Katharine Mack

The federal government has recently announced a series of changes to be made to benefit programs rolled out in response to the COVID-19 pandemic. The extension or expansion of these benefits and support measures will be welcome news for employers and employees alike as they continue to navigate the economic consequences of the pandemic.

These changes include:

• The extension of the Canada Emergency Wage Subsidy (“CEWS”) until June 2021.
• The cessation of the Canada Emergency Response Benefit (“CERB”) on September 26, 2020. Those who continue to be out of work transitioned to a “simplified Employment Insurance (“EI”) program”.
• The freezing of EI contribution rates for two years
• The introduction of three new recovery benefits for those who do not qualify for EI (with effect on October 2, 2020):
  • Canada Recovery Benefit
  • Canada Recovery Sickness Benefit
  • Canada Recovery Caregiving Benefit

Canada Emergency Wage Subsidy (“CEWS”) extended

The CEWS program was first announced by the federal government on March 30, 2020.  At that time, it was to be a 75% wage subsidy, up to a maximum of $847 per week per eligible employee, available to certain eligible entities whose qualifying revenue had dropped significantly (30% or more).  When first announced, the program was scheduled to end on June 6, 2020.

CEWS has now been extended by legislation to November 21, 2020 (with the ability to further extend it by regulation to no later than December 31, 2020). Additionally, the recent Speech from the Throne and subsequent announcements from the Department of Finance have indicated that CEWS will be extended to June 2021.

This legislation and these announcements also bring significant changes to the already complex formula for assessing eligibility and calculating subsidies under the CEWS program.

Following the most recent legislative changes, and effective for periods 5 and onwards of the CEWS program (i.e. starting on July 5, 2020), the CEWS is now divided into two parts: any qualifying entity experiencing a decline in revenue, no matter how small (as per specific calculation methods), may receive a ‘base subsidy’, and an additional ‘top-up subsidy’ is available to certain qualifying entities who have been most adversely affected.

Base subsidy

The new legislative scheme eliminates the requirement to demonstrate a 30% decline in qualifying revenue that applied in the earlier claim periods (periods 1-4, until July 4, 2020). Instead of a “flat” 75% subsidy and a maximum benefit¹ of $847 per employee, under the new regime a qualifying entity’s subsidy would be determined using a formula, where the available subsidy is determined with reference to, among other things, such entity’s qualifying revenue decline and a maximum benefit per employee that varies by CEWS period. The legislation provides several different approaches employers can possibly take in determining their qualifying revenue decline.

This new formula increases the maximum benefit to $959.65 per employee in periods 5 and 6 (i.e. July 5 to August 1, 2020 and August 2 to August 29, 2020, respectively) in combination with the top up subsidy discussed below. The maximum benefit was slated to be gradually reduced in the periods thereafter. However, the announcements from the Department of Finance suggest that the maximum benefit in periods 8, 9 and 10 (i.e. September 27 to October 24, 2020, October 25 to November 21, 2020 and November 22 to December 19, 2020, respectively) will be $733.85 per employee, again in combination with the top up subsidy, although legislation will be required to implement these announcements.

The new legislative scheme also removes the exclusion of employees who had not received remuneration for 14 or more days in a qualifying period from the eligibility criteria for periods 5 onward.

Top-up subsidy

The additional top-up subsidy is available to qualifying entities who have experienced a decline in qualifying revenue of more than 50% in the applicable reference period. The applicable reference period for the top-up subsidy is based on a three-month revenue-decline test, but the recent announcements from the Department of Finance indicate that the applicable reference period for periods 8, 9 and 10 will be harmonized with the base subsidy (generally speaking, it is a one-month revenue-decline test). Again, these announcements will require additional legislation.

To illustrate the effect of the top-up subsidy, without the top-up subsidy, the base subsidy provides a maximum benefit of $677.40 per employee in periods 5 and 6 (compared to $959.65 with the top-up subsidy), declining thereafter. Pursuant to the recent announcements, the base subsidy provides a maximum benefit of $451.60 per employee in periods 8, 9 and 10, rising to a maximum of $733.85 with the top-up subsidy.

Furloughed employees

The above rules regarding the current subsidy calculation apply only to active employees.  However, the CEWS remains available to employees who have been laid off/furloughed, albeit pursuant to a different calculation and rate structure.

According to the recent announcements from the Department of Finance, as of October 25, 2020, the wage subsidy for furloughed employees will be aligned with the benefits provided through EI to ensure equitable support to Canadian workers and in accordance with the new adjustments to the wage subsidy. This means the subsidy per week in respect of an arm’s length employee (or a non-arm’s length employee who received pre-crisis remuneration for the relevant period) will be: the amount of eligible remuneration paid in respect of the week; or, if the employee receives remuneration of $500 or more in respect of the week, the greater of $500 and 55% of pre-crisis remuneration for the employee, up to a maximum subsidy amount of $573.

CERB transitioning to EI

Beginning September 27, 2020, those claiming CERB were transitioned to a “simplified EI program” with new EI claimants receiving a minimum benefit rate of $500 per week (or $300 for extended parental benefits).

Under the revised EI scheme, individuals must have a minimum of 120 hours of work in the year prior to qualify for benefits. Ordinarily, the number of hours of insurable employment required to be eligible for EI regular benefits ranges from 420 to 700 hours, and 600 hours for special benefits, depending on the region. The federal government has lowered the required number of insurable hours by granting EI claimants a one-time insurable hours credit of:

• 300 insurable hours for claims for regular benefits (job loss)
• 480 insurable hours for claims for special benefits (sickness, maternity/parental, compassionate care or family caregiver)

By providing this credit to EI claimants, individuals can qualify for EI regular or special benefits with a minimum of 120 hours of insurable work. Both credits are available for one year.

The hours credit will be made retroactive to March 15, 2020 for claimants who were looking to transition early from the CERB to EI maternity, parental, compassionate care, family caregiver or work-sharing benefits but could not establish their EI claim due to insufficient hours. For these claimants, the qualifying period will also be extended.

Under the changes, workers may be eligible to receive EI through regular benefits or special benefits.  Qualifying workers can receive at least 26 weeks of regular EI benefits.

To help eligible Canadians transition from CERB back into the EI system and into the labour force, a minimum unemployment rate of 13.1% is being used for all EI economic regions in order to lower the hours required to qualify for EI regular benefits. This measure is effective for one year starting on August 9, 2020. Individuals in EI regions with an unemployment rate lower than 13.1% will have their EI benefits calculated on the basis of the 13.1% rate, while those in regions with a higher rate will have their benefits calculated using the actual higher rate.

EI premium rate frozen

To support Canadian businesses and workers through the COVID-19 pandemic, the federal government is freezing the EI premium rate for employees at the 2020 level of $1.58 per $100 of insurable earnings for two years. The rate for employers, who pay 1.4 times the employee rate, will also remain unchanged at $2.21 per $100 of insurable earnings.

Under ordinary circumstances, the Canada Employment Insurance Commission sets and announces (on or before September 14 each year) the annual premium rate for the coming year based on a seven year break-even rate. Freezing the premium rate will ensure that employees and employers do not have to pay increased EI premiums in a time of economic uncertainty, and help support job creation as the economy recovers.

Three additional recovery benefits announced

1. Canada Recovery Benefit

The new Canada Recovery Benefit (“CRB”) is effective from September 27, 2020 for one year and will provide a benefit amount of $500 per week, for up to 26 weeks, to workers who are not eligible for EI, mainly the self-employed and those working in the gig economy. These individuals may be eligible for the CRB if they continue to be unable to return to work due to COVID-19, or had their income reduced by 50% or more relative to pre-COVID-19 pandemic levels.

An official from the office of the Employment Minister, Carla Qualtrough, confirmed that Canadians who were already on EI as the lockdown started in mid-March and have exhausted benefits will be able to transition to the new CRB if they continue to be unable to find employment due to COVID-19.

Workers will need to apply after every two week period for which they are seeking income support and attest that they continue to meet the requirements. In order to continue to be eligible for the CRB the claimant would need to look for and accept work when it is reasonable to do so. The benefit is taxable.

Under the new changes, and to encourage recipients to work, individuals can still earn income from self-employment while receiving the CRB. However, recipients would need to repay $0.50 of the benefit for each dollar earned above $38,000 in the calendar year.

2. Canada Recovery Sickness Benefit

The new Canada Recovery Sickness Benefit (“CRSB”) will provide $500 per week for up to two weeks, effective September 27, 2020 for one year, for employees or self-employed workers who are unable to work for at least 50% of the time they would have otherwise worked because they are sick with COVID-19, must self-isolate due to COVID-19, or are medically susceptible to COVID-19.

Individuals must have had at least $5,000 in income from employment or self-employment in the year prior to their application to qualify for the CRSB. Workers would not be required to have a medical certificate to qualify for the benefit. Workers could not claim the CRSB and receive other paid sick leave for the same benefit period.

Workers will need to apply after the one-week period in which they are seeking income support and attest that they meet the requirements. The benefit is taxable.

3. Canada Recovery Caregiving Benefit

The new Canada Recovery Caregiver Benefit (“CRCB”), effective from September 27, 2020 for one year, will provide $500 per week, for up to 26 weeks, per household to eligible workers who are unable to work for at least 50% of the time they otherwise would have in the week because they had to stay home to care for a child or family member for reasons related to COVID-19.  Specifically, the worker must need to stay home because:

a. they cared for a child under 12 because

1. 1. the school or facility the child normally attended was closed, or only open certain times or for certain children, for reasons related to COVID-19
   2. the child could not attend the school or other facility they normally attended because
      1. the child contracted or may have contracted COVID-19
      2. the child was required to isolate for reasons related to COVID-19
      3. the child is medically susceptible to risk of serious health complications if the child contracted COVID-19, or
   3. the person who normally cares for the child is not available for reasons related to COVID-19, or

b. they cared for a family member who requires supervised care because

1. 1. the program or facility the family member normally attended was unavailable, closed, or only open certain times or for certain persons, for reasons related to COVID-19
   2. the family member could not attend the program or other facility they normally attended because
      1. the family member contracted or may have contracted COVID-19
      2. the family member was required to isolate for reasons related to COVID-19
      3. the family member is medically susceptible to risk of serious health complications if the family member contracted COVID-19, or
   3. the care services that are normally provided to the family member is not available for reasons related to COVID-19

Workers would apply after the period in which they are seeking income support and attest that they meet the requirements. Two members residing in the same household could not be in receipt of the benefit for the same period. The benefit is taxable.

¹ Note that the term “maximum benefit” does not include certain gross-ups, including gross-ups for EI/CPP premiums.

This article is provided for general information only. If you have any questions about the above, please contact a member of our Labour and Employment group.

Click here to subscribe to Stewart McKelvey Thought Leadership articles and updates.