Employment Insurance (EI)

Please go to https://www.canada.ca/en/services/benefits/ei/notice-covid-19.html for more information

  • Individuals will be eligible for a benefit if they have 120 insured hours within the prior year
  • The amount of the benefit will be a minimum of $500 per week before taxes ($300 per week for extended parental benefits)
  • Those transitioning from the CERB administered by the CRA will need to apply for EI
  • Those transitioning from the CERB administered by Service Canada should have their coverage continue automatically (as long as they did not indicate they returned to work full-time on their CERB report)

Canada Recovery Benefit (CRB)

Please go to https://www.canada.ca/en/revenue-agency/services/benefits/recovery-benefit.html for more information

  • Who can apply:
    • During the 2-week period the individual was either not working for reasons related to COVID-19 or the individual has a 50% reduction in average weekly income compared to the previous year due to COVID-19
    • The individual did not apply for or receive any of the following benefits:
      • Canada Recovery Sickness Benefit
      • Canada Recovery Caregiving Benefit
      • Short-term disability benefits
      • Workers’ compensation benefits
      • Employment Insurance benefits
      • Quebec Parental Insurance Plan benefits
    • The individual was not eligible for EI benefits
    • The individual resides in Canada
    • The individual was physically present in Canada
    • The individual was at least 15 years old
    • The individual has a valid Social Insurance Number
    • The individual earned at least $5,000 in 2019, 2020, or in the 12 months before the date you apply from any of the following sources:
      • Employment income
      • Self-employment income (including other than eligible dividends)
      • Maternity and parental benefits from EI or other similar provincial programs
    • The individual was, during the period, seeking work either as an employee or in self-employment
    • The individual has not quit their job or reduced their hours voluntarily on or after September 27, 2020
    • The individual has not turned down reasonable work during the 2-week period being applied for (or the 10 previous weeks)
  • Periods that can be applied for:
    • The benefit periods are fixed two week intervals.
    • Individuals are eligible for a maximum of 13 periods (or two weeks each) of benefits
    • The program is a temporary program that is open between September 27, 2020 and September 25, 2021
    • The individual must apply for the benefit within 60 days after the period has ended
    • This program provides benefits in arrears (i.e. after the period applied for). This is in contrast to CERB which paid benefits in at the beginning of the period
  • Amount of the benefit:
    • The benefit is $1,000 for every two week period
    • The benefit is taxable in the year it is received
    • The CRA will withhold 10% of the payment for income taxes (so $900 will be received in cash by the individual)
    • If the individual’s net income for tax purposes (excluding the CRB) is in excess of $38,000 in the year received, the individual will be required to pay back 50% of that excess

Canada Recovery Sickness Benefit (CRSB)

Please go to https://www.canada.ca/en/revenue-agency/services/benefits/recovery-sickness-benefit.html for more information

  • Who can apply:
    • During the 1-week period the individual
      • is unable to work at least 50% of the time the individual would have otherwise worked as an employee in the week, or
      • they have as a self-employed person reduced the time devoted to their work by at least 50% of the time they would have otherwise worked in the week
    • The reason for the reduction in work is because
      • They contracted or might have contracted COVID-19
      • They have underlying conditions, are undergoing treatments or have contracted other sickness that would make them more susceptible to COVID-19, and
      • They isolated themselves for reasons relating to COVID-19
    • The individual did not apply for or receive any of the following benefits:
      • Canada Recovery Sickness Benefit
      • Canada Recovery Caregiving Benefit
      • Short-term disability benefits
      • Workers’ compensation benefits
      • Employment Insurance benefits
      • Quebec Parental Insurance Plan benefits
    • The individual resides in Canada
    • The individual was physically present in Canada
    • The individual was at least 15 years old
    • The individual has a valid Social Insurance Number
    • The individual earned at least $5,000 in 2019, 2020, or in the 12 months before the date you apply from any of the following sources:
      • Employment income
      • Self-employment income (including other than eligible dividends)
      • Maternity and parental benefits from EI or other similar provincial programs
    • The individual is not receiving paid leave from their employer for the same period
  • Period that can be applied for:
    • Individuals apply on a week-by-week basis.
    • Each individual is eligible for a maximum of 2 weeks of benefits
    • The program is a temporary program that is open between September 27, 2020 and September 25, 2021
    • The individual must apply for the benefit within 60 days after the period has ended
    • This program provides benefits in arrears (i.e. after the period applied for). This is in contrast to CERB which paid benefits in at the beginning of the period
  • Amount of the benefit:
    • The benefit is $500 every week period
    • The benefit is taxable in the year it is received
    • The CRA will withhold 10% of the payment for income taxes (so $450 will be received in cash by the individual)

Canada Recovery Caregiver Benefit (CRCB)

Please go to https://www.canada.ca/en/revenue-agency/services/benefits/recovery-caregiving-benefit.html for more information

  • Who can apply:
    • During the 1-week period the individual
      • is unable to work at least 50% of the time the individual would have otherwise worked as an employee in the week, or
      • they have, as a self-employed person, reduced the time devoted to their work by at least 50% of the time they would have otherwise worked in the week
    • The individual is caring for a child under 12 or caring for a family member who needs supervised care because they are at home for one of the following reasons
      • Their school, daycare, day program, or care facility is closed or unavailable due to COVID-19
      • Their regular care services are unavailable due to COVID—19
      • The person under the individual’s care is (one of the following):
        • Sick with COVID-19
        • At risk of serious health complications if they get COVID-19, as advised by a medical professional
        • Self-isolating due to COVID-19 as advised by a medical professional or government authority
    • A family member is defined to include anyone whom the individual considers to be like a close relative or who considers the person to be like a close relative or the person who considers the individual to be like a close relative
    • The individual resides in Canada
    • The individual was physically present in Canada
    • The individual was at least 15 years old
    • The individual has a valid Social Insurance Number
    • The individual earned at least $5,000 in 2019, 2020, or in the 12 months before the date you apply from any of the following sources:
      • Employment income
      • Self-employment income (including other than eligible dividends)
      • Maternity and parental benefits from EI or other similar provincial programs
    • The individual is the only person in the household applying for the benefit in the week
    • The individual is not receiving paid leave from their employer for the week
  • Period that can be applied for:
    • Individuals apply on a week-by-week basis
    • Each individual is eligible for a maximum of 2 weeks of benefits
    • The program is a temporary program that is open between September 27, 2020 and September 25, 2021
    • The individual must apply for the benefit within 60 days after the period has ended
    • This program provides benefits in arrears (i.e. after the period applied for). This is in contrast to CERB which paid benefits in at the beginning of the period
  • Amount of the benefit:
    • The benefit is $500 every week period
    • The benefit is taxable in the year it is received
    • The CRA will withhold 10% of the payment for income taxes (so $450 will be received in cash by the individual)

Canada Emergency Wage Subsidy (“CEWS” or “the 75% wage subsidy”)

CEWS Changes for July through November 2020

CRA provides full details here
The Big Picture

  • Beginning in period 5 (July 5th – August 1, 2020), Bill C-20 has been passed into law, to continue helping businesses to have workers return through challenges presented by the COVID 19 pandemic and to involve a larger amount of businesses to apply for CEWS.
  • No longer an “all or nothing” approach – now scaled to the direct revenue decrease of business.
  • Accuracy for 2019 and 2020 qualifying revenue becomes more important as it drives the formula for eligible subsidy.
  • Business can use the revenue decline % of the current period or the previous period, whichever is better.
  • CEWS 2.0 will consist of a base percentage for a subsidy as well as a potential top-up subsidy for the business that suffer large and sustained revenue declines.

Eligible Entities

  • Individuals, partnerships, corporations, trusts, NPO’s, charities. Governments, crown corporations, and municipalities are excluded.
  • Entities who have experienced any revenue decrease in a reference period may be eligible for a wage subsidy.
  • Majority of businesses with any type of revenue decline can be eligible to apply for CEWS.
  • Entities are able to elect whether they wish to use January or February or the corresponding month in 2019 for revenue comparisons, regardless of what elections were used in periods 1-4. However the election on the prior reference period must be consistent throughout periods 5 – 10.

Eligible Employees

  • No longer need to pass the 14 day without remuneration test to be eligible for a subsidy on the wages paid for periods 5 – 10.
  • Baseline remuneration will not be relevant in periods 5 – 10 for non-arm’s length employees (with the exception of when the safe-harbor rule applies).

Top-up subsidy

  • Entities that experience over 50% in average revenue reduction can receive a top-up that will increase the subsidy in the claim period.
    • The average revenue reduction is based on the 3 months prior to the current claim period, compared to:
      • Corresponding 2019 3-month average or
      • Average of January & February 2020
  • The top-up subsidy can provide an additional 25% to the base percentage in the claim period.

Safe-harbor Rule

  • In periods 5 & 6, if an entity has a revenue decrease of greater than 30%, the subsidy amount claimed can be the greater of the CEWS 2.0 calculation, or the previous CEWS subsidy of 75%. 


Claiming Period Required Revenue Reduction Reference Period
Period 1-4 PLEASE REFER TO CEWS INFO AS OF JULY 14, 2020
Period 5 July 5 to August 1 1.2 x revenue reduction % (60% max)
  • Greater revenue reduction % of:
    • June 2020 to June 2019
    • July 2020 to July 2019

    Safe harbor rule applies

Period 6 August 2 to August 29 1.2 x revenue reduction % (60% max)
  • Greater revenue reduction % of:
    • July 2020 to July 2019
    • Aug 2020 to Aug 2019

    Safe harbor rule applies

Period 7 August 20 to September 26 1.0 x revenue reduction % 2.0 (50% max)
  • Greater revenue reduction % of:
    • Aug 2020 to Aug 2019
    • Sept 2020 to Sept 2019
Period 8 September 27 to October 24 0.8 x revenue reduction % (40% max)
  • Greater revenue reduction % of:
    • Sept 2020 to Sept 2019
    • Oct 2020 to Oct 2019
Period 9 October 25 to November 21 0.8 x revenue reduction % (40% max)
  • Greater revenue reduction % of:
    • Oct 2020 to Oct 2019
    • Nov 2020 to Nov 2019
Period 10 November 21 to December 19 0.8 x revenue reduction % (40% max)
  • Greater revenue reduction % of:
    • Nov 2020 to Nov 2019
    • Dec 2020 to Dec 2019
Period 11 and onwards December 20 – June 2021 TBD

Canada Emergency Business Account (“CEBA”)

(Updated June 29, 2020)

CEBA loans have opened for businesses that do not have payroll. Previously these loans were only open for businesses that had between 20K and 1.5M of payroll.

The full details of the program can be found at https://ceba-cuec.ca/

Most corporations other than holding companies should be able to qualify for this program as long as they have a bank account and at least $40,000 of expenses per year (including debt service payments). Notably candidates under the expanded criteria would be landlords, doctors, and farmers. Note that partners of professional service firms (i.e. lawyers) “might” be able to qualify, please reach out to your contact at BBLLP for more details.

The key terms of the program are as follows:

  • The business (which could be a sole proprietorship) will receive a loan from their financial institution of $40,000
  • The loan is interest free, payment free, and fee free until December 31, 2022.
  • If $30,000 of the load is repaid by December 31, 2022 then the remaining $10,000 balance will be forgiven

In order for the business to qualify the following criteria must be satisfied:

  • Have a CRA business number (sole proprietorships that don’t have a business number are not eligible)
  • Have an active operating account with a financial institution opened on or prior to March 1, 2020 and was not in arrears on existing borrowing facilities, if applicable with the financial institution by 90 days or more as at March 1, 2020.
  • Has not previously used the program (and the legal entity that contains the business has not used the program)
  • Must acknowledge its intention to continue to operate its business or to resume operations
  • Agree to participate in post-funding surveys conducted by the government
  • The $40,000 of proceeds must be spent on non-deferrable expenses

In addition to the above the business must qualify under one of two streams:

  • Payroll Stream – which requires the business to have paid at least $20,000 in wages during the 2019 calendar year. When qualifying under this stream the business must provide the total wages paid according to the T4 Summary in 2019.
  • Non-Deferrable Expenses Stream – requires the business to submit documentation showing that the business will incur $40,000 in eligible non-deferrable expenses in 2020. This is done in a separate step at a specific government portal and will be reviewed by the government (not the financial institution).

Non-deferrable expenses include the following:

  • Payroll
  • Rent
  • Utilities
  • Insurance
  • Property tax
  • Regularly scheduled debt service
  • Other expenses that cannot be deferred

Non-deferrable expenses do not include the following:

  • Prepayment/refinancing of existing indebtedness
  • Payments of dividends
  • Distributions
  • Increases in management compensation

For the Non-Deferrable Expenses Stream the business must have $40,000 of “Eligible Non-Deferrable expenses” which are defined as follows:

  • Wages and other employment expenses to independent (arm’s length) third parties
  • Rent or lease payments for real estate used for business purposes
  • Payments incurred for insurance related costs
  • Payments incurred for property taxes
  • Payments incurred for business purposes for telephone and utilities in the form of gas, oil, electricity, water and internet
  • Payments for regularly scheduled debt service
  • Payments incurred under agreements with independent contractors and fees required in order to maintain licenses, authorizations or permissions necessary to conduct business
  • When calculating the Non-Deferrable Expenses of a business other COVID-19 government relief should be subtracted (for example if the business received the Canada Emergency Commercial Rent Assistance, the rent expenses should be reduced)

Supplemental Unemployment Benefit Program

  • Pre-existing (i.e. pre COVID-19) plan that allows employers to increase employee’s weekly earnings without impacting EI benefits where:
    • Temporary stoppage of work
    • Illness, injury or quarantine
  • Employee ceases work completely and the employer wishes to “top up” their earnings.
  • What is the benefit? Employee can receive 95% of their normal weekly earnings where EI pays 55% of the weekly earnings up to approximately $54,000 (annualized) and the employer pays the balance.
  • Employer must register the SUB Plan with Service Canada
  • Key steps to registration include:
    • Meet the Plan Requirements – i.e. Prepare a SUB Plan based on the example at this link: Sample SUB Plan
    • Fill out the SUB Plan Registration Form located here: SUB Plan Registration Form
    • Additional documents – some companies may need to submit additional documents as described here: Additional Documents – SUB Plan
    • ROE – to be filled out as required by the SUB Plan. See the following link – ROE for SUB Plan
    • Note:
      • Registration date is the date the plan is submitted to Service Canada
      • Any amounts paid to an employee that is on EI prior to the registration date will be treated as earnings and would likely reduce the employee’s EI benefits
  • CERB and SUB Plan – we presume that the ROE indicating the SUB Plan would allow the employee’s application to still be processed through EI (and not the CERB program).
  • If the employer is eligible for the Canada Emergency Wage Subsidy, it will generally be advantageous to claim the wage subsidy.

Work Sharing Program

  • An agreement between employers, employees and Service Canada that allows groups of employees to share hours of work during a temporary reduction in business activity (that is beyond the control of the employer).
  • The program allows employees to retain more income than regular EI benefits would otherwise provide had the employees been laid off.
  • Must have been in business for 2 years.
  • Demonstrate a temporary shortage of work.
  • Submit and implement a recovery plan for workers to return to full time employment.
  • Individual employees who have the same job description cannot participate in work-sharing while others continue to work normal hours. As work increases, the additional hours of work must be shared equally.
  • Must be able to demonstrate a 10% decrease in sales within the last 6 months.
  • The reduction in work hours (10-60%) must correspond to the number of anticipated temporary layoffs for the whole section of employees affected by the shortage of work.
  • Application is submitted at the time of job sharing is agreed to.

Example:
Receiving Employment Insurance Work-Sharing benefits

  • Samantha works as a full-time employee and earns $40,000 per year (weekly earnings of $769). Due to the COVID-19 crisis, the firm faces significant reduction in workload because of decline in sales, and the possibility of laying off a quarter of its employees. The firm decides to enter into a Work-Sharing agreement with Service Canada, where all eligible employees in Samantha’s work unit agree to reduce their work hours per week by 35% and receive EI Work-Sharing benefits for days where they do not work as a result of the agreement.
  • If Samantha and her co-workers did not agree to voluntarily reduce their work hours to participate in the Work-Sharing program and were laid off, each of them would have been entitled to receive 55% of their weekly income ($423), by applying for EI regular benefits. By participating in the Work-Sharing program, Samantha and her co-workers receive 35% less of their regular weekly income (earning $500 per week); and collect EI benefits for that 35% of their average hours worked per week (equal to 55% of the value of the insurable earnings she would have received from the firm ($423), which is $148).
  • By participating in the Work-Sharing program, Samantha and her co-workers are able to earn a total of $648 per week ($500 worth of income from working at the firm plus $148 from Work-Sharing benefits), compared to $423 if they had been on EI regular benefits following a layoff. By participating in the Work-Sharing program, Samantha and her co-workers are able to earn more and keep their jobs, and keep their skills up to date. At the same time, the firm is able to retain its skilled and experienced workforce.
  • Consider that if the company was eligible for the Canada Emergency Wage Subsidy, it may be possible to achieve even better results.

Regional Relief and Recovery Fund (RRRF)

https://www.wd-deo.gc.ca/eng/20059.asp

Two streams – Funding of $40,000, and funding from $40,000 – $1,000,000

Eligibility – Funding of $40,000:

  • Fewer than 500 full-time employees
  • Located in Western Canada
  • Not located in an area served by a Community Futures office (there are alternate programs available for businesses located in rural locations)
  • Not eligible for the Canada Emergency Business Account
  • Was operational as of March 1, 2020
  • Have suffered financially because of the COVID-19 pandemic
  • Intend to continue operations in Western Canada
  • NOT organized as a sole proprietorship
  • NOT a not-for-profit organization

Parameters

  • Interest-free loan with no scheduled payments required until after December 31, 2021
  • If 75% of the loan is repaid prior to December 31, 2021, 25% of the loan will be forgiven
  • If not repaid by December 31, 2021 the full loan will be repayable by December 31, 2025
  • The loan is included in income for tax purposes when received, repayments are deducted when made

Key points – This financing is available to a business that doesn’t have any employees and pays its owner dividends.

Eligibility – Funding of $40,000 – $1,000,000:

  • Fewer than 500 full-time employees
  • Incorporated to operate in Canada
  • Located in Western Canada
  • Have suffered financially because of the COVID-19 pandemic
  • Has revenue of less than $10 million
  • Has applied for other federal COVID-19 support measures
  • Intend to continue operations in Western Canada
  • Can describe the financial impact that COVID-19 has had on its operations, and outline how the funding will help support the Western Canadian economy to:
    • Retain diverse and valuable talent
    • Maintain capital flow
    • Maintain critical supply chains and increase capacity to withstand supply chain disruptions
    • Protect technologies and processes that improve resilience, productivity, and/or competitiveness
    • Protect vital intellectual property

Parameters

  • The support must be repaid
  • No scheduled repayments until December 31, 2022
  • Full balance must be repaid by December 31, 2025
  • The loan is included in income for tax purposes when received, repayments are deducted when made