The 2021 Federal Budget outlines the extension of various relief programs as well as updates to eligibility requirements. The COVID-19 pandemic continues to cause significant hardship to Canadians and businesses and we guide you through what the Budget states for both business and individual support programs.
Canada Emergency Wage Subsidy (CEWS)
The federal government has introduced a number of programs to provide financial support for businesses and other entities negatively affected by the COVID-19 pandemic. The largest of these programs is the Canada Emergency Wage Subsidy (CEWS) with an estimated cost of $84.6 billion in the fiscal year 2020-2021, and a further $26 billion in the financial year 2021-2022 including the extension of the program announced within the Budget. There are significant recipients of this subsidy and there has been concern that the program is just too generous. The Budget proposes to increase the CEWS program to September 25, 2021. New rates under the program were announced for the four periods that run from June 6, 2021, to September 25, 2021.Any extension of the program after September 25, 2021, will be determined by rates set by regulation.
The Budget proposes a gradual reduction in subsidy rates beginning on Independence Day, 2021. The maximum CEWS subsidy amount in qualifying periods 17 – 20 will range from 75% (the current maximum) in Period 17 to 20% in Period 20. This maximum amount is reached when the comparative revenue decline is a minimum of 70%. For revenue declines of at least 50%, but less than 70%, there is a base rate plus a variable rate based on the revenue decline over 50%. The base rate declines from 40% to 10% over the four periods 17 -20, and the maximum variable rate drops from 35% to 10% over this same time frame.
In addition, the Budget proposes a requirement for publicly traded companies to repay the wage subsidy received for qualifying periods that start after June 5, 2021, where the aggregate compensation for certain specified executives in the 2021 calendar year exceeds the aggregate compensation for such executives paid during the 2019 calendar year. For the purposed of this proposed rule, a publicly listed company’s specified executives will include its Named Executive Officers—whose compensation is disclosed in its annual information circular—including its chief executive officer and chief financial officer, along with three other most highly compensated executives. The maximum repayment will be the amount of subsidy received for qualifying periods that start after July 5, 2021, to the extent of the increase in compensation of its specified executives.
Canada Emergency Rent Subsidy (CERS)
The Canada Emergency Rent Subsidy (CERS) was introduced in October 2020 to provide support to tenants and property owners through a subsidy for their rent or property ownership costs. It uses the same methodology as the CEWS program to determine comparative revenue declines. The CERS program has an estimated cost of $4.1 billion in the financial year 2020-2021 and with the extension announced during this budget, it’s projected to cost an extra $4.3 billion in the fiscal year 2021-2022.
The Budget proposes to increase the CERS program by an equivalent additional four-month period from June 6, 2021 to September 25, 2021. The proposals gradually end the bottom subsidy rate, beginning on July 4, 2021. Currently, the maximum base rate subsidy for the CERS is set at 65% of qualifying expenses. With these proposals, the utmost interest rate subsidy will gradually decline each period from 65% (effective until July 3, 2021) to twenty (effective beginning August 29 and up to September 25, 2021). The current 25% rate for the Lockdown Support will remain in effect from June 6, 2021, to September 25, 2021.
The Budget also proposes to limit eligibility for both the base rate subsidy and the Lockdown Support to organizations that demonstrate a decline in revenues of more than 10%, beginning July 4, 2021. The Budget proposes to provide legislative authority to the Federal Government to extend the base rate subsidy and Lockdown Support beyond September 25, 2021, should it be determined that an extension of the CERS is warranted.
Canada Recovery Hiring Program (CRHP)
The Budget proposes to introduce the new Canada Recovery Hiring Program (CRHP), which will provide eligible employers with a subsidy of up to 50% of the incremental remuneration paid to eligible employees between June 6, 2021, and November 20, 2021. This new program is meant to offset some of the additional costs that employers combat as they reopen, either by increasing wages, hours worked, or by hiring more staff.
Eligible employers are going to be ready to claim the upper of the CEWS or the new proposed subsidy in respect of a qualifying period, but not both. Generally, employers that are eligible for the CEWS will also be eligible for the CRHP; however, only corporations that are Canadian-controlled private corporations will be eligible for the CRHP.
To qualify for the CRHP, an eligible employer will need to have experienced a decline in revenues sufficient to qualify for the CEWS. For greater certainty, as with the CEWS, the proposed measures require that for periods ending after July 4, 2021, an eligible employer will have to experience a decline in revenues of more than 10% in order to qualify.
The amount of the CRHP that can be claimed in respect of each qualifying period will be equal to the employer’s incremental remuneration times the applicable recovery wage subsidy rate (the hiring subsidy rate) for the period. The maximum recovery wage subsidy rate is 50% for the period beginning June 6 and ending on August 28, 2021, and declines gradually to a maximum of 20% (for the period beginning October 24 and ending on November 20, 2021).
Incremental remuneration for a qualifying period is determined on a weekly basis by calculating the difference between an employer’s total current period remuneration, in respect of a week in the qualifying period, and its total base period remuneration, in respect of a week in the baseline period of March 14 to April 10, 2021.
Eligible remuneration for CRHP is that the same as eligible remuneration for CEWS. The wage recovery subsidy rate will apply to the lower of eligible remuneration paid in respect of a given week and $1,129.