By now most of you will have been struggling with self-isolation and attempting to get accustomed to a new way of working for at least a couple of weeks. As we roll into another month of life with the coronavirus many of you are trying to sift through the, seemingly, endless flow of press briefings and news updates to find a way to help you through this mess.
Over the last couple of weeks all levels of government have been announcing plans and measures intended to help and support Canadians in this time of need in order to convince everyone to stay at home. Please everyone, stay at home. The quicker we act, the sooner we can begin to recover – mentally, physically and economically.
In attempt to bring as much clarity as possible I want to provide you with a list of available support measures, their qualification criteria and how to go about obtaining them.
Support for Individuals:
If you find yourself out of work or, in some cases, struggling financially as a result of COVID-19 there are several benefits available depending on where and in what province you live. Federally there is the Canadian Emergency Response Benefit (CERB) and EI, provincially there are smaller benefits such as Ontario’s $200 one-time child support payment and BC’s $500 renter relief fund. In addition, most municipalities are allowing you to delay payments of property taxes without interest or penalties and the majority of financial institutions are granting mortgage payment deferrals to assist you in the short term.
If you found yourself out of work early and were eligible for EI you should probably hang tight and stay there for now. The CERB is an alternate program that is designed to fill in some of the gaps in the existing EI structure and easy some of the application load. You cannot collect benefits from both programs at the same time. If you applied for EI recently you may end up staying on EI or Service Canada may transition your application to the CERB. If you haven’t yet applied for either benefit the federal government is suggesting that you wait until applications for the CERB open on April 6 as they are likely to be processed faster than EI.
You will be able to apply for the CERB online through your My CRA account or over the phone beginning April 6. The government is recommending that people stagger their application by birth month in order to avoid overwhelming the system. Their recommended application dates are:
January, February, March: April 6, Mondays after that
April, May, June: April 7, Tuesdays after that
July, August, September: April 8, Wednesdays after that
October, November, December: April 9, Thursdays after that
People with any birth month can apply Fridays, Saturdays and Sundays.
In order to qualify for the CERB you would need to be unable to work because of COVID-19 (laid off, in isolation, caring for others in isolation, at home with children, no work), had at least $5,000 of income in the past year and expect to be without employment for at least 14 days of the next month. If you were unemployed prior to COVID-19 you will not qualify for CERB or EI. According to the government’s application: “The benefit is only available to individuals who stopped work and are not earning employment or self-employment income as a result of reasons related to COVID-19. If you have not stopped working because of COVID-19, you are not eligible for the benefit.”
If you qualify you will be approved for a one-time taxable payment of $2,000. If you continue to be unemployed, you can reapply each month for an additional $2,000 for up to four months in total. Should you continue to be unemployed after the four months and are eligible for EI benefits you will be able subsequently apply for those as well.
If you haven’t, already, now is a great time to sign up for you’re My Account or My Service Canada account and ensure you are set up with for direct deposit. These two accounts will be the starting point for any benefit applications and are great ways to track your tax and pension information in the future.
Support for Businesses:
The initial support for businesses was limited and confusing as the Federal government’s priority was to ensure support for individuals and workers. While not necessarily the wrong approach it took too long to establish, and businesses were left hanging in the wind. The current steps with 75% wage subsidies and government backed, interest free loans are heading in the right direction but should have been enacted earlier which may have avoided some of the panic in the business community.
For small businesses, outside of increased standard loan financing, there are essentially three programs available from the Federal government to help.
The temporary wage subsidy for employers (no fancy acronym) and the Canada Emergency Wage Subsidy (CEWS) are programs to assist businesses in retaining employees when faced with reduced income. The temporary wage subsidy was the program first introduced and, at this time, is still available. The CEWS is a new program that will be retroactive to March 15, 2020, but the qualification criteria are different, and the application / payment process are 3-6 weeks away.
Temporary Wage Subsidy
The temporary wage subsidy is available to eligible small businesses who have an existing business number and payroll program account with the CRA on March 18, 2020 and pay salary, wages, bonuses or other remuneration to an eligible employee (one who is employed in Canada). The benefit is 10% of gross earnings of each employee (up to a maximum of $1,375) for wages paid between March 18, 2020 and June 19, 2020 and up to a maximum benefit of $25,000 per employer.
Most payroll service providers have set up their systems to handle the credit, but essentially you would deduct 10% of the gross earnings against your monthly remittance. If you fail to take the deduction during the allocated time period, you will be allowed to claim the deduction when preparing your T4’s and the CRA will credit the balance or apply to your next year’s payroll account.
Canada Emergency Wage Subsidy (CEWS)
The CEWS is a newly announced program that will provide a 75% wage subsidy up to a maximum of $847 per employee /week to eligible employers for up to 12 weeks and is in place for pay periods between March 15 and June 6, 2020. As mentioned previously the program application process is expected to be launched within the next 3 weeks and payments would be expected to roll out within the next 6 weeks which may not be the best timing for businesses already feeling the crunch.
Eligible employers for CEWS include individuals, taxable corporations, and partnerships as well as non-profit organizations and registered charities. The subsidy would be available to eligible employers who have seen a 30% decline in revenue in the months of March, April and May, 2020 (as compared to the same month in 2019). There are still refinements in the qualification process to deal with newly established businesses, business transitions and other situations that don’t fit the mould, but essentially you should be prepared to demonstrate that for each month your business has shown at least a 30% reduction.
Canada Emergency Business Account (CEBA)
The new CEBA will provide interest-free loans of up to $40,000 to small businesses and not-for-profits to help cover their operating costs during a period where their revenues have been temporarily reduced. In order to qualify, the organization will need to demonstrate that they paid between $50,000 and $1,000,000 in payroll in 2019. Presumably having payroll outside of those limits would make a business ineligible to receive the loan.
The loan would be interest free with no principal payments required until December 31, 2022 at which time it can be converted into a 3-year term loan at a rate of 5%. However, there is also a condition that if 75% of the loan is repaid on or before December 31, 2022 the remaining balance, of up to $10,000, would be forgiven.
The application process for this loan is being handled by your individual banks and will be rolled out the week of April 6. If you are interested in utilizing this facility I recommend checking with your bank regarding the timing and process to apply.
If you haven’t already applied, now is a good time to register for My Business Account with the CRA and establishing direct deposit for your business payments in an effort to expedite any additional processes going forward.
If there is anything I can do to help facilitate any of the above noted programs please feel free to contact me. It is in all of our best interests to work together and get through these challenging times.
Although every reasonable effort has been made to ensure the accuracy of the information contained in this letter, no individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.
It is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.