On May 5, 2020, we had the pleasure of hosting a webinar for the New Car Dealers Association of BC and its members, with CEO Blair Qualey. We heard from car dealerships from across the province and answered their questions about CEWS, CERB and more. We thought the information covered should be shared with our communities as well, and this is how this post came about.
**Please be advised that this Q&A is only applicable to the first four reporting periods of the CEWS (March 15 to July 4). For reporting periods after July 5, 2020, please stay tuned as the federal government is in the process of introducing amendments to the CEWS program that would result in new formulas for calculating the subsidy amounts. We expect to have further updates as more information becomes available.***
On March 27th 2020 the Prime Minister announced a wage subsidy of 75% for qualifying businesses, and on May 8, 2020 he announced the program will be extended past June. The legislation allows for extension by regulation up to September 30, 2020 but further details will be released soon.
This program is the most important and fundamental initiative in the Federal Government’s COVID 19 strategy. Over the last few weeks we have covered the program, and other support programs extensively in our other blog posts, which we invite you to browse for more information – read our previous articles here.
Kane Shannon Weiler LLP wants to be there for our communities during these unprecedented times, and support businesses and individuals by sharing as much knowledge as we can.
Please remember that this information is general information and should not be taken as specific legal advice to your particular issues. Each case is analyzed to its particular facts. Also, the government makes changes on daily basis. Finally, please note that the notes below are only a condensed outline of the full questions and answers provided during the webinar. If you are dealing with any of these particular questions, we recommend that you contact Mike or Chris for legal advice.
Overview of CEWS (Canada Emergency Wage Subsidy):
The CEWS application has 4 parts:
1. Are you an eligible employer? Do you meet the revenue decline test? this a calculation you do prior to the application, several ways of doing this calculation. Once you choose a method you have to use the same one for the next periods. If you qualify for one period, you automatically qualify for the next period.
2. Who are your eligible employees? 1) Employed by a business in Canada, 2) and not without pay for a period of 14 days consecutive during the claim period. If that employee did not receive pay for 14 consecutive days in the claiming period, then that employee is not eligible – this way their won’t be doubling up for employees to use the CERB and CEWS.
3. Calculate the subsidy – Use the excel calculator spreadsheet provided on the government website. It allows you to put the date for each eligible employees you have for the claim period. You enter the pre-crisis weekly earnings, whether the employee is non-arms length, and the amount paid to the employee during the claiming period. The calculator will then provide the basic subsidy amount.
4. Apply for the CEWS online. You do this through your CRA MyBusiness Account. You can use the data from the spreadsheet calculator for the eligible remuneration and subsidy lines. There are lines to enter CPP/EI contributions for employees on payroll but not working (called furlough), which are refundable. There are also lines for the 10% subsidy, which is deducted, along with wages paid to employees on work-sharing. Finally, there is an attestation required to certify the application is true and accurate. There are significant penalties and even criminal liability for making fraudulent or other misrepresentations to CRA so use caution. If you have direct deposit set up, you should have the funds in your account in approximately 10 days.
CEWS, CERB and other programs — QUESTIONS and ANSWERS from webinar
1. Would like some clarification around how the employee is impacted if they received CERB and we call them back? Is it better to not claim CEWS for them during that CERB cycle so that they are not impacted by having to pay it back
Employee can earn up to $1,000 a month and still be eligible to CERB. If you are want to bring an employee back and still have them getting the CERB try to not pay them over $1000 a month so they will continue being eligible. If you pay them over $1000 a month they will no longer be eligible and they will have to pay the CERB back what they received. Consider if there is any risk associated with reducing their hours/wages or bring them back part time instead of full time which could lead to constructive dismissal and severance pay.
2. Are employees able to repay a week at a time back for the CERB if we rehire? The CRA Excel form automatically shows zero if you select the employee is not arm's length. If the employee's wages do qualify, do you select no? We laid employees off in March and then closed for 2 weeks. Do we not qualify for the subsidy for the 1 week they worked?
If you re-hire during the CERB cycle and pay more than $1,000 in the claiming period, the employee will be disentitled to the CERB for the rest of the claiming period and will have to repay any CERB amounts received. For non-arm’s length employees, you can only claim the subsidy based on pre-crisis earnings. As long as they were already on payroll before March 15, 2020, you should be able to calculate the subsidy using the spreadsheet. Regarding the employees that were laid off in March, you must review the definition of eligible employees to determine if they were without remuneration for 14 consecutive days in the claiming period. If they were then they are not eligible employees and you cannot claim the CEWs on the wages paid to them during the claiming period.
3. We pay our employees semi-monthly. To calculate average weekly for those paid commission or flat rate should we divide their earnings from Jan 1 to March 15 by number days worked plus vacation days plus stat days and multiply by 5 (for full time)? So basically divide by 10.6 weeks? Just want to do the same calculation that CRA would be doing.
The definition of baseline remuneration is as follows: “the average weekly eligible remuneration paid to the eligible employee by the eligible entity during the period that begins on January 1, 2020 and ends on March 15, 2020, excluding any period of seven or more consecutive days for which the employee was not remunerated.” So this person is exactly right – you want to take the total eligible remuneration actually paid to the employee and divide by the total number of weeks over which it was paid. The Excel calculator only provides for weekly and bi-weekly pay periods –so for those with semi-monthly pay periods you just have to normalize the calculations by figuring out the weekly average. We’ve learned that CPA Canada has asked the CRA to include semi-monthly as an option so hopefully that’s coming in the next version of the calculator.
4. What are our rights when an employee who has been called to come back to work and they want to stay on lay-off?
First thing, when you make the decision to call someone back, check the amendments to the Employment Standards Act, if you are an eligible employee you are entitled to an unpaid leave. Type of leaves that are there:
- If they have been diagnosed positively.
- Quarantined during self isolation not just voluntary but in accordance to some regulation or order.
- The employer due to the employers concerns about the employer exposure to other has directed the employee to not work.
- If they take care of people who are diagnosed.
Have ongoing communication with your employees that are on leave so that you will not be blindsided and they will not be as well. If they refuse to come back to work, try to understand why.
5. If the company paid employees on 3/31/2020 for the pay period is 3/9/2020-3/24/2020, we should use the pay date to calculate the subsidy or the pay period?
Subsidy is based on the amount actually paid during the relevant pay period March 15 – April 11th. Exclude March 9-14th, and start counting on March 15 and include anything paid up to April 11. This employer next pay period would be March 25 to April 8. All earning to that pay period. And then 3rd pay period April 9/10/11 and combine those three to total the amount paid to the employee during the first claiming period. You can claim wages that were paid for the specific period – “It is not when they were earned (wages) but it is when they were paid”.
6. If we laid off the employee on 3/28 and paid him on 3/31 and rehire him on 4/10/2020, but paid him on 4/30/2020 for the period from 4/10-4/24, which claim period we can include his wage?
“It is not when they were earned (wages) but it is when they were paid”. This employer would claim the wages paid for the period between March 15 and March 28 PLUS the wages paid for April 10 and 11 – which is just the first two days of the second pay period. The rest of that pay period would go on the second claiming period: April 12 to May 9.
7. How does the 10% wage subsidy impact the 75% wage subsidy calculation?
Any amounts that you have already claimed under the 10% claim will be deducted from the 75% for the specific period. So you will be receiving 65%.
8. What is the impact of withholding federal tax and not withholding federal tax for the 10% subsidy?
You have to withhold to get this subsidy as there is no other way to get it.
9. Is the criteria for qualifying for the 10% subsidy different than the 75% subsidy? What are the differences?
For the 10% you do not have to show any drop in revenue, you will automatically qualify if your taxable capital is less than $15 million in the previous tax year. Main difference is that 10% is limited to $25,000 total per employer and up to $1375 per employee for the 3 month period it applies – focus more on small business. Rather than the 75% that has no overall limit on what a business can claim.
10. What is the proper way of claiming the wage subsidy for commission sales people? Average from last year? Actual sales from the period claimed?
Focus is on the wages actually attributed to the employee’s payroll in the claiming period, not amounts that might have been “earned” but will be added to a later payroll period, because the subsidy is based on what you have actually paid the employees. The payment could be for commission earned for pervious months or years but it is shown on payroll in the claiming period, so it qualifies.
11. I read that once you are eligible for one period of subsidy, you automatically qualify for the next period, even if you are not below the 30%. Can you confirm that this is true?
This is true.
12. Sales commissions and monthly bonuses paid for reaching targets at month end. For CEWS are we able to take commissions paid and average them over 4 weeks in the month or are they treated as earned when paid. Also, can bonuses paid in May that are for targets reached in April considered as April earnings or do they have to be calculated as May?
Only look at amounts attributed to the employee’s payroll during the claiming period and not at amounts earned. Bonuses paid on May payroll for targets reached in April will go on the May claiming period when they are actually attributed to the employee’s payroll and paid by the employer.
13. If a company has more than one pay period type with different pay periods that fall within each of the CEWS periods do we wait until the last pay period's pay date occurs before a claim can be made or can multiple claims per period be made?
You can only make one claim per claiming period, if you have multiple pay periods within that claiming period best practice to wait until you paid all the amounts you are going to be paying eligible employees before you are making the application. You have to pay the money before you get the subsidy. If you have to wait to May 10th, wait. Pay the money and then make the application.
14. Are automobile benefits included in the total remuneration paid to an employee?
Yes, if it’s the taxable portion of the benefit.
15. As part of the conditions of receiving the CEWS, is an employer supposed to be topping up current wages to the pre-crisis baseline amount? In an Apr. 11 update it stated "These employers are expected where possible to maintain existing employees' pre-crisis employment earnings." But I haven't seen anything on this topic in more recent updates.
Nothing in the legislation itself that requires you to do that, if you do bring someone back at a reduced wage, you are not required to top them up to receive the CEWS. Nothing in the attestation either that requires the employers to certify that they are doing everything they can to top up the employee pre-crisis wages. The government has backed away from this position a bit in the sense that there do not appear to be any legal consequences for not topping up to pre-crisis earnings.
16. When bringing laid off staff back, do you have to bring them back in order of seniority?
Generally, no, unless they you have a collective agreement and you have to deal with the union on who gets called back. Secondly, the Employment Standards Act – check on updates if they are entitled to the COVID-19 leave.
17. If an employee is asked to quarantine by health officials, and then there is no work to come back to, do you amend the role from sickness to lack of work?
Yes – in this case you likely would have issued the first ROE with code “D” for sickness. If the reason for the interruption in earnings has changed, you want to issue a new ROE coded as “A” for shortage of work.
18. Regarding the BC Emergency Benefit for Workers, the one time $1,000 payment from the BC government according to the website, it says that in order to be eligible you must “have been approved for the CERB”. What if some of the employees that we temporary laid off was approved for EI instead of the CERB, can they still apply for the $1,000 BC emergency benefit even though they didn’t apply for the CERB because they were approved for EI instead?
In order to be eligible for the BC Emergency Benefit for Workers (BCEBW), individuals must:
- be a resident of B.C. on March 15, 2020;
- meet the eligibility requirements for the CERB, i.e.:
- Received at least $5,000 of income in 2019 or in the 12 months before the application;
- Ceased working for at least 14 consecutive days for reasons related to COVID-19 (e.g. sickness, quarantine, caregiving of family member due to COVID-19)
- Not received more than $1,000 in income during the benefits period;
- have been approved for the CERB, even if a federal benefit payment has not yet been received;
- be at least 15 years old on the date of application;
- have filed, or agree to file, a 2019 B.C. income tax return; and
- not be receiving provincial income assistance or disability assistance.
We note that for anyone who became eligible for EI regular or sickness benefits on March 15, 2020 or later, their Employment Insurance claim will be automatically processed through the Canada Emergency Response Benefit (CERB). As such, any employees laid off after March 15, 2020 should have their claim processed under CERB and not under the pre-existing EI rules and should therefore be eligible for the BCEBW.
19. Is it correct that you cannot claim the CEWS on wages paid to an employee that is collecting CERB? I thought this is what was said in one of the Dealer Pilot webinars.
The definition of “eligible employee” in the CEWS legislation requires that the employee was not without remuneration for 14 consecutive days or more during the claiming period. This was originally how the CERB eligibility was defined. Thus, if the employee is receiving CERB, it is possible they are not an eligible employee. To determine if the employee is eligible for CEWS, check your payroll records for the claiming period. If the employee was without pay for 14 or more consecutive days, then you cannot claim the CEWS on any wages paid during the claiming period.
20. Have there been any updates on the special code that is supposed to be used to report wage subsidy amounts on T4’s?
That question is not within our expertise as employment lawyers. I would suggest checking with your accounting or tax professional.
21. Don’t you have to deduct the TWSE from your CEWS claim regardless of whether you have claimed the TWSE or not?
No. You don’t have to deduct the 10% temporary wage subsidy from the CEWS unless you have actually claimed it. If you have not claimed it, you enter “$0” in Line F of the online application.
22. I have had different advice on the calculation of wages for the purposes of the CEWS claiming periods in that you must calculate those wages that were earned and paid with respect to each week. As such, the calculation is on an earned basis, not on a paid basis meaning that where the dealership’s pay periods does not line up with the claim period of March 15-April11 (which is likely the case). You will need to calculate what the employees earned for each week.
There is a key difference between “earned” and “paid” during the claiming period. For example, something can be earned during the claiming period but actually paid out for on a different claiming period. For the CEWS, our interpretation is that you look at the paid wages attributed to the employee during each week of the claiming period. What does their paycheque say they earned for that period and has it actually been paid? The wages may not have actually been paid during the claiming period (if the pay date falls after the pay period) as long as the wages have been paid before you make your application, they can be claimed. In essence, you look at the wages paid to the employee for each week in the claiming period.
Employment & Labour Group
Note to our Readers: Information regarding COVID-19 is rapidly evolving. We are working to bring you up-to-date articles as the legal issues unfold. This is not legal advice. If you are looking for legal advice or are dealing with an issue in relation to COVID-19, please contact our Employment & Labour Group: Chris Drinovz at email@example.com, Mike Weiler firstname.lastname@example.org, Jesse Dunning at email@example.com, Melanie Booth at firstname.lastname@example.org, or or our Tax Group: Kevin Scott at email@example.com