On March 18, 2020, Prime Minister Justin Trudeau announced new economic measures to help stabilize the economy during this difficult period. Following the announcement, on March 25, 2019, the federal COVID-19 Emergency Response Act (the “CERA”) received royal assent and became law. The CERA established the Canada Emergency Response Benefit (the CERB) and a 10% COVID wage subsidy called the Temporary Wage Subsidy (TWS).
Following the realization that the 10% COVID wage subsidy may be insufficient to help companies keep their workers on payroll, on April 1, 2020, the Ministry of Finance announced some details of an expanded 75% wage subsidy, referred to as the Canada Emergency Wage Subsidy. New legislation has been passed and implement the Canada Emergency Wage Subsidy (CEWS).
The following federal programs are available or will be available to help workers fare the economic downturn caused by the COVID-19 pandemic: Employment Insurance, EI Sickness Benefit, CERB, Work Sharing, Supplementary Unemployment Benefits Plans, the Temporary Wage Subsidy and the Canada Emergency Wage Subsidy.
Temporary Income Support for Workers and Parents
Changes have been made to the Employment Insurance rules for employees that are required to self-quarantine due to COVID-19. Additionally, employees can make a claim for sickness benefits when medical reasons are preventing them from working.
The one week waiting period to receive sickness benefits and the requirement for a medical certificate are both now removed. This means that if an employee is quarantining for two weeks, they will receive compensation for the entire two week period, instead of only half of the time period. It is important to note that a medical certificate is required to make a claim for benefits outside of the quarantine period, for example, if an employee contracts COVID-19 and is unable to work. Find out more information on medical certificates.
Requirements for EI Sickness Benefit
- Unable to work due to medical reasons;
- Regular weekly earnings have decreased by more than 40% for at least one week; and
- At least 600 insured hours of work in the previous 52 weeks before the start of the claim (600 hours of work amounts to 20 weeks of work, working 30 hour weeks).
More information on requirements for EI Sickness Benefit.
If you are self-employed: EI Special Benefits
You must be registered for access to EI Special Benefits and the amount of time spent on your business has decreased by more than 40% for at least one week due to your medical condition and you need to have earned at least $7,279.00 in 2019.
How much can an employee claim?
You could receive 55% of your insurable earnings, as defined by the CRA, to a maximum of $573.00 per week for a maximum of 15 weeks. The amount received depends on your insurable earnings in the past 52 weeks, or since the start of your last claim, whichever is the shorter time period.
If your family income is $25,921.00 or less, you may be entitled to the family supplement if you also have one child under 18 and you or your spouse receive the Canada Child Benefit. This supplement would be automatically added to your weekly benefit payments; however, the total weekly amount provided cannot exceed $573.00.
Canada Emergency Response Benefit
On March 25, 2020, the Federal Government announced the introduction of the Canada Emergency Response Benefit (CERB). The notice of ways and means amending the Income Tax Act (Canada) and introducing the CERB has been published on the same date.This new benefit scraps the previously announced and unimplemented Emergency Care Benefit and Emergency Support Benefit.
This benefit will provide up to $2,000 for 16 weeks for those who lose pay as a result of the COVID-19 pandemic. Workers, such as employees, self-employed ad contractors who do not qualify for EI will have access to the CERB.
How to apply
The CRA published guidance on how to apply for the CERB. Applications will be made though the CRAMyAccount portal and will be available starting April 6.Payments should be within 10 days.CERB payments will be issued every four weeks, and will be available retroactively from March 15, 2020 to Oct. 3, 2020.
EI and CERB
Those already receiving EI regular benefits and sickness benefits will, as of today, continue to receive those benefits and should not apply to the CERB.
Nearly 1 million EI applications have been received in the week of March 16 to 20, 2020. Those who already have applied for EI and whose application has not yet been processed do not need to reapply.
Canadians who are eligible for regular EI and sickness benefits can still access those benefits if they are still unemployed after the 16-week period covered by the CERB.
NEW: On March 25, 2020, the Federal Government announced the introduction of the Canada Emergency Response Benefit (CERB). The notice of ways and means amending the Income Tax Act (Canada) and introducing the CERB has been published on the same date. This new benefit scraps the previously announced and unimplemented Emergency Care Benefit and Emergency Support Benefit.
This benefit will provide up to $2,000 for 24 weeks, for a maximum amount of $12,000, for those who lose pay as a result of the COVID-19 pandemic. Workers, such as employees, self-employed ad contractors who do not qualify for EI will have access to the CERB.
Longer Term Income Support for Workers
To avoid lay-offs, employers have the option to implement either a Work Sharing Program whereby the employees would agree to reduce their normal working hours and receive some EI support or to implement a Supplementary Unemployment Benefit Plan through which they would top up EI payments for employees subject to a “temporary stoppage of work”. The two options are outlined below and are compared in table form at COVID Lay Off Alternatives: Comparison table for SUB and Work Sharing.
Work Sharing Program – Update Approval in 10 Calendar Days
For businesses that are able to continue operations despite the Ontario declaration of emergency, but who are experiencing a reduction in work volume, the EI Work Sharing Program may be a good option to maintain their workforce. A similar program, Kurtzarbeit or short-time work, was used successfully in Germany during the 2008 financial crisis and has now been reinforced to deal with the economic turmoil resulting from COVID-19 pandemic.
The Federal EI Work Sharing Program provides EI benefits to workers who agree to reduce their normal working hours as a result of developments out of their employer’s control. Employees must be year-round permanent or part-time permanent employees, be eligible to receive EI benefits, and agree to a reduction of their normal working hours. To be eligible for this benefit, employers must:
- Have been in business in Canada for at least two (2) completed years;
- Be a private business, a publicly-held company, or a not-for-profit organization;
- Demonstrate that the shortage of work is temporary, and is out of their control, and is it is not a cyclical or recurring slowdown;
- Demonstrate a recent decrease in business activity of approximately 10%; and
- Submit an implement a recovery plan designed to return to normal working hours.
Under the EI Work Sharing Program, an employee’s work schedule can be reduced between a minimum of 10% (one half day) and a maximum of 60% (three days). In any given week, the work reduction can vary depending on available work, as long as the work reduction on average is between 10%-60% for the duration of the program. The program must have a minimum duration of six weeks and as a result of COVID-19, may last up to 76 weeks.
Employers may benefit from implementing a work sharing plan rather than laying off employees because it would limit their liability for a potential constructive dismissal claim, further, it would allow them to preserve their workforce and get back into gear quickly once economic conditions improve.
The employer and the employees (and the union, if applicable) must agree to participate in a Work-Sharing agreement and must apply together. An application for a Work-Sharing agreement must be submitted and now Service Canada has streamlined its procedures to aim to reduce processing times to 10 calendar days. Before applying, employers should read the Applicant Guide and discuss the work sharing agreement with their employees.
Employers applying for the Work-Sharing program must complete:
- Application for a Work-Sharing Agreement
- a list of all the employees participating the the work sharing plan, the list is referred to as Attachment A (available in PDF (8 KB) and Excel (36 KB) format). The employer and all non-unionized employees must sign Attachment A. For unionized employees, the union representative must sign the document, together with the employer.
- Recovery plan template. The recovery plan should reflect the particular circumstances of the business, the cause of the work shortage and the conditions of the community/industry in which the employer operates and it should demonstrate that the employer will implement activities during the period of the Work-Sharing agreement to alleviate the work shortage in order to return to normal work conditions.
- Ontario based businesses should send their applications to ESDC.ON.WS-TP.ON.EDSC@servicecanada.gc.ca
Service Canada provides a helpful overview updated to March 2020 regarding the Federal Work Sharing Program.
Supplemental Unemployment Benefit Program
For employers who are now unable to continue operations due to Ontario’s declaration of emergency or because the government ordered them to shut down physical locations because they do not provide essential services, implementing a Supplemental Unemployment Benefit plan would be an option to help out their employees during these uncertain times.
Employers can use a Supplemental Unemployment Benefit (“SUB”) plan to increase their employees’ weekly earnings when they are unemployed due to a temporary stoppage of work, training, illness, injury or quarantine. The top-up cannot exceed 95% of the employee’s weekly earnings.
The SUB Plan must indicate the maximum number of weeks SUB payments are payable. There is no minimum or maximum number of weeks for the payments, however, the plan must be in place for at least one year.
The SUB Plan must be registered with Service Canada before payments under the plan start, otherwise, the payments under the plan will decrease the employee’s EI entitlement.
For employers there are two main reasons why a SUB plan may be an advantageous option as opposed to a lay off without any pay, it would reduce their exposure to constructive dismissal claims because employees would be receiving payments for some time after their termination and it would allow employers to make laid off employees whole during the work stoppage.
For employees, an important aspect of the SUB program is that “top up” pay paid to employees is not considered as earnings and is therefore not deducted from their EI benefits.
Employment and Social Development Canada provided a sample SUB plan that contains all the required information.
Setting up a SUB Plan
There is no formal template to follow when creating the SUB Plan, but it must contain the following information:
- Employee identification: the group(s) of employees covered and the type of unemployment covered (i.e., temporary stoppage of work, illness, injury, or quarantine)
- Employee EI instructions: indicate that employees must apply for and be in receipt of EI benefits
- Value of top-up payments: the amount of the combined amount (EI and SUB) cannot exceed 95% of an employee’s normal weekly earnings.
- The employer must indicate whether the top up is being paid as a fixed amount or a percentage of the normal weekly earnings
- Duration of Payments: the SUB Plan must indicate the maximum number of weeks that the top-up payments are payable – note: there is no minimum or maximum number of weeks
- SUB Plan Duration: it must indicate a start and end date, and must be in place with Service Canada for at least one year
- SUB Plan Finance: the plan must indicate which one of the following three methods is being used to pay the top-ups
- Through the general revenues of the company;
- Through deposits into a trust fund established to provide SUB payments; or,
- Through paying 100% of applicable insurance premiums required to finance the SUB payments.
Placing Employees on the SUB Plan
The employer must complete the employee’s Record of Employment and indicate that the “SUB Plan Benefit” will be being paid out in the “other monies” section on the ROE.
SUB Payment Verification
The employer must ensure that the employees are either in receipt of, or will be receiving EI benefits, and what the amount they will be receiving. This is important because the benefits paid out cannot exceed 95% of the employee’s normal weekly earnings.
Canada Emergency Wage Subsidy
On April 11, 2020, the CEWS became law. The details of the Canada Emergency Wage Subsidy are as follows:
- cover “up to 75 per cent” of employees’ wages — but only for the first $58,700 worth of salary. The maximum amount of subsidy would translate to $847 per week, unless an employer tops up any salary exceeding $58,700 from the business’s own funds;
- the program would be in place from March 15 until August, 29 2020;
- it will be available to any businesses, small or large, charities and non-profit organizations, with the exception of public sector organizations;
- eligible organizations have experienced a decline in gross revenue from arm’s-length sources in the course of its activities in Canada of 15% or more in March 2020 or 30% or more in April or May 2020, as compared to either the same month in 2019, or to an average of its monthly gross revenue earned in January and February 2020.;
- the entitlement to the wage subsidy will be based entirely on the salary or wages actually paid to employees. All employers would be expected to at least make best efforts to top up salaries to 100% of the maximum wages covered;
- applications for the subsidy will be made through the Canada Revenue Agency Portal.
NEW: The August 29,2020 extension of the CEWS will be broken down into three separate four week qualifying periods (i.e., Period 4 – June 7, 2020 to July 4, 2020; Period 5 – July 5, 2020 to August 1, 2020; and Period 6 – August 2, 2020 to August 29, 2020).
Eligibility criteria for Period 4, including the 30% revenue decline threshold, will be the same as those in Period 3 with the prior reference period being June 2019 rather than May 2019. Therefore, any potential changes to the eligibility criteria would commence as of Period 5 and/or Period 6.
For more answers and details regarding the CEWS read our post Employers Frequently Asked Questions About Employment and COVID-19.
Those organizations that do not qualify for the CEWS may continue to qualify for the TWS, the 10% COVID wage subsidy, paid from March 18 to before June 20, up to a maximum subsidy of $1,375 per employee and $25,000 per employer.
Additionally GST and HST payments, as well as duties and taxes owed on imports, will be deferred until June, 2020 and small businesses may have access to interest-free government backed loans of up to $40,000. To learn more about government backed loans in response to the COVID-19 pandemic read What Employers Need to Know- Answers to the Best Frequently Asked Questions regarding COVID-19 and the Workplace.
Below is a summary of the details pertaining to the TWS that were announced previously and the CRA guidance that was published regarding the TWS. This wage subsidy is available to small businesses.
Information Regarding the TWS
On March 20, 2020, the CRA published guidance regarding the TWS. The CRA guidance is not law and other changes or requirements may be introduced by legislation.
Non-profit organizations, charities and Canadian-controlled private corporations (CCPC) are eligible for the subsidy. Sole proprietorships and partnerships are excluded from the wage subsidy.
The CRA has clarified that CCPCs are only eligible for the subsidy if their taxable capital for the preceding tax year, calculated on an associated group basis, is less than $15 million. A corporation’s taxable capital is, in general, the total of its shareholder’s equity and loans and advances to the corporation less investments in other corporations.
How Much is the Subsidy?
The subsidy is equal to 10% of the remuneration you pay between March 18, 2020, and June 20, 2020, up to $1,375 per employee and to a maximum of $25,000 total per employer. For example, if you have 5 employees, the maximum subsidy you can receive is $6,875 ($1,375 x 5 employees), even though the per employer maximum is $25,000.
Employers can reduce remittances for payroll paid between March 18, 2020 and June 20, 2020. As a result, most employers will see the benefit when remitting March withholdings on April 15, 2020. The subsidy can only be applied against income tax withholdings that are to be remitted. An employer cannot reduce remittances of Canada Pension Plan contributions or Employment Insurance premiums.
On a positive note, associated CCPCs will not be required to share the maximum subsidy of $25,000 per employer.
For more information and details regarding the TWS and the interaction of the various government programs read our post Employers Frequently Asked Questions About Employment and COVID-19.
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