Understanding the Current CEWS Subsidy Rate

Justin Trudeau announced the CEWS rate will be frozen at the current rate for the rest of 2020. The question many entrepreneurs are asking is – what is that rate again? Is it 75%, 65%?

In periods 1-4 the program had one rate. If you qualified you received a subsidy that was 75% of your eligible payroll to a maximum limit per person. The measurement was a little tricky given there were 4 ways to slice and dice the comparison, but the rate itself was super simple.

Periods 5-9 are more complex to determine. It is no longer a single subsidy % but instead a declining rate that you multiply by your Revenue Decline to a maximum subsidy %. And that just gets you the base, there is also a kicker if your business has been really adversely impacted.

Okay – you really don’t need to know all of this. We’re here to help. But I appreciate that you need to be able to get a sense of what your % will be so that you can do your cash flow planning. Let me help by breaking it down a little.

First, measure your revenue decline and we’ll call this your Revenue Decline %.

If this decline is less than 50% your Base Rate will be equal to .4 multiplied by the Revenue Decline %. (Example: My revenues dropped by 30% so my Base Rate = 12%. The math is 30% multiplied by .4 equals 12%).

If your Revenue Decline was 50% or greater your Base Rate is a flat 40%.

If your revenues over the past 3 months have dropped by more than 50% compared to your prior year or prior reference period you may be eligible for a top up percentage that is equal to the Revenue Decline % minus 50% multiplied by 1.25 which could reach a total Subsidy rate of 65% for this period. One important piece to note is that this top-up portion is based on the last 3 calendar months that ended before the relevant reference period and is therefore not using the same Revenue Decline % that we calculated above.

So, if your revenues are generally down by less than 50% you can generally plan with your Revenue Decline multiplied by .4 to get your Subsidy Rate. The most you can get if your revenue drop is less than 50% is 20%.

If your revenues have dropped more than 50%, you’ll want to assess whether the top up applies, and if so it could mean your subsidy rate is as much as 65%.

If you need help calculating your subsidy rate, get in touch with numbercrunch today.

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