CEWS Eligibility has Exploded – Are you missing out?

According to a recent Parliamentary Budget Office Report, the Canada Emergency Wage Subsidy is expected to expand coverage to 10 million employees (from 3 million) as of July, 2020. In the past, some may have shied away from claims thinking that their revenue declines must be tied to COVID-19. Some may have felt that it wouldn’t be worth the time and effort. However, due to recent major expansions, few will now be left without strong incentive.

Why are so many businesses eligible?

First off, there is no legislative requirement that the decline be tied to COVID-19. It is simply a mathematical calculation of revenue change multiplied by eligible remuneration (to certain limits). Any revenue decline for any month from July to November of 2020 would make the business eligible. How many businesses can say that they haven’t, or won’t, experience a decline for any of July through November? Not many. Further, the subsidy is still available for the March through June periods. The required decline is 15% for March, or 30% for each of April, May or June. You can apply for as many months as eligible. 

The biggest reason why most will be eligible, however, comes from the generous calculation of the revenue decline. You start off by comparing your revenues from the claim month to the same month from the prior year.  Has it gone down? What about last month compared to the same month of last year? The greater of those declines (as a percentage) is what you use. Alternatively, you can compare your current revenues to the average monthly revenues from January and February of 2020. One catch, if you choose this alternate method, you have to use it for all of Periods 5 through 10 (July-December). Similarly, businesses can choose to use this method for the Periods 1 through 4 group as well (March-June). After examining all of the options, it is highly likely that at least one will result in a revenue decline, meaning that large numbers of businesses will be eligible.

If that isn’t enough, you can choose to calculate declines using the cash basis or more traditional accrual basis. Assume you have $100 of sales for the month, but you only have collected $50 in the month. Accrual basis revenue would be $100, while cash basis would be $50. Given that some of your clients might have been slower to pay during COVID-19 times, this possibility significantly broadens the number of entities eligible, and enhances their claim. 

Still not convinced? There are also rules that would assist newly amalgamated corporations, corporations that are affiliated with others, corporations that are part of larger corporate groups, and corporations that have bought the business assets from others.

Few will not be eligible. They primarily include businesses that have no payroll (some exceptions apply), small businesses whose only employee(s) are the owner and family members (and they did not receive salaries prior to March 15, 2020), those without any decreased revenues, and those that are brand-new.  

How much do I get? – Quick Estimation Tool

When it comes to how much, many would also be surprised. Now that claims can be made for any, or all, of the 10 periods announced (9 of which we have rules for) the potential for eligibility, and higher total subsidy, has gone up significantly. While missing one month may not have much impact, the value of not applying for multiple months really starts to add up.

Want to get a feel for how much is at stake? Use the CEWS 2.0 Estimator at WageSubsidyCalculator.ca. Just enter your estimated monthly revenues and remuneration for the applicable periods and you will immediately get a feel for how much money has been left on the table. 

Thinking about opening up a portion of your business? Just adjust your expected revenue to see the impact on the subsidy. 

Thinking about increasing staff hours?  Just update the remuneration field.

The amount you get is based on the size of your revenue decrease. For the first four periods, it is all or nothing. If you meet the required decline, you get the subsidy, which is targeted to be 75% of payroll (with limitations). For the remaining periods, it is really a factor of how big those revenue declines are. A decline of up to 50% for the month of claim is eligible for a base subsidy of up to 60% (this maximum decreases starting with the September period). If the decline for the previous three months is over 50%, you get a top-up subsidy, which is also a factor of how large the decline is.

For more details on how it works, see the explanatory video on the CEWS 2.0 Estimator site, or go to the government application site.

What you should do:

1. Estimate the subsidy. Go to WageSubsidyCalculator.ca. Plug in the numbers to see what kind of claim you are looking at. 
2. Talk to your accountant. They can help you figure out the specific calculations, choose which options are best, and identify/navigate the landmines (there are some things to watch out for, like revenue from non-arm’s length parties!).
3. Get all applications submitted before February 2021.