Extending Business Support Measures Through the Pandemic

In the face of the COVID-19 pandemic, the government acted swiftly to protect Canadians and support people and businesses. To help ensure a strong recovery, it has adapted and extended this support as the pandemic has evolved.

June 2, 2021

In the face of the COVID-19 pandemic, the government acted swiftly to protect Canadians and support people and businesses. To help ensure a strong recovery, it has adapted and extended this support as the pandemic has evolved.

Extending the Canada Emergency Wage Subsidy

How to apply for the Canada Emergency Wage Subsidy

The government introduced the Canada Emergency Wage Subsidy at the outset of the pandemic to prevent job losses and encourage employers to quickly rehire workers previously laid off as a result of COVID-19.

The program provides eligible employers that have experienced a decline in revenues with a wage subsidy for eligible remuneration paid to their employees. To date, it has helped more than 5.3 million Canadians keep or regain their jobs.

With the Wage Subsidy set to expire in June 2021, the federal budget proposes to extend the program until September 25, 2021, in order to bridge businesses and workers through to a strong recovery. It also proposes to gradually decrease the subsidy rate, beginning July 4, 2021, in order to ensure an orderly phase-out of the program as the economy reopens. Changes to the program are included in Bill C-30, An Act to implement certain provisions of the budget tabled in Parliament on April 19, 2021 and other measures, which is currently before Parliament.

Table 1, below, details the proposed Wage Subsidy rate structures from June 6, 2021, to September 25, 2021. Beginning July 4, 2021, employers would need to have a decline in revenues of more than 10 per cent to be eligible for the Wage Subsidy.

Ensuring Wage Subsidy Funds Support Workers: Executive Pay Clawback

The intention of the Wage Subsidy has always been to preserve and protect jobs. The program was designed to provide employers who had suffered revenue declines during the pandemic with the support they needed to keep employees on the payroll and re-hire laid off employees. Canadians expect businesses that use government support for their operations especially at a time of widespread personal difficulty to not increase the compensation of their top executives.

The recent federal budget proposed that any publicly listed corporation receiving the Wage Subsidy and found to be paying its top executives more in 2021 than in 2019 be required to repay the equivalent in Wage Subsidy amounts received for any qualifying period starting after June 5, 2021, and until the end of the Wage Subsidy program.

The amount of the wage subsidy required to be repaid would be equal to the lesser of:

• the total of all wage subsidy amounts received in respect of active employees for qualifying periods that begin after June 5, 2021; and
• the amount by which the corporation's aggregate top executives' compensation for 2021 exceeds its aggregate top executives' compensation for 2019.

This requirement to repay would be applied at the group level and would apply to wage subsidy amounts paid to any entity in the group.

The Wage Subsidy program is meant to serve workers and if, during recovery, businesses are boosting top executive pay, they have clearly demonstrated that they have their own resources to support workers.

Interaction with the Canada Recovery Hiring Program

Eligible employers would also be able to apply for the proposed new Canada Recovery Hiring Program instead of the Wage Subsidy. The Hiring Program would provide alternative support for businesses affected by the pandemic so they can hire more workers as the economy reopens. The Hiring Program would be in place from June 6, 2021 until November 20, 2021, allowing employers to shift from the Canada Emergency Wage Subsidy to this new support at a pace that works for them, as different jurisdictions reopen at different paces. The Hiring Program would be available through the Canada Revenue Agency, just as the Wage Subsidy and Rent Subsidy are, and the application portal would open in the coming weeks after Royal Assent of the Bill C-30, the Budget Implementation Act.

Example

Max and Chinmay run a bookstore whose storefront was shut down sporadically through the winter and spring due to public health restrictions. While their business survived, they had to lay off three of their 10 employees, each of whom they pay $600 per week. Their baseline payroll from March 14 to April 10 was $16,800 (i.e., seven employees x $600 x four weeks).

As public health restrictions are lifted and the vaccination campaign continues, their business begins to recover. In May, their revenues were still down 50 per cent from their level before the pandemic, but are only down 20 per cent in June, and by July are close to their pre-pandemic level. As a result, they are able to hire back their three laid-off employees starting June 6, and are even able to add an additional employee starting July 4.

As a result of proposed measures in the federal government's recovery plan, Max and Chinmay's business will benefit from either the extended Canada Emergency Wage Subsidy or the new Canada Recovery Hiring Program:

• For June 6 to July 3, their payroll is $24,000. Their business would be eligible for a Wage Subsidy rate of 40 per cent (based on a 50-per-cent revenue decline), resulting in a Wage Subsidy of $9,600. Alternatively, the business would be eligible for a hiring subsidy rate of 50 per cent, which would be applied to the difference between its current payroll and its baseline payroll, resulting in a hiring incentive of $3,600. They are better off claiming the Wage Subsidy of $9,600 for this period.
• For July 4 to July 31, their payroll is $26,400. Their business would be eligible for a Wage Subsidy rate of 8.75 per cent (based on a 20-per-cent revenue decline), resulting in a Wage Subsidy of $2,310. Alternatively, the business would be eligible for a hiring subsidy rate of 50 per cent, which would be applied to the difference between its current payroll and its baseline payroll, resulting in a hiring incentive of $4,800. In this instance, they are better off claiming the hiring incentive of $4,800 for this period.

In total, Max and Chinmay will be eligible for at least $14,400 in support from these two measures to help their business rebuild as the economy recovers.

Support for Furloughed Employees

The Government of Canada is also proposing to extend the Canada Emergency Wage Subsidy for furloughed employees until August 28, 2021. Currently, a separate wage subsidy rate structure applies for furloughed employees that is aligned with the benefits provided through Employment Insurance (EI), which ensures equitable treatment of such employees between the two programs.

To ensure this alignment continues, the recent federal budget proposed that the weekly wage subsidy for a furloughed employee from June 6, 2021 to August 28, 2021 be the lesser of:

• the amount of eligible remuneration paid in respect of the week; and
• the greater of:
• $500; and
• 55 per cent of pre-crisis remuneration for the employee, up to a maximum subsidy amount of $595.

The wage subsidy for furloughed employees would continue to be available to eligible employers that qualify for the Wage Subsidy for active employees for the relevant period until August 28, 2021. Employers will also continue to be entitled to claim, under the Wage Subsidy, their portion of contributions in respect of the Canada Pension Plan, EI, the Quebec Pension Plan and the Quebec Parental Insurance Plan for furloughed employees.

Extending the Canada Emergency Rent Subsidy and Lockdown Support

How to apply for the Canada Emergency Rent Subsidy and Lockdown Support

The government introduced the Canada Emergency Rent Subsidy to provide direct and easy-to-access rent and mortgage support to organizations that continue to be economically affected by the COVID-19 pandemic. Under the Rent Subsidy, qualifying organizations that have experienced a decline in revenues are eligible for a subsidy on qualifying expenses.

Lockdown Support provides additional support for locations subject to a lockdown or that must significantly restrict their activities under a public health order issued under the laws of Canada, a province, or territory.

The Rent Subsidy and Lockdown Support have helped more than 187,000 organizations with rent, mortgage, and other expenses.

With the Rent Subsidy and Lockdown Support currently set to expire in June 2021, the federal budget proposes to extend them until September 25, 2021, in order to bridge businesses and workers through the rest of the crisis and support a strong recovery.

Table 2, below, details the proposed Rent Subsidy rate structures from June 6, 2021, to September 25, 2021. Beginning July 4, 2021, employers would need to have a decline in revenues of more than 10 per cent to be eligible for the Rent Subsidy and Lockdown Support. The current subsidy rate of 25 per cent for the Lockdown Support would remain available until September 25, 2021.