Wage Subsidy Calculation - COVID-19 (March 20, 2020)



Business owners have had many questions the about the Government of Canada’s commitment to supporting businesses in response to COVID-19 including a Temporary Wage Subsidy.


At the time we learned businesses can reduce source deductions by 10% up to a maximum of $1375/employee and a total of $25,000 per organization. This is a subsidy, which means it is not repayable to the government. We were not given any further details as to how this subsidy would be applied based on the the Government of Canada website. Well the good news is that the website has now been updated and has made it very easy for payroll providers to interpret.


Here is the summary:

  • This is a three-month measure that applies to remuneration paid to employees between March 18th, 2020 and June 20, 2020 only.

  • You must calculate this manually and keep two caps in mind: the $1375/employee and $25,000 per business.

  • Keep records of your calculation in the event of a future Audit.

  • If you own multiple businesses that are associated they will not have to share the maximum subsidy. (So each would be eligible for $25,000)

  • You apply the 10% to the gross pay or wage to calculate the amount of the subsidy. You claim it by reducing the income tax portion of your source deductions by this amount.

  • Note: you cannot reduce your remittance of CPP and EI premiums

  • You can start reducing remittances in the first remittance period that includes remuneration paid starting March 18, 2020 (for many businesses that would be April 15, 2020)

  • To be clear, you are still deducting Income Tax from employees, you are simply not remitting the amount equivalent to the subsidy to CRA

  • You may only reduce remittances made to CRA (does not apply to remittances to Revenu Quebec)

  • If you use a payroll service provider like ADP we do expect they will calculate and apply this subsidy. As of Friday afternoon March 19th we were still being told by ADP that they were waiting for further details from the government and so we do expect they are now preparing instructions on how they will administer the subsidy.


Here is a link to the website:

https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update/frequently-asked-questions-wage-subsidy-small-businesses.html#h4

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