April 7, 2020 by Stacey
Last updated September 19, 2020.
This is intended as general information only. Readers seeking guidance specific to their individual situation are advised to consult with their accountant.
As a bookkeeper who serves small businesses in the Fraser Valley of BC, I find the landscape related to payroll shifting nearly weekly, as rapid layoff then rehiring scenarios have become the ‘new normal’; and supportive COVID-related government programs expand.
These are strange times for a bookkeeper. I was at first busy issuing ROE’s for worried employers; and trying to educate myself on programs that my clients may be able to take advantage of. Instead of the eerie calm that I had expected to follow, Canada Emergency Wage Subsidy claims have taken over, as they extend until December. The small businesses that I serve are resilient enough to come out OK, on the other side.
I update this page as the Canadian subsidy program scene continues to unfold, so consider bookmarking it.
This Record of Employment information is now available as a separate blog post, as interest in special Federal COVID programs grows, and new information emerges.
The Record of Employment or ‘ROE’ is the document that allows employees to apply for Employment Insurance (EI) benefits.
For detailed information on how to complete the ROE for employees, in the face of COVID-related interruptions, please click here.
EI-eligible employees who experienced a COVID-related job interruption after March 15, 2020, and had not yet applied for EI benefits, and who are a fit for the Canada Emergency Response Benefit (CERB), have been re-routed to a special Service Canada ‘track’ to apply for CERB.
Starting on September 27, 2020, the CERB program will be replaced with a more permissive Employment Insurance (EI) program, which is expected to be in force for one year. Among the enhancements are reduced required insurable hours, increases to the weekly maximum EI payouts, and an increase to the entitlement period. Further information can be found here.
For smaller businesses that were able to maintain something akin to their regular revenue and employment levels, but needed a bit of assistance with cash flow, the Federal Government offered the Temporary Business Wage Subsidy program.
Framed as a subsidy to ‘help prevent layoffs’, this program subsidized 10% of gross wages up to a maximum of $1,375 per employee, and $25,000 per employer. The period covered spanned March 18 to June 19, 2020.
Unlike the CEWS program (see below), there is no requirement that the employer’s revenues be negatively impacted due to the COVID events. The qualifying organization can have up to 18 employees.
Although some believe that this program had been replaced by the newer 75% Canada Emergency Wage Subsidy (described below), this 10% subsidy program remained in place until its expiry in June.
Qualifying employers deduct the 10% subsidy from the tax amount owing (not CPP or EI) on their regular payroll remittance to CRA.
Third party payroll providers (such as ADP and Ceridian) have made this reduction when they calculated the monthly payroll remittance for their clients.
For employers that manage their payroll in-house, be sure to keep detailed records showing how the reduction was calculated, and tracking maxes per employee. Form PD27 must be completed after the end of the 2020 calendar year.
Except for tax-exempt employers such as NPO’s and charities, this subsidy is considered as taxable income to the employer.
Towards the end of July, an extension was announced, which would stretch the CEWS offering through to December 2020.
Among the program redesign measures is a departure from the 30% revenue reduction threshold (which was initially required in order to qualify), to a more enabling sliding scale revenue decline measurement, plus an additional top-up for employers experiencing more dramatic revenue reductions, due to COVID-19.
For employers experiencing revenue declines of less than 50%, the proposed changes would yield a ‘base’ wage subsidy of up to 1.2 times the revenue decline percentage for July and August, gradually diminishing to 0.4 times the decline percentage for November revenues. The maximum subsidy per employee peaks at $677, reduced to $226 towards the end of the program.
The somewhat onerous baseline measurement of pre-COVID wages for arms-length employees has been jettisoned.
One element that is certain is the added complexity of the new version of the CEWS program. It is crucial to note the nuances: and is not for the faint of heart!
That said, the CRA worksheet provided within the CRA CEWS calculator is a work of art. I couldn’t imagine making CEWS claims without it, particularly after period 4. This worksheet is not a strict requirement to completing the CEWS claim, and is not to be confused with making the claim itself.
Here are some excellent links that delve into details:
CEWS FAQ’s, CRA website, frequently updated
For more information, phone CRA’s CEWS info line, at 1.833.966.2099.
This program provides a taxable monthly benefit of $2,000, for up to 28 weeks, for workers (including self-employed people), who are out of work due to circumstances tied to COVID.
The CERB program runs to September 26, 2020, with an accompanying transition to a new, more permissible ‘COVID version’ of the Employment Insurance program intended to pick up the slack after CERB ends. See section above.
The benefit will cover nine four-week cycles (starting March 15, 2020), with a payment eligibility window of March 15 to September 26, 2020. Individuals can receive benefits for any seven of the nine available cycles. They must reapply for each of the cycles.
The CERB permits earnings of up to $1,000 per four-week CERB period. Also eligible are seasonal workers, and folks whose EI benefits ran out shortly before (i.e. January 2020) the COVID crisis.
For CERB recipients who are signed up for CRA Direct Deposit, the CERB funds are deposited to the same bank account as the most recent personal tax refund, or the bank account on file. Those not signed up for Direct Deposit will receive cheques.
The applicant is required to have earned at least $5,000 (through some form of work, or an ineligible dividend) in either the 2019 calendar year, or the 12 months preceding the application.
Those who had already applied for EI coverage due to a COVID-related work interruption after March 14th are automatically routed to the CERB funding stream. There is no need for them to apply for this program directly, if they have already applied for EI.
At time of writing, over 8.7 million folks are receiving this support, many of those represented by EI applications, and switched internally to CERB.
Because the benefit reaches back to March 15th, the first $2K CERB payment released covered March 15 to April 14. Moving forward, the CERB payments are sent at the beginning of the eligible period.
The application process for CERB is very simple. Beware applying for the CERB if you do not qualify to receive it. If you attest in the application that you are entitled to the program, you will likely receive payments, only to have them clawed back later!
Please visit this link, and review the information carefully.
The Government of Canada is extending interest-free loans of up to $40K, with 25% of the unpaid balance being forgiven, if the remaining 75% is repaid by December 31, 2022. No personal guarantees are required.
The loans must be used to cover existing operating costs that cannot be deferred, such as rent, payroll, utilities, etc.
This support was originally open only to businesses (including sole proprietorships and partnerships) that were active on or before March 1, 2020; and that had paid out between $20K and $1.5M in payroll in 2019. The 2019 T4 Summary of Remuneration Paid was required as evidence of the payroll benchmark.
More permissive program entry rules were announced in May. Businesses that have paid less than $20K in 2019 payroll (or even no payroll) must have a CRA Business Number, have filed a 2018 or 2019 tax return, have an active business bank account, and must be able to demonstrate at least $40K in non-deferrable business expenses during the period January 1 to March 1, 2020. This ‘proof requirement’ is proving much more onerous than for those who do meet the payroll threshold.
Eligible applicants should approach their own financial institutions for access to this patient financing. We have seen wide variations on how the $40K is being distributed to qualifying companies — from a ‘Visa’ card with $40K limit… to a single $40K ‘cash dump’ to the main bank account.
The application window for this program closes on October 31, 2020.
In essence, the RRRF is a CEBA program (see last section) for businesses that aren’t eligible for the CEBA.
Businesses must choose between CEBA and RRRF.
The RRRF is a $40K loan, of which 25% is forgiven if the 75% is repaid by December 2022 (identical to CEBA).
There is no need for payroll history, to make application.
Unlike CEBA, the RRRF is not accessed through financial institutions. If the business is located within a Community Futures catchment area, the application is made via the Community Futures in the applicant’s service area. Links to the Community Futures offices, by province, are located at the bottom of this Government of Canada webpage.
Businesses outside of a Community Futures service area (or those needing more than $40K – up to $1M per application) would apply via regional development agencies. The application for funds over $40K is much more involved.
The RRRF is NOT open to sole proprietorships or NPO’s, if the regional development agency application path is chosen. The Community Futures path is open to sole proprietorships and social enterprises.
This program is based on rolling intake. Once the money is spent, the offering will close.
While the CEBA extends $40K per applicant, the RRRF will only fund the ‘operating balance’ which is the applicant company’s estimated operating deficit.
This program provides forgivable loans to commercial landlords to cover 50% of April through August 2020 rents.
The landlords must agree to forgive 75% of the tenant’s rent, and pause evictions while the agreement is in place.
The tenant must cover 25% of the regular rent amount.
This relief only applies if the tenant has suffered a minimum 70% drop in revenues, due to COVID.
The program applies to monthly rents under $50K.
The application window for this program closes on September 30, 2020.
The BC government will send out a one-time $1,000 payment to anyone whose employment situation has been negatively impacted by COVID-19; and is receiving payments under the CERB program.
Some links of note
In the addition to the hyperlinks contained in this article, these may be of interest:
BCGEU EI Factsheet (for employees)