Applications Open for CEWS Period 5

Walter Harder & Beth Graddon

Despite a hack at CRA, which shut down its site for applicants of various pandemic relief programs, Period 5 Canada Emergency Wage Subsidy (CEWS) applications can now be accessed.  This newly extended program also marks the beginning of new eligibility requirements. There is now a sliding revenue test, eliminating the requirement for a minimum 30% drop. In addition, a special top-up subsidy is available to some employers.  Following are details to consider:

The CEWS application can be accessed here.

CEWS CLAIM PERIODS AND RATES:

Note:  *In Periods 5 and 6 it is possible to use the new Safe Harbour Rules; that is, to claim the old 75% rate for active employees if a 30% revenue drop was experienced or for furloughed employees if the employer is eligible for the top-up. 

**Adjust CEWS to align to CERB and EI received by furloughed employees. 

Here’s an example of how the new calculations work for a sample company with 5 employees:

They have a payroll of $20,000 and experiencing a reduction in revenue of 20% for July 2020 compared to July 2019.  This was in fact a larger drop than in the previous period.  Assume that the average revenue drop for April, May, and June, compared to the previous year, was less than 50%.

• The CEWS rate for period 5 will be 120% of the revenue drop percentage or 24% (120% x 20%).
• Because the average revenue drop in the previous three months was less than 50%, the company is not eligible for an additional top-up rate.
• With a payroll of $20,000 for the period, the company is eligible for a wage subsidy of 24% x $20,000 - $4,800.

Had the percentage drop in July been more than the percentage drop in June, the company would be eligible for a higher CEWS rate based on the June over June percentage revenue drop. 

In addition, had the company’s revenue drop for the April to June period been more than 50% compared to the same period in the previous year, it would be eligible for a top-up of 125% of the revenue drop in excess of 50%.

Though the CEWS extension and changes bring positive news, they aren’t without complexity, not according to the responses so far on our August poll which asks: “In your opinion, is the new two-tiered Canada Emergency Wage Supplement (CEWS) too complex?”.

 Be sure to weigh in with your thoughts!

Here’s what some readers have had to say:

“I understand the need to wean businesses off the benefit, but it would have been sufficient to either lower the base, or have a revenue based reduction. Combining the two, with the additional severe loss top off makes it unnecessarily complicated” -  Dovid Lando

“May be a good year for this accountant to retire!” - Minna

“It is too complex and revenue lost from 2019 to 2020 cannot be compared.  We have hundreds if not thousands of additional expenses per month, revenue is capped to stay safe and social distance, so to achieve more revenue will cost more pay so profits are substantially lower if we are even 20% lower in revenue.” - Ron

For more information on pandemic benefit program updates and the financial fallout, including the complex auditing process that still lies ahead, attend to the September 30 Virtual CE Summit.

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