It has been 100 days since Prime Minister Justin Trudeau announced that the Federal Government was proceeding with a 75% wage subsidy program. The Canadian Emergency Wage Subsidy (CEWS) was created and details began to be released in the days and weeks. In less than 100 days the government has received over 500,000 applications from 250,000 organizations and funded $17 billion to support nearly 3million jobs. Incredible!
At numbercrunch we have been doing our best to help our clients navigate the program as it matured and details became defined. We have had a number of organizations reach out to us to review what they’ve claimed. As time goes on, we have found that there are a number of false assumptions being formed about the program. These assumptions are actually blocking some business owners from submitting claims. Part of the reason this has happened is that the information was released iteratively from the Government and changes were made based on public feedback. As a result, some business owners made conclusions early on and may be missing funding opportunities.
With the intention to help you quickly understand the information that may pertain to your organization, please find the 8 common issues we see from the data thus far.
Not knowing all 5 (yes you need to know there are 5) revenue eligibility methods to consider
Not considering the strategy of selecting your eligibility method
Not understanding the “deeming rule”
Not knowing that there is a “14 day rule” when it comes to determining eligible employees in a given period
Not knowing that you could be claiming more than 75% of your wages paid if you have hired back your staff on reduced hours and/or reduced salaries
Not understanding the rules for owners and family members
Not realizing there is a difference between pay date and the remuneration period
Not understanding “furloughed employees” as it relates to claiming CPP and EI
From the list of common issues above, here are the top 5 errors we have seen in claim calculations to date.
Companies are eligible more often than they think. In the majority of cases when a company says they are no longer eligible we have discovered that they actually are. I realize this could lead readers to false hope, but since our mission is to empower entrepreneurs I do want to encourage you to understand that there are 5 eligibility methods to consider and there is a strategy required to ensure you are choosing wisely.
Claiming employee wages that are not eligible. Overall I think CEWS is a great program for Canadian businesses (as proven by the $17billion that has been distributed so far), but companies are often overlooking the 14 day rule. I initially missed it myself so I understand how easy it is to miss details. When I meet a new business owner and they show me their CEWS claims there is almost always an employee included that shouldn’t be due to the fact they had been hired or fired in the period. If an employee had 14 consecutive days that they were NOT earning remuneration (i.e. 2 weeks that they were not employed during the period) the days that they were employed are not considered eligible. So if you hired them mid-period, or they left mid-period you may need to exclude their wages from that month’s claim.
The deeming rule is not just for April. About a month into the announcement of the program one of the changes that the Federal Government made was to allow companies to automatically qualify for one period if they qualified for the prior period. This was to really encourage employers to hire back staff that had been laid off. The assurance of this rule helped ease concerns that one month of CEWS was not going to be enough. Many entrepreneurs seem to have concluded that this deeming rule was just applicable for April. The rule applies to each month. So if you met the revenue criteria in May then you will also be eligible for June.
As a business owner, you can’t give yourself a raise and expect to get 75% back. The program has special rules for those not dealing at arms length. This essentially means founders and their families. Eligibility of these individuals has been capped based on the average of what was being remunerated in pre-covid 2020 (Jan through mid Mar). You could give your employees a raise and have 75% of that claimed back (to the maximum cap of $847/week), but any additional compensation you pay yourself will not be eligible for the subsidy. Because tech entrepreneurs are often underpaying themselves during the startup phase it seems some have decided this is a good opportunity to pay themselves back for the previous periods because they did not understand that this would not actually be eligible.
The details of the pay periods matter immensely. The most recent changes to the CEWS section of Canada.ca are adding the increased commentary around the eligibility periods. For those that have maintained their staff on salary without interruption it is fine to simply calculate the claim based on regular salary payments. But for new hires, changes in hours, terminations, and especially retroactive hires the details of work hours matters. Bi-weekly pay periods may not be in sync with the CEWS periods and CRAs website makes it clear that you cannot just average time over a pay period. If you have hourly workers you need to calculate the time based on the dates the workers were paid for, which is going to be different from when the dates the workers were paid. This can be a time consuming exercise depending on the size and complexity of your business. In addition, just a reminder that you cannot file your claim until the workers have been paid by you for the time that was claimed.
I don’t like to point out problems without solutions so over the coming days I’ll be drilling down on each of these to help clarify our understanding of how it works.
Stay tuned for more updates on the items listed. Signing up to receive updates here.