Navigating the Canada Emergency Wage Subsidy for Canadian Employers

In light of the COVID-19 pandemic, the Canadian government has rolled out a series of financial assistance measures. One of the most significant is the Canada Emergency Wage Subsidy for Canadian employers. I hope this guide provides clarity during these challenging times, and most importantly, I hope you and your loved ones are safe. 

Understanding the Wage Subsidy 

The Canadian government offers a wage subsidy covering up to 75% of an employee’s first $58,700 in wages. This translates to a maximum subsidy of $847 weekly for each employee. 

To illustrate, consider Kartik Welding Inc., an Ontario-based company with four employees, including its owner. While each employee earns $3,000 monthly ($36,000 annually), Kartik, the proprietor, draws a monthly salary of $7,000 ($84,000 annually). Given a 15% revenue drop in March 2020, Kartik Welding Inc. is eligible for a wage subsidy totaling $10,138 for its four employees. However, since Kartik’s salary exceeds the $58,700 cap, his subsidy is capped at $847 weekly or $3,388 monthly. 

Owner-specific Rules 

Company owners and their families are subject to specific regulations. For instance, if Kartik had never been an employee at his firm and only drew dividends, and then started receiving a weekly salary from March 15, 2020, hoping to benefit from the wage subsidy, he would be ineligible. This is because he wasn’t an employee before March 15, 2020. 

Eligibility Guidelines 

Canadian registered businesses can apply if they can prove a 15% revenue drop in March and a 30% decrease in the following months. For instance, if Kartik Welding Inc. experienced a 15% sales drop in March and over 30% in April and May 2020 compared to 2019, they would qualify for the subsidy for these months. 

Additionally, there’s an alternative method to determine revenue. Companies can compare their revenue to the average of their January and February earnings. This method benefits rapidly growing companies. Once a business selects an approach, it must stick to it monthly.