How to find out if your business qualifies for the COVID-19 wage subsidy

By March 23, 2020 Uncategorized

How to find out if your business qualifies for the COVID-19 wage subsidy

Ottawa’s 10 per cent wage subsidy won’t apply to all employers

Business owners must calculate the wage subsidy their company is entitled to, then reduce how much they remit in payroll deductions to the CRA accordingly. (kitzcorner/Shutterstock )

There is new information available to business owners on the federal government’s proposed temporary wage subsidy that is part of the economic response plan to counter Canadians’ financial hardships due to COVID-19.

The Canada Revenue Agency has now released a more detailed breakdown of who is eligible and how the subsidy will be implemented.

Here’s what you need to know.

What is the wage subsidy?

Ottawa’s proposed wage subsidy was announced last week and is set to be in place for three months.

It will be equal to 10 per cent of total remuneration paid between March 18, 2020, and June 20, 2020, up to a maximum of $1,375 per worker and $25,000 per employer.

Does my business qualify?

The wage subsidy is limited to eligible small businesses. The CRA says that includes the following:

  • Non-profit organizations.
  • Registered charities.
  • Canadian-controlled private corporations with less than $15 million in taxable capital employed in Canada, a measure also used to calculate the existing small business deduction.

If a business is eligible, but not paying employees during the applicable period because it is closed, it does not qualify.

How will the subsidy work?

The subsidy will be available immediately, but rather than receiving a cheque from the government, the employer will reduce how much they remit in payroll deductions to the CRA. In other words, pay less.

Employers can only reduce remittance of federal, provincial or territorial income tax — not Canada Pension Plan contributions or Employment Insurance premiums.

Who does the math?

Businesses must manually calculate the subsidy, based on the CRA’s guidelines.

Companies need to keep records of all information used to determine the subsidy, including total remuneration paid during the applicable period, the taxes that were deducted during that time, and the number of employees who were paid.

More questions?

The CRA is encouraging business owners to consult the new frequently asked questions page on its website, rather than calling the agency.

“Due to the ongoing situation, the CRA is currently operating at a reduced capacity and is experiencing a tremendous increase in phone calls,” said CRA media relations spokesperson Christopher Doody in an email to CBC News.

Is more help coming for businesses?

Many in the business community say the wage subsidy falls short, including the Canadian Federation of Independent Business that represents small businesses across the country.

“The level of the subsidy needs to be far higher in order to help — closer to the 75 to 90 per cent levels announced in many European countries,” said Dan Kelly, president of the CFIB, in a written statement.

Calgary-based tax expert and small business owner Kim G.C. Moody says a 10 per cent wage subsidy won’t make staffing decisions any easier.

He argues that the subsidy cap of $1,375 per employee is equal to significantly less than 10 per cent of an employers’ total cost per worker, because employers’ expenses include not only salaries but also contributions to the Canada Pension Plan and Employment Insurance.

“It’s not that impactful; it’s negligible in the whole scheme of things,” said Moody, the CEO and director of Canadian Tax Advisory for Moodys Tax.

“It makes me wonder if the government thought this through,” said Moody.

‘Initial phase’ of economic support

On Sunday, Prime Minister Justin Trudeau said the subsidy is intended to help keep workers on payroll and make it easier for the economy to bounce back following the COVID-19 pandemic.

He also reiterated that the wage subsidy is part of a first set of measures, and that there will be more to come.

“That was only the initial phase of what is necessary. We are continuing to talk about next steps,” said Trudeau.

A first step in the right direction

A public policy think tank based in Montreal has been advocating for measures that help businesses hold onto their employees during these difficult times, and says the government’s wage subsidy is a step in the right direction.

“It’s difficult to find workers — once they’re trained it’s really disruptive to a business to lose people, so employers want to keep workers on,” said Peter St Onge, senior economist at the Montreal Economic Institute.

However, St Onge agrees that the government should increase both the percentage of income that would be subsidized, and the total available per employer.

“Those limits are really stingy,” said St Onge.

While St Onge and others want to see the government do more, he says that — from the range of policies the government has announced so far — it appears to be trying to use anything available to help.

“I’m sympathetic to the government; they’ve thrown the pantry at this,” said St Onge.