an overview of government relief measures for businesses

Current as of May 15, 2020

FREE*

We’ve prepared a practical one-stop guide to help businesses understand and access federal and provincial relief measures.

*DISCLAIMER: Information made available in this document is for information purposes only and is current to the date first written above. It is not and should not be taken as legal advice.

Subsidies

Canada Emergency Wage Subsidy

On March 27 the Government of Canada announced the Canada Emergency Wage Subsidy (CEWS). This initiative was introduced to help businesses of all sizes (except public companies) who have been significantly impacted by loss of revenue. The goal is to incentivize businesses to re-hire employees they may have initially laid off and help ensure they are better positioned once the economy is normalized.

Employers eligible for CEWS are encouraged to top up their employees to 100% of their pre-crisis earnings when possible. Employees who were receiving the Canada Emergency Response Benefit (CERB) may need to repay any benefit received if they are re-hired and earning wages under the CEWS.

Eligible employers should have a CRA payroll account as of March 15, 2020 and be able to verify a 15% drop in revenue in March and a 30% drop in April and May. Calculations must use an employer’s normal accounting method, whether accrual or cash basis. Drop in revenue is determined by comparing the current month against the same month in the prior year or by comparison to the average revenues earned during January and February 2020. The accounting method and comparison period selected must be consistent for each application. For further clarity, you may not show a revenue drop of 15% in March by comparing to the prior year and subsequently apply for a 30% drop in May by comparing to an average of January and February 2020. Once you have been approved for the CEWS, you will automatically be approved for the following month, even if you do not meet the required drop in revenue.

The subsidy covers 75% of employees’ wages on the first $58,700 – up to $847 per employee per week. Employers can also claim a 100% refund for employer-paid contributions to Employment Insurance, Canada Pension Plan, Quebec Pension Plan and Quebec Parental Insurance Plan for employees on leave with full or partial pay.

Originally, three benefits periods were established for the CEWS: March (March 15 – April 11), April (April 12 – May 9), and May (May 10 – June 6) 2020.  On May 15, 2020, the Federal Government announced last week that they would be extending the CEWS beyond the third benefit period until the end of August 2020.

The Federal Government also announced that the CEWS will now be available to a wider array of entities, including Indigenous government-owned corporations, amateur athletic associates and non-public colleges and schools.

Applications opened on April 27, 2020 through the CRA online portal. Payments are expected to be received by early May. Click here to determine your eligibility and calculate your subsidy using the online subsidy calculator.

There will be a 25% penalty on the CEWS received if it is found that the employer engaged in transactions that artificially reduced revenues in order to qualify for the subsidy.

10% Temporary Wage Subsidy

The 10% Temporary Wage Subsidy (TWS) was one of the first relief measures announced as a way to provide relief to businesses by reducing payroll remittances. To be eligible, an employer must have a business number, a payroll account and be paying remuneration to employees who are employed in Canada. Qualified employers include individuals (excluding trusts), partnerships, non-profit organizations, registered charities and Canadian-controlled private corporations (required to have a business limit of greater than nil on their last taxation year ending before March 18, 2020). The subsidy claimed must be reported as income for the year it was received. The TWS has no impact on employee remuneration and deductions.

The subsidy equates to 10% of remuneration paid, up to $1,375 for each eligible employee to a maximum of $25,000 per employer. Eligible employers can claim the subsidy over the period of March 18 – June 19, 2020. The calculated subsidy reduces the income tax remittance made by the eligible employer. It does not reduce remittance in respect of Canada Pension Plan contributions or Employment Insurance premiums.

There is currently no application process. It is expected that employers maintain a copy of records to show remuneration, income taxes and the number of eligible employees during the period the subsidy was claimed. More details are expected to be released on reporting requirements.

The subsidy calculation should be conducted internally, as the CRA (and likely most payroll providers) will not determine the allowable subsidy. The calculation should be conducted for each pay period until the employer reaches the maximum benefit. If the subsidy calculated is greater than the remittance, the additional subsidy amount can be carried over to a future period, even if it falls outside of the indicated period.

The TWS and the CEWS are separate programs, so an employer that is eligible for both programs can access both, but any amount received under TWS reduces the amount obtainable through CEWS for the same period.

Employment Programs

As you consider your options regarding your workforce, you should be aware of the recent changes to the BC Employment Standards Act that extend job-related protections for employees who are on leaves of absence related to COVID-19. Such employees have the right to return to the same (or very similar) job once they no longer require the leave of absence.

Despite the above-noted wage subsidies (and some of the loan and tax options we will discuss later in this guide) many employers may still be considering how to downsize their workforces during this difficult time. Terminating or laying off* employees may mean that employees are entitled to benefits through the federal Employment Insurance (EI) program or the new CERB program.

* Our employment lawyers would like to remind you that there are significant legal considerations at play if you’re considering layoffs. You may wish talk to someone about a Workforce Adjustment.

CERB

+        provides $500 per week to those who qualify for up to 16 weeks;

+        available to those who have stopped working due to COVID-19, those who are eligible for EI benefits/EI sickness benefits, or those who have exhausted EI benefits between December 29, 2019 and October 3, 2020;

+        first-time applicants cannot have earned more than $1,000 in employment or self-employment income for 14 or more consecutive days within the applicable four-week claim period;

+        for subsequent applications, applicants cannot have earned more than $1,000 in employment or self-employment income for the entire applicable four-week claim period;

+        requires monthly applications;

+        employees who are re-hired by their employers may have to repay CERB if they receive the CERB and employment income over the same period; and

+        anyone who became eligible for EI after March 15, 2020 will receive CERB, rather than EI benefits.

EI

+        provides an employee with a maximum benefit of $573 per week;

+        the one-week waiting period has been waived for those accessing EI as a result of COVID-19;

+        available to employees who have lost their jobs or who are unable to work because they are sick or quarantined;

+        employees must have paid into the EI program and worked a minimum of 600 hours in the last 12 months (or since their last EI claim).

Many employers we talk to are doing everything they can to avoid terminating or laying off (yes, employment lawyers, we get it, risky) their workforce. The federal government has some workforce adjustment programs that might make some of these difficult decisions and considerations easier. Below, we highlight the Federal Work Sharing Program, Supplemental Unemployment Benefit plans, the Canada Summer Jobs Program and the Temporary Wage Boost for Essential Employees.

Federal Work Sharing Program

The federal Work Sharing Program is administered through Canada’s EI program and is designed to allow employers to work with employees to distribute hours among staff to avoid layoffs. Under the workshare program, groups of employees (called a Work Sharing Unit) agree to reduce their hours by 10% to 60% and receive pay from their employers for their working hours and EI for the time they are off due to the reduction in hours.

A Work Sharing Unit (WS) must comprise of at least two employees and should include all employees with similar job duties, who share a common job description, or who perform similar work. A WS should not include employees who help generate work or are essential to the recovery of the business.

The Work Sharing Program was initially industry-specific, but has been extended to businesses, public corporations and not-for-profit employers who are experiencing a reduction in business due to COVID-19. For eligible organizations seeking to make use of the Work Sharing Program due to COVID-related downturns, the federal government has increased the maximum duration of the federal Work Sharing Program from 38 weeks to 76 weeks and waived the requirement to file a recovery plan along with the Work Sharing Program application.

Employers must submit their application to the Work Sharing Program 10 calendar days before the requested start date. Not only does the Work Sharing Program application require applicants to identify all employees in a WS, but the employees must have a union or employee representative who consents to entering into a Work Sharing Agreement on behalf of the WS.

While participating in the Work Sharing Program does allow an employer to avoid layoffs, we found it challenging to come up with an effective plan for redistributing work across a WS. Participation in the Work Sharing Program is accompanied by heavy reporting requirements for both employers and employees.

As previously noted, the federal government announced that anyone who became eligible for EI after March 15, 2020 for reasons related to COVID-19 will receive CERB, rather than EI benefits. However, the Service Canada website suggests that anyone applying for EI in connection with a Work Sharing Program will receive EI Benefits and not CERB.

Federal Supplemental Unemployment Benefit Plan

Employers can apply to have a Supplementary Unemployment Benefits (SUB) plan approved by Service Canada. A SUB plan permits employers to top up certain EI benefits (to a maximum of 95% of an employee’s normal weekly earnings). Employers can apply to have SUB plans in place to top up EI benefits for “temporary stoppages of work” and “illness, injury or quarantine.”

Well-meaning employers who layoff employees and then top up EI benefits without first registering a SUB plan with Service Canada will not ultimately be getting money to their employees; Service Canada will consider any payments made without prior approval as insurable earnings and deduct such payments from an employee’s EI benefits. In addition, an employee whose net income (including EI and SUB payments) exceeds $67,750 (1.25 times the maximum insurable earnings for 2020) may have to repay some of the EI benefits they received.

Employers who apply to have a SUB plan in place can restrict the plan to certain groups of employees, certain types of unemployment and can indicate the duration for which they will provide the top-up. A SUB plan can help employers ensure key staff members take home up to 95% of their full salary while laid off. This may help ensure that employees do not feel pressured to look for new employment after being laid off and, in turn, will help keep workforces intact when it comes time to return to work.

As previously noted, the federal government announced that anyone who became eligible for EI after March 15, 2020 will receive CERB, rather than EI benefits. This potentially impacts SUB programs in two ways: (i) CERB payments are marginally lower than the maximum EI benefit, which means SUB programs could become more costly to employers, (ii) and the federal government has not addressed if or how the SUB program applies to CERB. Service Canada is still approving new SUB plans (or changes to existing plans) with a quick turnaround time. Our advice is that businesses who wish to keep this top-up option open should register SUB plans with Service Canada, as we are hopeful that there may be a change to CERB coming that would allow employers to top up CERB payments. This would be consistent with the federal government’s position that business should be doing all they can for their employees.

Canada Summer Jobs Program

In an effort to encourage employers to provide work experience for Canada’s youth during the COVID-19 pandemic, the federal government has announced temporary changes to the Canada Summer Jobs Program.

The intention behind the Canada Summer Jobs program has been to ensure meaningful summer work experience for young people between the ages of 15 and 30 (you heard it here first; anything over 30 is not youthful). The federal government will be offering wage subsidies to non-profits, public sector employers and private sector employers with up to 50 full-time staff.

The Canada Summer Jobs call for applications for the 2020 season closed on February 28, 2020 and it is currently unclear if the government will reopen the application process to allow additional employers to participate in this program. The federal government has indicated it will be working with Members of Parliament to allow employers who provide essential services (but who did not previously apply to the program) to participate.

The temporary changes announced on April 22, 2020 include:

+         increasing the wage subsidy for private and public sector employers to up to 100% of the applicable minimum wage;

+         extending the end date of eligible employment from August 28, 2020 to February 28, 2021; and

+         providing employers with the ability to participate in the program with part-time staff.

Temporary Wage Boost for Essential Workers

The federal government has announced its intention to provide a monthly top-up payment to essential workers (for example, grocery store employees, food supply workers, those who provide care to the elderly, employees who work in essential retail services and others) who earn less than $2,500.00 per month.

We will provide updates to this program as more details are made available.

Loans

Business Development Bank of Canada (BDC) Working Capital Loan

BDC is offering working capital term loans of up to $2,000,000. During year 1, only interest is payable. During years 2 and 3, 40% of the loan is repayable. A balloon repayment on the final 60% of the loan is due at the end of year 3. All loans require guarantees. For businesses that do not already have a relationship with BDC, there will be a substantial amount of reporting requirements in order to receive loan approval. The approval and underwriting process is expected to take anywhere from 4 to 6 weeks.

BDC Business Credit Availability Program (BCAP)

BDC is working in conjunction with financial institutions to provide loans for small and medium sized enterprises (SMEs). These loans are intended to help businesses that are struggling with cash flow during the crisis. Eligible businesses must have been financially viable prior to the crisis.

Loans differ based on the size of the business (i.e. amount of revenue). The maximum loans available are for up to $6,250,000. 80% of the financed amount is provided by BDC and 20% is provided by the business’ financial institution. Only interest is payable during the first year. Financial institutions will be responsible for underwriting and payment processing. Businesses should contact their financial institutions to apply. Check out our Guide to Working with Banks to Access Relief or the Webinar recording on this topic.

EDC Business Credit Availability Program (BCAP)

Export Development Canada (EDC) is working in conjunction with financial institutions to support businesses who require short term liquidity to meet their cash flow needs during the crisis. This loan program is not available for dividend payouts, shareholder loans, bonuses, or repayment or refinancing of other debt.

Under this program, loans are available to a maximum of $6,250,000 at a 1.8% interest rate, which will be payable in quarterly installments. There is an opportunity for an interest payment deferral. EDC will guarantee 80% of the loan, which will be either a set term or revolving loan. Repayment of the loan is due within one year, but renewal terms may be renegotiated with your financial institution. The financial institution is responsible for the underwriting.

This program is yet to be available, but it is advised to contact your financial institution as they will be administering the program.

Check out our Guide to Working with Banks to Access Relief or the Webinar recording on this topic.

Canada Emergency Business Account (CEBA)

The Government of Canada has developed a program that is providing loans to SMEs to ensure they have access to capital intended to help with essential, non-deferrable operating costs during the crisis. The loan will be interest-free, partially forgivable and will be managed through eligible financial institutions in cooperation with the BDC. The loan is guaranteed by the Government of Canada. This program officially launched on April 9, 2020.

To learn how to apply, businesses should contact their financial institutions. Most financial institutions have online applications and are able to fund the loan within five days of approval.

Eligible businesses should have been in operation as of March 1, 2020 and be registered with a federal tax account. Since the originally announcement on March 27, 2020, a subsequent amendment was made on April 16, 2020 which expanded eligibility to businesses that paid $20,000 to $1,500,000 in total payroll during 2019.

Loans of up to $40,000 are available. If the full loan is repaid by December 31, 2022, then 25% of the loan – up to $10,000 – is forgivable.

Check out our Guide to Working with Banks to Access Relief or the Webinar recording on this topic.

Canada Emergency Commercial Rent Assistance (CECRA)

On April 16, 2020, the Canada Emergency Commercial Rent Assistance (CECRA) was announced as an additional relief measure for small businesses. This program reduces rent by 75% for small businesses that have been affected by the crisis. The program offers loans, some forgivable, to commercial property owners who will in turn lower or forgo the rent for their small business tenants. The program is expected to be available for a three month period, retroactive from April to June.

To qualify for CECRA, small businesses must pay less than $50,000 per month in rent and, due to COVID-19, must have temporarily ceased operations or have experienced at least a 70% reduction in revenue.

CECRA is expected to be operational by mid-May, with further details to be announced in the coming weeks.

Check out our Guide to Working with Banks to Access Relief or the Webinar recording on this topic.

Deferrals

Mortgage Payment Deferral

Mortgage deferrals are being offered to businesses by financial institutions. This initiative is intended to help businesses curb potential cash flow issues. The deferral will be available for up to a six-month period and will apply to both principal and interest. Interest will continue to accrue on the outstanding principal during any deferral period. Once the deferral period is over, the missed payments are expected to be repaid. To determine eligibility and details of the deferral, it is advised to contact your mortgage lender.

WorkSafeBC Deferral

WorkSafeBC has postponed the payment deadline for Q1 premiums. Employers who report their payroll and pay WorkSafeBC premiums on a quarterly basis have until June 30, 2020 to pay Q1 premiums without penalty. Employers may wish to report Q1 payroll regardless to ensure they have an accurate account balance and that their clearance status is not negatively impacted. Employers who report and pay WorkSafeBC premiums annually do not need to report their 2020 payroll or pay 2020 premiums until March 2021.

For holders of Personal Optional Protection, premiums that were regularly due on April 20 can now be deferred until June 30, 2020 without risking cancellation of coverage or negatively impacting clearance status.

Federal Tax Filing and Payment Extensions

The table below summarizes tax filing and payment extensions. The following table includes extensions granted to individuals, businesses, trusts and other entities. Deadline extensions apply to certain tax balances due, as well as installments, under Part I of the Income Tax Act.

Deferral of GST/HST remittance

GST/HST payments have been deferred until June 30, 2020 for the following GST/HST registrants:

+        Monthly filers remitting amounts collected for the February, March and April 2020 reporting periods;

+        Quarterly filers remitting amounts collected for the January 2, 2020 through March 31, 2020 reporting period; and

+        Annual filers whose GST/HST return or installments are due in March, April, or May 2020 and who are remitting amounts collected and owing for their previous fiscal year and installments of GST/HST in respect of their current fiscal year.

GST/HST returns are still required to be filed by their regular deadlines, however the Canada Revenue Agency has stated that no penalties will be imposed for late returns, provided they are filed by June 30, 2020.

Deferral of Customs Duty Payments

Customs duty payment deadlines for imported goods related to statements of account for March, April and May have been deferred to June 30, 2020. These amounts are normally due to be submitted to the Canada Border Services Agency as early as the end of March 2020. No interest or penalties will accumulate on these amounts during this period.

Provincial Tax Extensions and Reductions

Effective March 23, 2020, tax filing and payment deadlines for the following sales taxes are extended until September 30, 2020:

+        provincial sales tax;

+        municipal and regional district tax;

+        tobacco tax; and

+        motor fuel tax.

The deadline for filing BC logging tax returns normally due between March 18, 2020 and May 31, 2020 has been deferred to June 1, 2020.

The following tax changes announced in the BC Budget 2020 will be postponed until further notice:

+        eliminating the PST exemption for carbonated beverages that contain sugar, natural sweeteners, or artificial sweeteners; and

+        expanded registration requirements for Canadian sellers of goods, along with Canadian and foreign sellers of software.

Delayed Carbon Tax Increase

Carbon tax rates will remain at their current levels until further notice. The tax measure announced in the BC Budget 2020 aligning the carbon tax rates with the federal carbon pricing backstop is also postponed until further notice.

Reduced School Tax Rates for Businesses

School tax rates for commercial properties (Classes 4, 5 and 6) will be reduced by 50% for the 2020 tax year. This is intended as relief for commercial property owners and tenants.

Specific Programs for Charities and Not-For-Profits

On April 21, 2020, the federal government announced $350 million in emergency funds to support charities and not-for-profit organizations through the Emergency Community Support Fund (“ECSF”). The ECSF will flow through national organizations that have the ability to quickly disperse funds to local organizations serving vulnerable populations, such as United Way Centraide Canada, Canadian Red Cross and Community Foundations of Canada.

ECSF will support activities like increasing volunteer-based home deliveries of groceries and medications, provide transportation services for seniors or those with disabilities who need to attend appointments, staff help lines and assist vulnerable populations in accessing government benefits.

ECSF will also provide training, supplies and supports to volunteers so they can continue to make their invaluable contributions to the COVID-19 response and boost virtual contact. Further details, such as eligibility requirements will be provided in the coming weeks.