COVID-19 … programs for Canadian employers and workers

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April 7, 2020 by Stacey

Last updated November 23, 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 into summer 2021. 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.

Issuing Records of Employment (ROE’s) related to COVID work interruptions

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 was 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.

Temporary Business Wage Subsidy program (10%) — now ended

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 2020.

Qualifying employers deducted 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) 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.

Canada Emergency Wage Subsidy (CEWS) program

Among the program redesign measures for the second phase of CEWS (to December 2020) is a departure from the 30% revenue reduction threshold (which was initially required in order to qualify), to a more enabling revenue decline measurement, plus an additional top-up for employers experiencing more dramatic revenue reductions, due to COVID-19.

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.

Connected to the Throne Speech in late September 2020, a second extension was announced, which would stretch the CEWS offering through to June 2021. Details of the 2021 iteration will be posted here, when known. We do know that the previously planned sliding scale entitlement to December 19, 2020 will be replaced with a more generous freeze of up to 65%.

If you would like me to prepare your CEWS claim for you, please see details of the offering here.

Here are some excellent links that delve into details:

CEWS FAQ’s, CRA website, frequently updated

Federal Department of Finance news release

CPA Canada summary

For more information, phone CRA’s CEWS info line, at 1.833.966.2099.

Canada Emergency Response Benefit (CERB) — now ended

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 ran 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 ended. See section above.

The CERB benefit covered nine four-week cycles (starting March 15, 2020), with a payment eligibility window of March 15 to September 26, 2020. Individuals could receive benefits for any seven of the nine available cycles. They had to reapply for each of the cycles.

The CERB permitted earnings of up to $1,000 per four-week CERB period. Also eligible were seasonal workers, and folks whose EI benefits ran out shortly before (i.e. January 2020) the COVID crisis.

For CERB recipients who were signed up for CRA Direct Deposit, the CERB funds were 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 received cheques.

The applicant was 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 were automatically routed to the CERB funding stream.

Close to 9 million folks are received this support, many of those represented by EI applications, and switched internally to CERB.

Please visit this link, and review the information carefully.

Canada Emergency Business Account (CEBA)

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 extended application window for this program closes on December 31, 2020. The September Throne Speech hinted at an expansion from $40K to $60K per applicant, $20K of which would be forgivable. An attestation of COVID’s negative impact on the business will be required. More info will be posted here, when known. 

Regional Relief and Recovery Fund (RRRF)

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 the initial version of 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.

Canada Emergency Commercial Rent Assistance (CECRA) — now ended

The initial version of this program provided forgivable loans to commercial landlords to cover 50% of April through September 2020 rents.

The landlords had to agree to forgive 75% of the tenant’s rent, and pause evictions while the agreement was in place.

The tenant had to agree to cover 25% of the regular rent amount.

This relief only applied if the tenant had suffered a minimum 70% drop in revenues, due to COVID.

The application window for this version of the program closed on October 31, 2020.

Canada Emergency Rent Subsidy (CERS)

A decided improvement on the CECRA program described above, this rent and mortgage support program enables commercial tenants and property owners to apply for subsidy relief from the Federal Government directly, rather than relying on landlords to apply (i.e. as with CECRA).

Available starting late November, and backdated to offer support for October 2020 occupancy costs, the basic program offers up to 65% of commercial rent or mortgage interest subsidies on a sliding scale, linked to revenue declines (much like the CEWS structure).

An additional 25% top-up is available to those organizations experiencing temporary closures due to mandated lockdowns. 

In addition to core occupancy costs of rent or commercial mortgage interest, this program also supports property tax and property insurance expenses.

The filing methodology and revenue test parallels that of the CEWS.

The CRA website for the CERS, including a claim calculator, can be found here. 

An excellent CERS FAQ page can be found here. 

BC Emergency Benefit for Workers

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:

Canada’s COVID-19 Economic Response Plan

Canada Revenue Agency COVID-19 webpage

BC Government COVID-19 Economic Development Resources

The Business Implications of Coronavirus (KPMG)

COVID-19 Federal and BC Programs (Rise CPA)

Small Business BC COVID-19 Resources for Small Business

How to complete the Record of Employment (ROE) form

The Canadian Payroll Association’s Q&A’s from the Payroll Infoline

The Canada Emergency Wage Subsidy and its application to Charities and Non-profits (Blumbergs)

BCGEU EI Factsheet (for employees)

Institute of Professional Bookkeepers of Canada — COVID-19 updates and resources

Layoffs, salary, Ei, and more: your coronavirus and employment questions answered (Globe and Mail)

When making business decisions in response to COVID-19, factor in CRA’s collections powers (Dean Blachford, HazloLaw)

Dividends only — Are owner-managers out of luck for COVID-19 support? (Video Tax News)

COVID-19: Resources for Workers and Renters (Canadian Centre for Policy Alternatives)

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