In March the government of Canada announced temporary measures to support small business owners during COVID-19. Part of the emergency response includes a wage subsidy program for small businesses. There are two subsidies available: the 10% Temporary Wage Subsidy and the 75% Canadian Emergency Wage Subsidy (CEWS).
For more information about the government of Canada’s response, as well as measures enacted by provinces, to COVID-19 read What the COVID-19 Credits Mean for Your Small Business.
Find out how to qualify, where to apply, and how the two wage subsidies impacts your small business’ payroll.
10% Temporary Wage Subsidy
What is the 10% Temporary Wage Subsidy?
The 10% Temporary Wage Subsidy will allow eligible employers to reduce the amount of payroll deductions, over a three-month period, required to be remitted to the Canada Revenue Agency (CRA). The following remittances are not included in the temporary wage subsidy: CPP, QPP, EI, and QPIP.
Who is eligible?
Any employer who has employees that are completing work in Canada is eligible for the 10% Temporary Wage Subsidy.
10% Temporary Wage Subsidy and Taxes
The 10% wage subsidy is taxable income in the year that it was received.
How to receive the 10% wage subsidy
In order to receive the subsidy employers do not need to apply. Instead, they will continue to deduct income tax, CPP/QPP contributions, and EI/QPIP premiums from salaries, wages, bonuses, or other remuneration paid to employees. The subsidy will be calculated when an employer remits the income tax, CPP and EI amounts to the CRA.
Employers can reduce their current pay remittance of federal, provincial, or territorial income tax that they send to the CRA. They must continue remitting the employee and employer share of CPP or QPP contributions and EI or QPIP premiums to the CRA.
Learn more here.
If an employer has multiple locations with their own unique business numbers, would each individual organization qualify for the 10% Temporary Wage subsidy?
Associated Canadian Controlled Private Corporations (CCPC) will not be required to share the maximum subsidy of $25,000 per employer. Each separate employer (with their own unique business number) will be entitled to their own subsidy, up to the maximum of $25,000 each.
The subsidy calculation is based on the total number of (unique) eligible employees employed at any time during the three-month period, including laid off employees.
If I do not reduce my remittance during the year, can I defer it to the end of the calendar year?
Yes. Eligible employers that choose not to reduce their payroll remittances during the year can still calculate the 10% Temporary Wage Subsidy for Employers on remuneration paid from March 18, 2020, to June 19, 2020, and transfer it to next year’s remittance. The CRA will pay the amount to you or transfer it to your next year’s remittance.
An employer has temporarily laid off all 15 employees; however, each employee was given a $50 bonus within the eligible period. This remuneration would count toward the 10%, but would each employee in receipt of the bonus also be considered an eligible employee toward the calculation of the $1,375 (up to the $25K maximum)?
Yes, each employee in receipt of the bonus would be considered an eligible employee for purposes of calculating the maximum eligible subsidy.
Are all taxable benefits included as eligible remuneration? The 75% wage subsidy does not include severance pay, or items such as stock option benefits or the personal use of a corporate vehicle; however, the 10% subsidy does not list such exclusions.
Subsection 153(1.03) of the Income Tax Act defines “eligible remuneration” as salary, wages or other remuneration paid to an eligible employee during the eligible period. As such, all sources of employment income, including taxable benefits and allowances, are included as eligible remuneration for purposes of the 10% Temporary Wage Subsidy.
75% Canada Emergency Wage Subsidy
What is the 75% Canada Emergency Wage Subsidy (CEWS)?
The Canada Emergency Wage Subsidy provides a 75% wage subsidy to eligible employers for up to 12 weeks, that will be backdated to March 15, 2020.
The subsidy amount for a given employee on eligible remuneration paid between March 15 and June 6, 2020 would be the greater of:
- 75 per cent of the amount of remuneration paid, up to a maximum benefit of $847 per week; (based on 75 per cent of $58,700) and
- The amount of remuneration paid, up to a maximum benefit of $847 per week or 75 per cent of the employee’s pre-crisis weekly remuneration, whichever is less.
Employers must make their best effort to top-up employee salaries to pre-crisis levels.
Eligible remuneration may include salary, wages, taxable benefits and other remuneration. However, it does not include severance pay/retiring allowances, or items such as stock option benefits or the personal use of a corporate vehicle.
Who is Eligible?
Eligible employers include:
- Taxable corporations
- Partnerships (consisting of eligible employers)
- Non-profit organizations
- Registered charities
Public bodies like local governments, crown corporations, public universities, colleges, schools, and hospitals are not eligible.
When applying, employers are required to attest to the decline in revenue of 15% for the month of March and a 30% threshold from April onward.
Eligible employees are any individual who is employed in Canada, whether that employee is working or on leave.
Be sure when considering the date of remuneration that there are not 14 days or more that are unpaid in the following four-week periods:
- From March 15 to April 11, 2020
- From April 12 to May 9, 2020
- From May 10 to June 6, 2020
How to apply for the 75% wage subsidy
Eligible employers will be able to apply for the Canada Emergency Wage Subsidy through the Canada Revenue Agency’s My Business Account portal starting April 27, 2020. Employers will be required to maintain records that demonstrate a reduction in revenues and remuneration paid to employees.
How does CEWS interact with the 10% Temporary Wage Subsidy?
For employers who are eligible for both the Canada Emergency Wage Subsidy and the 10% Temporary Wage Subsidy, any benefit from the 10% wage subsidy will reduce the amount available to be claimed under the Canada Emergency Wage Subsidy in the same period.
How does CEWS interact with the Work-Sharing Program?
For employers and employees who are participating in a Work-Sharing program, EI benefits received by employees through the Work-Sharing program will reduce the benefit that their employer is entitled to receive under the CEWS.
Garnishment Orders During COVID-19 FAQ
Which jurisdictions have officially suspended or cancelled garnishments as a result of COVID-19?
To date, only the Canada Revenue Agency Requirement to Pay and the Third Party Demands have been suspended until further notice.
The CRA requirement to pay is a method used to collect tax debts from a taxpayer (employee) who does not voluntarily pay the amounts they owe. A legal notice is sent to a third-party payer (such as an employer).
A Third Party Demand is a notice sent by the CRA to a payer to collect payments when an individual has an outstanding debt to Employment and Social Development Canada (ESDC) for the following programs:
- Defaulted Canada Student Loans (CSL)
- Employment Insurance (EI) overpayments and penalties
- Training Allowances Payment System (TAPS)
- Canada Pension Plan (CPP) overpayments
- Grants and contributions (G&C) overpayments
- Operations and maintenance (O&M) receivables
More information can be obtained on the CRA’s website.
The Canadian Payroll Association will advise employers in the event that other provincial and territorial jurisdictions suspend their respective garnishments.
Jurisdictions may be able to make changes to the current garnishments on a case-by-case basis. The payroll department can contact their respective jurisdictions if there has been a change to the employee’s status.
We have an employee that has three garnishments, a Requirement to Pay, a Family Support Order, and a Small Claims Court garnishment. How do we calculate and remit the respective garnishments now that Requirements to Pay have been suspended as a result of COVID-19?
Under normal circumstances, the Requirement to Pay has priority, however as these orders have been suspended, the priority shifts over to Family Support followed by the Small Claims Court orders.
Generally speaking, the Small Claims Court Orders will only be able to be honoured if the Family Support order is deducting less than what a Small Claims Court order will allow.
Once the suspension on Requirements to Pay has been lifted, the priority will shift back to the Requirement to Pay, Family Support and Provincial Court ordered garnishments.
Bonus Payments During COVID-19 FAQ
Our organization will be paying bonus amounts to our employees as a result of COVID-19. Has the government relaxed its rules related to the bonus taxation method?
No. The government has not changed its rules on the taxation of a bonus.
How can I explain to employees how the bonus taxation method works as the income tax is usually higher than when paying a regular pay?
If a bonus payment falls within an employee’s pay period, the regular income tax tables should not be used to determine the amount of income tax owing on the bonus, as this will increase the amount of tax being deducted even more.
The pay period tables apply a rate of taxation based on the assumption that the employee will be making X amount of dollars for the year, spread over Y number of pay periods.
A bonus payment increases the employee’s overall earnings for the year, which increases the rate at which the employee should have been paying income tax since the beginning of the taxation year.
For example, an employee receiving an annual salary of $50,000 per year in addition to a bonus payment of $10,000 will be taxed based on $60,000 per year when they file their personal income tax return at the end of the year. The employee’s income tax deductions each pay period, however, are only calculated based on an annual salary of $50,000.
With a bonus payment, the payroll system is required to recalculate the employee’s taxes based on $60,000 and then calculate the difference between the income taxes the employee pays on a regular basis and the employee’s newly revised salary which has been increase by $10,000 for the entire year.
The payment of the bonus often results in the employee being bumped up to a higher income bracket. Both the Canada Revenue Agency (CRA) and Revenu Québec (RQ) require the employer to collect the difference between the pro-rated income tax that the employee regularly pays on an annual pay of $50,000 and the income taxes that would have been paid based on an annual salary of $60,000. This difference is then deducted from the bonus payment.
If an employer pays an employee additional bonuses throughout the year, the income taxes will be recalculated once again to take into consideration the previous bonuses paid to the employee.
The bonus tax method can be used for any payments that do not represent regular pay period earnings, for example, stock option taxable benefits, a taxable gift or award, or outstanding vacation paid upon termination.
Issuing the Record of Employment (ROE) FAQ
Do we still need to issue a record of employment if there is a reduction in available shifts?
A reduction in available shifts would not qualify for an ROE, unless it was a total shortage of work with the employee not earning any employment income. Service Canada has confirmed that there have not been any changes to the policy of not issuing an ROE when earnings go below 60% except for these reasons:
- Because of illness, injury, quarantine
- The need to care for a newborn or a child placed for the purposes of adoption,
- The need to provide care or support to a family member who is gravely ill with a significant risk of death,
- The need for a parent to care for a critically ill child, and an interruption of earnings occurs.
Workers’ Compensation FAQ
Our employees are now working from home as a result of COVID-19. Are they still covered under Workers’ Compensation?
Yes. Although employees are working remotely, under the Act, they are still covered under Workers’ Compensation because an employee-employer relationship exists while performing services for the organization.
The Occupational Health and Safety Act defines ‘workplace’ as land, premises, location or thing at, upon, in or near which a worker works.
Workers’ compensation legislation varies across jurisdictions, it is recommended that employers maintain their coverage for their remote staff.
Which jurisdictions have relaxed their policies as it pertains to Workers’ Compensation premium relief, and do we still need to report any assessable Earnings?
There are several jurisdictions that have deferred premiums and assessments for a specific period of time. Please click here to access the chart.
Have a Question About COVID-19 and its Impact on Your Payroll?
The Canadian Payroll Association has made it possible for non-members to access the 200+ years of expertise on the Payroll InfoLine. You can submit your COVID-19 related payroll questions through email here.
For more information about CERB download The Canadian Payroll Associations COVID-19: Most Frequently Asked Questions from Payroll Infoline