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COVID- 19 and Entrepreneurial Business – Canada Emergency Wage Subsidy ( CEWS ) for Dummies


Well, here we are a month in, and for myself and most of the clients I have spoken with, I think the word coping rather than adjusting would best describe the present mindset. There is still an element of shock to it all, and while, as business owners, we are dealing with many new challenges and making the difficult decisions required, it remains far from feeling like a new normal.

This past weekend, in an unprecedented Easter Saturday session, Parliament enacted the Canada Emergency Wage Subsidy ( CEWS ) into law. Fortunately, the final version of the legislation addressed many of the problematic issues identified following the release of the initial backgrounder by the Department of Finance and, as a result, the subsidy will have much broader application.

There is a vast amount of commentary already available online that sets out the details of the program, and so my intention here is to focus on some of the more practical considerations in the context of entrepreneurial businesses.


The CEWS provides a cash subsidy to employers of up to 75% of remuneration paid to an eligible employee, to a maximum of $847 per week, which equates to a gross remuneration of $1,129 per week. The subsidy applies to remuneration paid in the 12 week period between March 15 and June 6, 2020.

This is a meaningful subsidy and should enable employers in many circumstances to retain or recall employees they would otherwise not be able to support.

Who Qualifies for the Subsidy?

The subsidy is available only to employers who have experienced a material decrease in revenue, defined as a decline of 15% or more in March 2020 and 30% or more in April or May 2020. The initial proposal measured the decline by comparing revenue in those months to the same month in the prior year. For the reasons set out in my previous communication, this was disadvantageous in some common circumstances and would have disqualified many employers seriously impacted by this crisis.

There is now much greater flexibility provided to measure the decline in revenue in order to determine if you qualify for the subsidy program:

  • You can compare revenue to the same month in the prior year based on traditional accrual accounting.
  • You can compare revenue to the same month in the prior year using the cash method of accounting. This will be beneficial in circumstances where a company continues to operate and generate invoices ( and accounting revenue ) , but where cash receipts have dried up.
  • You can compare revenue in March, April and May 2020 to the average revenue in the months of January and February 2020, on either a cash or accrual basis. This will be beneficial where the business has grown since last year and current revenue exceeds that of the prior year but has decreased sharply relative to the first two months of 2020.

If you qualify for one period, you will automatically be deemed to qualify for the next period. In other words, if you suffered a decline in revenue in March 2020 of at least 15% based on one of the approaches described above, you will qualify for the subsidy for remuneration paid in both the first qualifying period of March 15 to April 11, as well as the second qualifying period of April 12 to May 9.

How is the Subsidy Calculated?

On its face, the calculation of the subsidy appears straightforward, but depending on the circumstances, there can be some complexity.

For arms-length employees, the subsidy is equal to the greater of:

  • 75% of eligible remuneration paid in respect of that week to a maximum of $847.
  • The least of:
    • 100% of eligible remuneration paid in respect of that week
    • 75% of baseline remuneration
    • $847

In simple terms, for pre-existing arms-length employees where there has been no change to their compensation, the subsidy will be 75% of compensation to a maximum of $847.

However, in cases where there has been a reduction in the employees wages, 75% of their “baseline remuneration” will be greater than 75% of their current remuneration, and the subsidy will be calculated on that higher figure.

For non-arms length employees, primarily shareholders and family members, these rules are similar, and the subsidy will be the lesser of:

  • The actual amount of remuneration paid in the particular week
  • $847.00
  • 75% of the “baseline” remuneration.

Baseline remuneration is the weekly average remuneration paid to the non-arms length employee during the period between January 1, 2020 and March 15, 2020. If no remuneration was paid during this period, the baseline remuneration would be nil.

This means that non-arms length employees will not qualify for the subsidy if:

  • They go on the payroll for the first time in 2020 after March 15, 2020.
  • Up until March 15, 2020 they have been receiving “compensation” in the form of dividends.


Action Plan

Determine if you qualify

  •  For many small and medium size businesses, revenue is not tracked closely on a monthly basis, or certainly not on a year over year comparative basis. Therefore, as a first step, you will need to extract from your accounting system your reported revenue for the months of March, April and May 2019. This figure will generally be revenue based on accrual accounting; in other words, it reflects invoices issued in the month rather than cash received.
  • Determine your revenue for the month of March 2020. Again, the records extracted from your accounting software will, in most cases, reflect as revenue the invoices issued in the month of March 2020.
  • Compare the two figures to determine if the revenue in March 2020 is 85% or less than the revenue in March 2019. If so, you will qualify for the subsidy for remuneration paid between March 15 and May 9, 2020.
  • If there is no revenue decrease, or it is less than 15%, conduct the same exercise, but on a cash basis. This will be a little more work as your accounting system will generally not be tracking revenue based on cash received and you may need to extract this from your general ledger bank account detail.
  • Finally, if on both an accrual basis and a cash basis you have not experienced a 15% decline in year over year revenue, you may use the average of January and February 2020 revenue as the basis for comparison if invoices and/or cash receipts have declined sharply in March.

Remember, if your revenue has declined by 15% in March, you qualify for the subsidy for remuneration paid for the first two qualifying periods – March 15 to April 11 and April 12 to May 9. If you then do the same exercise for revenue in April, you will automatically qualify for the subsidy in the third, and so far final, qualifying period of May 10 to June 6 if your revenue had decreased by at least 30%.

Entrepreneurs generally have a good sense of their revenues, or at least their bank account balances and so will likely know if the revenue decline is greater year over year or compared with the first two months of 2020. In most cases, the determination will be quite straightforward, however, there will be certain circumstances where it is more complicated, such as with sales between related corporations, where there are special rules, or businesses where revenue is calculated based on a percentage completion basis and the figures are not readily available from internal accounting records on a month by month basis.

Calculate the amount of the subsidy

The subsidy is based on the remuneration paid in three “Qualifying periods”: March 15 to April 11, April 12 to May 9 and May 10 to June 6. Therefore, you need to review the remuneration paid to employees in each of those periods to calculate the amount of subsidy.

To date, I am not aware of the payroll service companies providing assistance with these calculations. That may change, but unless and until then, you will need to do the math yourself, likely using a spreadsheet.

Depending on the number of employees and the circumstances of their remuneration, the calculations may be quite straightforward. If you have 5 employees and they all make at least $1,129/week, the subsidy is five times the maximum subsidy of $847. For non-arms-length employees –  shareholders and family members – who have been on a regular payroll throughout 2020 at a level exceeding $1,129/week, the subsidy will also be the maximum of $847. A little more work will be required where there are employees earning less than $1,129/week and you need to calculate 75% of the amount they are being paid.

Eligible remuneration includes most amounts for which the employer has a withholding obligation, including regular salaries, wages, commissions as well non-cash benefits such as automobile allowances.


Applications are made online through the CRA My Business Account portal or a web based application that is still in development. If you have not yet registered for My business Account, you can do so at The original guidance indicated the application would be available in four to six weeks from April 1.

It is interesting to note that you have until September 30, 2020 to submit the application, and so in cases where the subsidy is not immediately required in order to fund remuneration there is no urgency or need to submit the application during the Qualifying periods.

Detailed information supporting the decline in revenue and subsidy calculation will not be required at the time of application, however, you should ensure that you are retaining supporting documents and calculations as there will almost certainly be some subsequent audit activity. Significant penalties of 25% of the value of the subsidy in addition to a full repayment have been announced in circumstances where fraudulent or inflated claims are made.

Interaction with subsidy other programs

The amount of CEWS subsidy you are otherwise entitled to is reduced by any benefit you have received in a qualifying period under the 10% temporary wage subsidy program. Many companies took advantage of the immediate benefit provided by the 10% wage subsidy and so will need to ensure that when applying for the CEWS the appropriate adjustment is made.

The Canada Emergency Response Benefit ( CERB ) which provides individuals with up to $2,000 a month if they have lost employment, is entirely independent of the CEWS, which provides a subsidy to the employer. Finance has indicated that it is considering approaches to limit any duplication in these programs where, for example, a laid off employee claiming CERB is rehired by the employer.

Payroll Deductions and remittances

The receipt of any CEWS does not change the obligation of the employer to withhold and remit the usual amounts for EI, CPP and income tax based on gross remuneration. However, in cases where an employee is on leave with pay and the employer is eligible to make a claim for that employee under the CEWS, the employer can apply for a refund of 100% of the employer contribution to CPP and EI. This only applies where the employee is paid but does not perform any work in that week.

In Conclusion

The CEWS will provide meaningful assistance to many employers and will assist in preserving the jobs of employees who could otherwise not be supported. There is a bit of work involved in the calculations as described above – let us know if we can help.

On the good news front, the curve does seem to be flattening generally and we are beginning to see the economies of countries that preceded us in this crisis start to open up. For ourselves and many of our clients, we have been forced to look at our businesses more critically than ever before and to find new and innovative ways of doing things that will ultimately be beneficial when all of this over.

This will end, and when it does I am confident that we will all be more efficient, more resilient, and not least more grateful for many things we previously took for granted.