COVID-19: The Guide for Small Business Owners and Employers

Up to date as of April 13, 2020.

Below we provide a summary of the programs offered by the federal government as alternatives to laying off your employees. Bonus: it can also reduce your exposure to damages claimed for constructive dismissal.

1. EI Work Sharing Program

Is this the right fit for your business?

  • You are a business that is able to continue some operations but are experiencing a reduction in work volume
  • You successfully obtain approval for your WorkShare program
  • Upon satisfaction of the above two requirements, the reduction in work can be spread across a number of workers (as opposed to individual layoffs)

How quickly does support arrive?

  • Approximately 10 days

Is your business eligible?

  • In business in Canada for at least one (1) completed year
  • 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
  • Employees must be year-round permanent or part-time permanent employees
  • Employees must agree to reduce their normal working hours as a result of developments out of their employer’s control
  • Employer and employees must agree to participate in this program and must apply together

Supporting Documentation Needed

  • Employer must submit:
    • Application for a Work-Sharing Agreement form; and
    • Work-Sharing Unit form
      • The above two forms should be submitted 10 calendars days prior to the requested start date
  • Employers in BC should send your applications to: [email protected] sergicecanada.gc.ca

What does it do?

  • Meant to prevent layoffs
  • Workers get full wage rate for the time they work (this can be more than what regular EI provides because you get your full wage rate)
  • The WorkShare program can run between 6-76 weeks and all sectors of industry can apply (historically, WorkShare applied to only a few industries including aluminum, forestry, steel)

What are the advantages of WorkShare?

  • Allows large reductions in payroll at little cost to the employer, while preserving your workforce in the anticipation of a return to regular business
  • If employees agree to a WorkShare and are later laid off entirely, their EI rate will be determined at their full normal wage (if employee’s hours are reduced without a WorkShare, and they are later laid off, the reduced earnings period may reduce their EI benefits rate)

Limitations

  • Only applies to certain categories of employees
  • Reduction in work has to be between 10-60%
  • All impacted employees must agree and sign off on the application

If you would like assistance to complete the online forms and write compelling letters, or you don’t have the time to put into the application – please contact our employment lawyers today.

Link to more information from the government:

https://www.canada.ca/content/dam/esdc-edsc/documents/corporate/notices/coronavirus/overview-presentation-e.pdf

2. Supplementary Unemployment Benefit (SUB)

Description

  • You are an employer who is unable to operate because BC’s declaration of emergency of because the government ordered them to shut down physical locations because they do not provide essential services
  • The SUB plan increases employees’ weekly earnings when they are unemployed due to a temporary stoppage of work, training, illness, injury or quarantine
  • You want to help employees during difficult times

Are you eligible?

  • Must indicate how many weeks SUB payments are payable
  • SUB plan must be in place for at least 1 year
  • SUB plan must be registered with Service Canada before payments under the plan start (other wise the payments under the plan will decrease the employees EI entitlement)

What does SUB do?

  • Increase your 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 employees weekly earnings

What is the advantage of the SUB plan vs lay-off without pay?

  • Reduce exposure to constructive dismissal claims because employees would be receiving payments for some time after their termination
  • Allow employers to make laid off employees whole during the work stoppage
  • Allows businesses to preserve their workforce and more easily return to regular business when the economy improves

Link to learn more information: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/payroll-deductions-contributions/special-payments/supplementary-unemployment-benefit-plan-subp.html

3. Canada Emergency Wage Subsidy (CEWS)

Bill C-14 Passes creating Canada Emergency Wage Subsidy (CEWS)

  • On Saturday April 11, 2020, the Government passed Bill C-14 (amending the Income Tax Act) to create the CEWS
  • The subsidy provides financial support to eligible employers for wages paid to eligible employees for the period from March 15, 2020 to June 6, 2020 (divided in three periods) – the Government has the right to create additional qualifying periods in the future up to September 30, 2020

Eligible Employers

Two key criteria:

  1. Employer must be taxable corporation/individual/registered charity/non-profit or other tax exempt organization/certain partnership/other prescribed organization
  2. Employer must be able to show that it has experienced a gross revenue reduction of:
    • 15% or more in March 2020 when compared to March 2019 or when compared to the employer’s average revenue in January/February 2020
    • 30% or more in April 2020 when compared to April 2019 or when compared to the employer’s average revenue in January/February 2020
    • 30% or more in May 2020 when compared to May 2019 or when compared to the employer’s average revenue in January/February 2020

Eligible Employees

  • Any individual employed in Canada during a qualifying period, unless the employee was without pay for 14 or more consecutive days
  • Employees who do not deal at arm’s length with their employers can be considered “eligible employees” but are subject to some special rules

How much is the subsidy?

For employees who are dealing at arm’s length with their employer, the greater of the following amounts:

  • $847 or 75% of the remuneration paid for the week, whichever is less; and
  • $847, the amount of remuneration paid during the week, or 75% of the employee’s average pre-crisis weekly earnings, whichever is less.

For employees who do not deal at arm’s length with their employer, the lesser of the following:

  • $847, the amount of remuneration paid for the week; or
  • 75% of the employee’s average pre-crisis weekly earnings

Things to note

  • Even though there is a weekly “cap” per employee, there is no limit on the total amount that eligible employers can claim
  • Employers will be required to include any subsidy received in its income for Canadian tax purposes
  • “Remuneration” generally includes salary, wages, and other taxable remuneration, as well as fees, commissions and similar amounts. It does not include retiring allowances, certain equity entitlements, amounts that will be repaid by the employee to the employer or a related party, or amounts paid to an employee to increase the subsidy claim

How do you apply?

  • Eligible employers will be able to apply through the CRA’s My Business Account portal
  • Applications must be made before October 2020
  • To apply, an employer must have had a CRA business number and payroll account as of March 15, 2020
  • The subsidy will be treated as an overpayment of Part I income tax, so employers may be required to file a Canadian income tax return in order to obtain the subsidy
  • The federal government will announce more details about the application process available soon

Link to the full text of Bill C-14: https://www.parl.ca/DocumentViewer/en/43-1/bill/C-14/royal-assent

Disclaimer – The information contained herein is of a general nature. It is not intended to be legal advice and it is not intended to address the exact circumstances of any particular individual or entity. No one should rely on or act upon such information without receiving appropriate professional advice and without a thorough examination of their particular situation. Please contact our office if you have any questions with respect to the content of this entry, this website, or our Terms and Conditions .