CEWS Webinar Follow-up

Last Tuesday, we partnered with Wilde & Company Chartered Professional Accountants to deliver a webinar walking you through the new Canada Emergency Wage Subsidy (CEWS) and answering some of your most commonly asked questions. 
This was one of our most well attended webinars yet, and we can't thank you enough for helping us to raise almost $2,000 for local Edmonton-area food banks. If you missed the live webinar, you can watch a recording of it here.
We also received dozens of questions from participants during the webinar. We didn't have time to get through all of them in the hour, but we did see some common themes emerge. Below is a short Frequently Asked Questions (FAQ), with answers. If you don't see your question answered below, feel free to reach out to us directly. We know this is a stressful time for so many businesses, and we are available to assist. 
Frequently Asked Questions
1.   What is the CEWS, and how do I apply?
The Canada Emergency Wage Subsidy is a program introduced by the federal government to assist employers who have experienced a reduction in revenue related to COVID-19, and is intended to help maintain employees on payroll. The subsidy generally provides 75% of an employee's wages, up to $847 per week. Even if your business has been forced to close temporarily as a result of COVID-19, you and your employees can be eligible. 
The subsidy is currently scheduled to last 12 weeks, though the government has the ability to extend it. The program is divided into three 4-week periods: March 15 - April 11, April 12 - May 9, and May 10 - June 6. 
A wide range of employers are eligible, including: individuals, taxable corporations, non-profit organizations and charities, partnerships and more. Notably, public institutions are not eligible for the subsidy. Self-employed people would qualify if they have payroll and take a salary. 
More information, and a link to apply, can be found here.
2.   My pay periods don't align with the CEWS periods.  What do I do?
It's likely that your pay periods won't align perfectly with each of the three CEWS periods. That's ok! CEWS is intended to reimburse employers for a portion of their employees' wages. You won't receive the funds before payroll. In fact, you must have paid your employees before including them on your application. The government has created a wage subsidy calculator that will assist employers in understanding how to calculate their wage subsidy. It can be accessed here.
3.   What earnings qualify for the wage subsidy?
Generally speaking, if you pay remittances on the earnings, it qualifies. Wages, bonuses, commissions, fees, etc. are all eligible and can be included in the application. Vacation pay and pay an employee receives from an employer while off sick also qualifies. 
Some employers have third-party benefits set up for short-term and/or long-term disability pay. This is an example of pay an employee might be receiving that is likely not going to qualify. 
Another question we've received on numerous occasions relates to employees who have been provided with notice of termination for a without cause termination. In these situations, employers are required to give employees notice. Some employees are given working notice, while others receive pay-in-lieu of notice. The latter is commonly called severance pay or termination pay. This kind of lump sum payment, called a "retiring allowance" for the purposes of the Income Tax Act is not eligible for the wage subsidy. However, employees who have been given working notice and remain on payroll receiving their regular wages are eligible, in accordance with the legislation that created the CEWS program. However, using the CEWS program to provide working notice may be contrary to the whole intent of the program which is to maintain employment relationships rather than terminate them. As a result, we caution employers that the use of the CEWS program to provide working notice may ultimately be disallowed even though there are currently no impediments to doing so.
The government has stated that employers who take advantage of the program will face serious consequences. Indeed, there are steep fines and penalties for employers who try to "game the system". As the intention of the CEWS program is to keep employees on payroll, as opposed to funding terminations, we are cautioning employers who intend to use the subsidy to fund working notice of termination, particularly where working notice extends by the applicable statutory termination notice.
4.   When should I recall my employees?  And how do I do that?
This program is intended to assist employers who have employees that are still working, as well as those who have had to lay-off some or all of their staff. It is important to remember that in order to include an employee on your application for a particular period, they must have already been recalled and paid for that period of time. 
You can retroactively recall and pay employees. As the CEWS pays a higher maximum amount than the Canada Emergency Response Benefit (CERB), this could result in more money for your employees. However, CEWS is a reimbursement to employers. This means you have to have paid them before including them on your application. For some employers who have been forced to close, this might not be feasible. 
If you are going to retroactively recall employees, consider doing so in conjunction with the CEWS period for which you are eligible. For example, if you recall and retroactively pay employees to April 1 but don't qualify for the first period (March 15 - April 11), you will not be eligible for a reimbursement of the period from April 1 to April 11. 
Additionally, you should keep in mind that employees who go 14 consecutive days within a single CEWS period without pay are not eligible for the remainder of that period. So using the April 1 example again, if employees had not received any pay from March 15 - March 31, they would not be eligible for CEWS for the remainder of that period (up to April 11). 
Finally, you should be cognizant in Alberta of the Employment Standards Code requirement that employees who are recalled from a temporary layoff must be given written notice 7 days in advance of their return to work date. For employees who are going to be recalled to receive CEWS but not be required to return to work (because the business is closed, for example), this 7-day notice is likely not going to be a barrier. Nonetheless, you will need to provide written notice of recall. 
5.   Should I include everyone on my CEWS application?
There are many factors that will go into your decision of whether to apply for CEWS, and for which employees. One such factor is that it's possible that not all of your employees will be better off receiving CEWS. For example, if employees are part-time workers, they may be receiving more from CERB than they would see in the wage subsidy. Further, if your organization is not positioned to top up the remaining portion of their wages not covered by CEWS, CERB may continue to be a better option for employees. 
Employers in Alberta should also be aware of the "deemed termination" provision in the Employment Standards Code relating to temporary layoff. This has recently been temporarily extended by the provincial government from 60 days to 120 days. This means that employees who have been on a temporary layoff for more than 120 days and who have not received wages or payments into a benefit or pension program are deemed to have been terminated. Termination pay is then owed to the employee. Depending on how long a layoff has lasted, the CEWS program may assist you to recall that employee before the deemed termination takes effect. This means the employment relationship continues and no termination pay would be owing. 
These FAQs represent just some of the questions we have received, and continue to receive, about the Canada Emergency Wage Subsidy. As you can see, the answers are often complex and involve many different considerations. We strongly suggest that you seek professional legal and accounting assistance to ensure you do not find yourself offside the rules. As always, you can contact any of the Neuman Thompson lawyers here. For specific accounting needs, you can contact Wilde & Company here

The information in this update is intended as general information and should not relied on as legal advice.