Federal government’s COVID-19 Economic Response Plan
As a part of Canada’s COVID-19 Economic Response Plan, the Government of Canada has announced a series of added benefits to assist Canadians, as well as key changes to some previously-announced plans. The government’s most recent announcements can be found here and here.
In addition to the many announcements from the federal government regarding benefits available to assist businesses and workers, various provinces have made a number of their own benefit announcements and changes to employment standards legislation in response to COVID-19. We encourage members to keep up to date on provincial benefit announcements and strongly encourage you to speak with your local employment counsel for advice regarding whether there are any legislative changes that may impact your employment-related rights or obligations.
updated April 2, 2020
On April 1, Minister of Finance, the Hon. Bill Morneau released additional information related to the newly-titled Canada Emergency Wage Subsidy. There are a number of outstanding questions related to today’s announcement and the CMPA is seeking clarity from a variety of government sources while we wait to hear more from the Department of Finance in the coming days. We will update you as soon as we learn more.
The Canada Emergency Wage Subsidy is for eligible employers, regardless of business size, that experience a decline of 30 per cent or more in revenue during the months of March, April and/or May, when compared to the same month in 2019. It would apply at a rate of 75 per cent of the first $58,700 earned by employees, which translates to a maximum benefit of $847 per week. Employers can also apply for this subsidy in respect of new employees. There is no overall cap on the subsidy amount that an individual employer may claim. The program will be in place from March 15 to June 6, 2020.
Employers are additionally being asked to make best efforts to provide the remaining 25 per cent of their employees’ remuneration. They are also encouraged to apply for the subsidy if they re-hire employees they have had to initially lay off because of COVID-19.
Employers will be able to apply through the Canada Revenue Agency’s My Business Account portal and will be required to re-apply each month. More details on the application process will be revealed soon. Funds are expected to flow within six weeks of the portal’s launch.
Interplay between Canada Emergency Wage Subsidy and previously-announced wage subsidy
Employers who are ineligible for the Canada Emergency Wage Subsidy may still apply for the previously-announced wage subsidy of 10 per cent of remuneration paid from March 18 to June 19, up to a maximum subsidy of $1,375 per employee and $25,000 per employer. Details of that subsidy were reviewed in our previous Note to Members.
If an employer is eligible for both wage subsidies during the same period, any benefit received from the 10 per cent wage subsidy would generally reduce the amount available to be claimed under the Canada Emergency Wage Subsidy during that same period.
Interplay between Canada Emergency Wage Subsidy and Canada Emergency Care Benefit
Employers would not be eligible to claim the Canada Emergency Wage Subsidy for remuneration paid to an employee in a week that falls within a four-week period for which the employee is eligible for the Canadian Emergency Response Benefit.
If an employer is ineligible for the Canada Emergency Wage Subsidy and lays off an employee, that employee could then apply for the Canadian Emergency Response benefit.
The usual tax treatment associated with benefits of this sort will apply and as such, any wage subsidy amounts will be included in the employer’s taxable income. Further, any assistance received under either the Canada Emergency Wage Subsidy or the previously-announced wage subsidy would reduce the amount of remuneration expenses eligible for other federal tax credits calculated on the same remuneration.
Issues with CRA business number
As stated, the wage subsidy requires an employer to have had its own CRA business number as of March 18, 2020. However, if a member has partnered with an industry payroll service provider (e.g. EP, Cast & Crew), then it likely would have made use of that provider’s CRA business number rather than securing its own. The fact the business lacks its own business number may serve to disqualify businesses from this subsidy.
The CMPA is carefully reviewing options by which to address this issue with the CRA so that members are not disqualified from application for this subsidy by virtue of their use of an industry payroll service provider’s business number.
Deferral of sales tax remittance and customs duty payments
The federal government has directed a maximum $30 billion in cashflow or liquidity assistance for businesses and self-employed individuals over the next three months by deferring Goods and Services Tax/Harmonized Sales Tax (GST/HST) remittances and customs duty payments to June 30, 2020.
Loan programs for businesses
updated March 27, 2020
Canada Emergency Business Account
This is a $25 billion program that will be implemented by eligible financial institutions in cooperation with Export Development Canada. Eligible small businesses can receive interest-free loans of up to $40,000 to help cover their operating costs during a period where their revenues have been temporarily reduced due to the economic impacts of the COVID-19 virus.
To qualify, small businesses (who are directed to apply through their financial institutions) will need to demonstrate that they paid between $50,000 to $1 million in total payroll in 2019. If a business repays the balance of the loan on or before December 31, 2022, this will result in loan forgiveness of 25 per cent (up to $10,000).
Loan guarantee for small and medium enterprises
This program offers small and medium-sized enterprises (SMEs) an Export Development Canada (EDC) guarantee to backstop new operating credit and cashflow term loans of up to $6.25 million from financial institutions.
Co-Lending Program for Small and Medium Enterprises
The Co-Lending Program is intended to provide additional liquidity for SMEs with the Business Development Bank of Canada (BDC) partnering with financial institutions, which will co-lend term loans to for operational cashflow requirements.
Eligible SMEs may obtain incremental credit amounts up to $6.25 million, with BDC contributing up to $5 million of this amount per loan. Under this program, financial institutions will conduct the underwriting and work with loan recipients throughout the process.
Temporary income support
updated March 27, 2020
Canada Emergency Response Benefit
The federal government has collapsed the previously-announced Emergency Care Benefit and Emergency Support Benefit into the single Canada Emergency Response Benefit (CERB). This is a taxable benefit of $2,000 a month for up to four months, and is available to the following individuals:
– workers who must stop working due to COVID-19 and do not have access to paid leave or other income support;
– workers who are sick, quarantined, or taking care of someone who is sick with COVID-19;
– working parents who must stay home without pay to care for children that are sick or need additional care because of school and daycare closures;
– workers who still have their employment but are not being paid because there is currently not sufficient work and their employer has asked them not to come to work; and
– wage earners and self-employed individuals, including contract workers, who would not otherwise be eligible for Employment Insurance.
The government has indicated that applicants would begin to receive CERB payments within 10 days of application. Payments will be paid every four weeks, and available from March 15, 2020 until October 3, 2020.
Based on conversations with the federal government, we understand that the CERB application process is likely to involve answering two basic questions:
1. Has the applicant lost income as a result of the COVID-19 pandemic?
2. Has the claimant earned at least $5,000 in income in the preceding 12 months, prior to filing the application?
We also understand that no supporting documentation will be required when making an application and that applications are likely to be accepted from April 6, 2020.
Interplay between EI and CERB
The CERB would apply to wage earners, contractors and self-employed individuals who would not otherwise be eligible for Employment Insurance (EI). Canadians who are already in receipt of EI regular and sickness benefits would continue to receive those benefits, and are advised not to apply for the CERB. If, however, their EI benefits end before the CERB termination date of October 3, 2020 and they are unable to work due to COVID-19, then they can apply for CERB once their EI benefits cease. Conversely, employees who qualify for EI but who receive the CERB first, may apply for EI after the sixteen-week CERB benefit period has ended.
These are just some of the measures included in Canada’s COVID-19 Economic Response Plan. In addition to these broad relief programs, the CMPA continues to work closely industry stakeholders to secure additional support for our sector. We will provide further details regarding this additional support and other Economic Response Plan measures of relevance to our members, their business and their employees, as they become available.