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What Employers Need to Know about Canada’s COVID-19 Economic Response Plan

The federal government has introduced numerous measures to help small business avoid layoffs and keep employees on their payroll during the COVID-19 crisis. Some of those measures are discussed below.

The Temporary 10% Wage Subsidy

Organizations that do not qualify for the Canada Emergency Wage Subsidy [discussed in other blogs] may still qualify for the previously announced wage subsidy of 10% of remuneration paid to employees from March 18 to June 19, 2020, up to a maximum subsidy of $1,375.00 per employee and $25,000.00 per employer.

The wage subsidy is a three-month measure that will allow eligible employers to reduce the amount of payroll deduction required to be remitted to the Canada Revenue Agency (CRA).

Eligibility:

  • Individuals, partnerships, non-profit organizations, registered charities, or Canadian-controlled private corporations (including a cooperative corporation) eligible for the small business deduction
  • with an existing business number and payroll program account with the CRA on March 18, 2020; and
  • who pay salary, wages, bonuses or other remuneration to an eligible employee (an individual employed in Canada)

How to apply: You do not need to apply for the subsidy.

  • Your business will continue deducting income tax, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums from salary, wages, bonuses, or other remuneration paid to your employees, as you currently do
  • The subsidy is calculated when you remit these amounts to the CRA
  • The subsidy must be calculated manually, either by you or whoever is responsible for making your payroll remittances
  • The calculation is the following: Planned income Tax remittance – 10% subsidy = New Income Tax remittance
  • Once you have calculated your subsidy, you can reduce your current payroll remittance of federal, provincial, or territorial income tax that you send to the CRA by the amount of the subsidy
  • You cannot reduce your remittance of Canada Pension Plan contributions (CPP) or Employment Insurance (EI) premiums

If your business closed due to COVID-19 and you did not pay salary, wages, bonuses, or other remuneration to an eligible employee from March 18, 2020 to June 19, 2020, you cannot receive the subsidy, even if you are an eligible employer.

For more information, see: FAQ – Temporary wage subsidy for employers: CRA and COVID-19

The Federal Business Credit Availability Program (BCAP)

The BCAP was introduced to help Canadian businesses obtain financing during the COVID-19 crisis, and provides $65 billion in direct lending and other types of financial support to businesses.

BCAP is being implemented by eligible financial institutions in cooperation with the federal government.

The BCAP includes three programs:

  1. Canada Emergency Business Account (CEBA)

The CEBA provides Interest-free loans of up to $40,000.00 provided and funded by the federal government to small businesses and not-for-profits to cover non-deferrable operating costs such as payroll, rent, utilities, insurance, property tax, or debt service. The CEBA cannot be used to fund any payments or expenses such as prepayment/refinancing of existing indebtedness, payments of dividends, distributions and increases in management compensation.

Up to $10,000.00 of the loan is expected to be forgiven if the loan is paid back by December 31, 2022.

If the loan is not repaid by December 31, 2022, the remaining balance will be converted to a three-year term loan at 5 per cent interest.

Eligibility:

The borrower must:

  • be a Canadian operating business in operation as of March 1, 2020
  • have a federal tax registration
  • have a payroll of between $20,000.00 and $1.5 million in 2019
  • have an active business chequing/operating account with the Lender, which is its primary financial institution, which account was opened on or prior to March 1, 2020 and was not in arrears
  • have not previously used the Program, and cannot apply through multiple financial institutions
  • acknowledge its intention to continue to operate its business or to resume operations
  • agree to participate in post-funding surveys conducted by the Government of Canada

How to apply: businesses can contact their primary lender for application information.

  1. EDC Loan Guarantee for Small and Medium-Sized Enterprises

The EDC Loan allows financial institutions to issue operating credit and cash flow term loans of up to $6.25 million to existing clients, with 80 per cent guaranteed by EDC.

This money is to be used for operational expenses, not for dividend payouts, shareholder loans, bonuses, stock buyback, option issuance, increases to executive compensation or repayment/refinancing of other debt.

Eligibility: Canadian businesses in all sectors that were otherwise financially viable and revenue generating prior to the COVID-19 outbreak are eligible to apply.

How to apply: businesses can contact their primary lender for application information.

  1. BDC Co-Lending Program for Small and Medium Enterprises

The BDC Loan provides term loans for operational and liquidity needs of businesses, which could include interest payments on existing debt. Loans would be interest-only for the first 12 months, with a 10-year repayment period. The amount of the loan will depend on the size of the business’s revenue.

Eligibility: Canadian businesses in all sectors that were otherwise financially viable and revenue generating prior to the COVID-19 outbreak are eligible to apply.

How to apply: businesses can contact their primary lender for application information.

For more information, see: Business Credit Availability Program (BCAP)

The Federal Work-Sharing Program

The program provides EI benefits to eligible employees who agree to reduce their normal working hours and share the available work while their employer recovers from a temporary decrease in business activity caused by COVID-19. Work-Sharing is an agreement between employers, employees and the Government of Canada. The federal government has extended the maximum duration of the work-sharing program from 38 weeks to 76 weeks for employers affected by the COVID-19 crisis.

Eligibility: year-round Canadian businesses in operation for at least 1 year that are either 1) a private business, a publicly held company, or not-for-profit, or 2) have at least 2 employees in the work-sharing unit (in other words, someone who is self-employed or a sole proprietor is not eligible)

How to apply: businesses should submit their applications 10 calendar days prior to the requested start date of the work-sharing agreement, and applications can be submitted online.

For more information, see: Notices

Other Deferrals and Financial Relief

Federal taxes: The Federal Department of Finance has announced that Goods and Services Tax/Harmonized Sales Tax (GST/HST) remittance payments will be extended until June 30, 2020, and payment of Customs Duty and Sales Tax for Importers has been deferred to June 30, 2020.

For more information, see: Additional Support for Canadian Businesses from the Economic Impact of COVID-19

Provincial taxes: On March 25, 2020, the Ontario government announced a five-month relief period for Ontario businesses who are unable to file or remit select provincial taxes on time, due to the COVID-19 crisis. Between April 1, 2020 and August 31, 2020, the province will not apply any penalty or interest on any late-filed returns or incomplete or late tax payments under select provincially administered taxes.

For more information, see: COVID-19: Support for businesses

WSIB Financial Relief: Allows businesses to defer premium reporting and payments until August 31, 2020. Businesses who report and pay monthly, quarterly or annually based on their insurable earnings are eligible for this deferral. No application is required; all businesses covered by the WSIB’s workplace insurance are automatically eligible for the financial package.

For more information, see: Businesses: WSIB financial relief package

Utility payments: As of Tuesday, March 24, 2020, small businesses who pay time-of-use electricity rates will be charged off-peak rates 24 hours a day, seven days a week.

For more information, see: COVID-19: Support for businesses

For further information about the programs discussed in this article, and other programs such as the Canada Emergency Wage Subsidy, see: Canada’s COVID-19 Economic Response Plan

How Minken Employment Lawyers Can Help

Minken Employment Lawyers is your source for expert advice and advocacy on today’s employment law issues. If you have any questions on COVID-19 and Your Workplace or want to know the financial measures that are available for you, please contact us today at contact@minken.com or call us at 905-477-7011. Sign up for our newsletter to receive up-to-date COVID-19 information, including new legislation and Court decisions impacting your workplace.

This article is for informational purposes only and does not constitute legal advice.

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