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CEWS 2.0: The Federal Government’s Revisions to the CEWS Program

by | Aug 20, 2020 | News

CEWS 2.0: The Federal Government’s Revisions to the CEWS Program

August 20, 2020

The Federal government has recently announced changes to the Canada Emergency Wage Subsidy (CEWS). The revised program, or ‘CEWS 2.0’ as they are calling it, has a number of changes:

    • Some businesses that did not meet the 30% revenue decline test were not eligible for CEWS 1.0 are now eligible for CEWS 2.0. This includes any wage-paying business that has any drop in revenues compared to the same month in 2019.
    • The calculation for the subsidy has changed as well. The greater the drop in revenues, the greater the percentage subsidy.
    • If the business suffered a drop in revenues of 62% or more, the subsidy will be greater under CEWS 2.0 compared to CEWS 1.0.
    • For period 5 and 6 (July 5 – August 1 and August 2 – 30), the business has the option to use CEWS 1.0 or 2.0 to calculate the subsidy.
    • Under CEWS 1.0, any employee who was without remuneration from the eligible entity in respect of 14 or more consecutive days in the qualifying period was not eligible. This rule has been eliminated under the CEWS 2.0.

We’ve laid out the CEWS 2.0 changes and details into the following sections:

All charts and data in this article are retrieved from the Department of Finance of Canada

The Redesigned CEWS Program

The CEWS program is now divided into nine four-week “qualifying periods” commencing on 15 March 2020 and ending on 21 November 2020. The amount of periods have increased since our last post about CEWS. Here’s a breakdown of the periods:

Period CEWS qualifying period Current and prior reference periods Alternative prior reference period
CEWS 1.0 1 15 Mar – 11 Apr, 2020 Mar 2020 – Mar 2019 Jan/Feb 2020
2 12 Apr – 09 May, 2020 Apr 2020 – Apr 2019 Jan/Feb 2020
3 10 May – 06 Jun, 2020 May 2020 – May 2019 Jan/Feb 2020
4 07 Jun – 04 Jul, 2020 Jun 2020 – Jun 2019 Jan/Feb 2020
CEWS 2.0 5 05 Jul – 01 Aug, 2020 Jul 2020 – Jul 2019 Jan/Feb 2020
6 02 Aug – 30 Aug, 2020 Aug 2020 – Aug 2019 Jan/Feb 2020
7 31 Aug – 26 Sep, 2020 Sep 2020 – Sep 2019 Jan/Feb 2020
8 27 Sep – 24 Oct, 2020 Oct 2020 – Oct 2019 Jan/Feb 2020
9 25 Oct – 21 Nov, 2020 Nov 2020 – Nov 2019 Jan/Feb 2020

For Period 1 to 4 (original CEWS 1.0): if the entity experienced a 30% decline in revenue (or at least 15% for March), then the entity was entitled to a wage subsidy of 75% of the wages and salaries payable, up to a maximum of $847/employee/week.

Under CEWS 2.0, any entity that has experienced a decrease in revenue during the relevant calendar month compared to the corresponding 2019 calendar month will be entitled to a wage subsidy.

Key Elements

  1. The 30% revenue decline requirement and corresponding 75% wage subsidy is replaced by a sliding-scale subsidy that consists of two parts:
    • a “base subsidy” for an Eligible Employer that has experienced any level of revenue decline for a particular period, and
    • an additional “top-up subsidy” for Eligible Employers that have experienced a revenue decline of greater than 50% for a particular period.
  2. A “safe-harbour” rule for periods 5 and 6, which allows an eligible employer that have experienced a more than 30% revenue decline and would have been entitled to a larger per-employee subsidy under the original CEWS rules (CEWS 1.0) can use CEWS 1.0 instead of CEWS 2.0.
  3. Elimination of the eligible employee 14 day rule – Any employee who was without remuneration from the eligible entity in respect of 14 or more consecutive days in the qualifying period was not eligible for CEWS 1.0. This rule has been eliminated under the new rules.
  4. Prior period deeming rule – CEWS 2.0 has a similar rule, if an eligible entity’s actual revenue reduction percentage for the current period is lower than the immediately preceding period, the revenue reduction percentage for the current period is deemed to be equal to its revenue reduction percentage for the immediately preceding period.
  5. Furloughed employees – Different rules for employees on special leave without pay.

CEWS 2.0 “Base Percentage”

The revenue reduction percentage is used to determine the “base percentage” of the subsidy for the eligible entity for the particular qualifying period.

    • Period 5 & 6: Base % = 1.2 x Revenue Reduction %
    • Period 7: Base % = 1 x Revenue Reduction %
    • Period 8: Base % = 0.8 x Revenue Reduction %
    • Period 9: Base % = 0.4 x Revenue Reduction %
    • Base amount: Base % x Employees Eligible Remuneration Up to $1,129

For details, see text version. The following illustrates how the base subsidy rate is calculated in Periods 5 – 9 for employers with a revenue decline of 50% or more and for employers with a revenue decline of less than 50%:

Timing Period 5*:
Jul 5 – Aug 1
Period 6*:
Aug 2 – Aug 29
Period 7:
Aug 30 – Sep 26
Period 8:
Sep 27 – Oct 24
Period 9:
Oct 25 – Nov 21
Maximum weekly benefit per employee Up to $677 Up to $677 Up to $565 Up to $452 Up to $226
Revenue drop
50% and over 60% 60% 50% 40% 20%
0% to 49% 1.2 x revenue drop (e.g., 1.2 x 20% revenue drop + 25% = 24% base CEWS rate) 1.2 x revenue drop (e.g., 1.2 x 20% revenue drop + 25% = 24% base CEWS rate) 1.0 x revenue drop (e.g., 1.0 x 20% revenue drop = 20% base CEWS rate) 0.8 x revenue drop (e.g., 0.8 x 20% revenue drop = 16% base CEWS rate) 0.4 x revenue drop (e.g., 0.4 x 20% revenue drop = 8% base CEWS rate)
* In Periods 5 and 6, employers who would have been better off in the CEWS design in Periods 1 to 4 would be eligible for a 75% wage subsidy if they have a revenue decline of 30% or more.

CEWS 2.0 “Top-Up Percentage”

For employers whose revenue decline is more severe (more than 50%), a “top-up” of up to 25% of the base subsidy is available.

To determine whether it qualifies for a “top-up” and has met the greater-than-50% threshold, eligible entity compares its average qualifying revenue for the 3 prior months in 2020 to the same 3 months in 2019 (or if the eligible entity has elected to use January/February 2020 as its “prior reference period”, then to its average qualifying revenue for January/February 2020).

The basic top-up rate % calculation: 1.25 x (Revenue decline % for 3 month – 50%)

The following table illustrates how the top-up subsidy rate is calculated:

3-month average revenue drop Top-up calculation = 1.25 x (3 month revenue drop – 50%) Top-up CEWS rate
70% and over 1.25 x (70%-50%) = 25% 25%
65% 1.25 x (65%-50%) = 18.75% 18.75%
60% 1.25 x (60%-50%) = 12.5% 12.50%
55% 1.25 x (55%-50%) = 6.25% 6.25%
50% and under 1.25 x (50%-50%) = 0.0% 0.00%

The following chart illustrates the combined calculation:

Timing Period 5*:
Jul 5 – Aug 1
Period 6*:
Aug 2 – Aug 29
Period 7:
Aug 30 – Sep 26
Period 8:
Sep 27 – Oct 24
Period 9:
Oct 25 – Nov 21
Maximum weekly benefit per employee Up to $960 Up to $960 Up to $847 Up to $734 Up to $508
Revenue drop in the current 1-month reference period
50% and over 85%
(60% base CEWS + 25% top-up)
85%
(60% base CEWS + 25% top-up)
75%
(50% base CEWS + 25% top-up)
65%
(40% base CEWS + 25% top-up)
45%
(20% base CEWS + 25% top-up)
0% to 49% 1.2 x revenue drop + 25% (e.g., 1.2 x 20% revenue drop + 25% = 49% CEWS rate) 1.2 x revenue drop + 25% (e.g., 1.2 x 20% revenue drop + 25% = 49% CEWS rate) 1 x revenue drop + 25% (e.g., 1 x 20% revenue drop + 25% = 45% CEWS rate) 0.8 x revenue drop + 25% (e.g., 0.8 x 20% revenue drop + 25% = 41% CEWS rate) 0.4 x revenue drop + 25% (e.g., 0.4 x 20% revenue drop + 25% = 33% CEWS rate)
* In Periods 5 and 6, employers who would have been better off in the CEWS design in Periods 1 to 4 would be eligible for a 75% wage subsidy if they have a revenue decline of 30% or more.

As always, if you have any questions or need assistance in applying for CEWS, please contact your Provision relationship manager.