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 14, 2020
The House and Senate passed Bill C-14, the COVID-19 Emergency Response Act, No. 2, which included additional proposed amendments to the Canada Emergency Wage Subsidy (CEWS). As a reminder, the program provides a 75 per cent wage subsidy to eligible employers for up to 12 weeks, retroactive to March 15, 2020.
In two separate announcements, the government confirmed the following improvements to the subsidy:
Employers can now compare their revenues of March, April and May 2020 to the same month of 2019 or to an average of their revenue earned in January or February 2020.
For the month of March, the benchmark revenue will be reduced to 15 per cent rather than the original 30 per cent, recognizing that the COVID-19 crisis only caused business shutdowns mid-month
When an employer is found eligible for a specific period, they automatically qualify for the next and do not need to re-apply. For example, if you experienced a drop in revenue of more than 15 per cent in March, you qualify for the first two periods of the subsidy. Likewise, if you experience a drop in revenue of 30 per cent in April, you qualify for the second and third periods of the program.
Employers can measure revenues on accrual accounting (money earned) or cash accounting (money received). The same accounting method must be used consistently throughout the program once selected by the employer.
Employers will be compensated for their contributions to the CPP, EI, QPP and QPIP paid to employees currently on leave with pay because of COVID-19.
Full information on revenue calculation, subsidy amount and payroll contribution refunds can be found in the detailed backgrounder released by the government here. More information on the application process is expected to be announced shortly.
While the CMPA continues to analyze the details of the new Act, we are cautiously optimistic that certain more technical changes to the revenue calculation required for eligibility may be of greater assistance to Canadian production companies than previous rules. We continue to work directly with representatives in government to ensure that production companies’ unique business models are taken into account as the federal COVID-19 action plan continues to be developed.
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 April 16, 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 $20,000 to $1.5 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.