Canada Emergency Wage Subsidy (CEWS). This time I am sharing what we know about the changes that were made in July that go into effect for period 5 of the CEWS program. The changes made in July have further complicated the subsidy calculation, which you might not have thought was possible until you see the new system.
The first thing is that the program has been extended again, this time to December 2020. The second thing is that there is no longer a minimum revenue decrease required of 30%, there is a sliding scale instead. The third thing is that there are two parts to the CEWS, now the base subsidy and a top-up subsidy.
If your organization has experienced any reduction in your revenue in 2020 over 2019, then for the coming CEWS periods you are entitled to some subsidy. The larger the revenue decrease, the larger your subsidy will be. There is a formula involved, for July the calculation is to take your percentage decrease in revenue for July 2019 compared to July 2020 and multiply that percentage by 1.2. The number you get is the percentage of subsidy that you are entitled to receive, subject to the other rules.
An example, if your revenue is down 20% then you multiply 20% by 1.2 and you are entitled to a subsidy of 24% of your wages paid, subject to the usual maximums. This factor of 1.2 is reduced as 2020 continues and the maximum weekly wage is being reduced as well. This is the rule for the base subsidy and here are the factors.
There is an additional top-up subsidy for organizations whose revenue is decreased by 50% or more over the past three months. This additional subsidy is calculated by taking the three month average of revenue decline and subtracting 50% from the average and then multiplying that number by 1.25. That will give you the amount of the top-up subsidy which is in addition to the base subsidy.
The above new rules replace the subsidy rules which were in place for July and August previously. As the new rules are likely to be less advantageous for many organizations there is a safe harbour rule as well. If you were better off under the old rules then you can continue to use the old rules for period 5 and 6.
The tip here is that if you thought that you did not qualify because your revenue had not decreased by a large enough number, then you need to look again, starting with July 2020. It is possible that if you have payroll and lower revenue that there is subsidy available for you, if you would spend some time doing the calculations.