The Government of Canada recently announced a Temporary Wage Subsidy for Employers due to impacts from the COVID-19 outbreak. It is a three-month measure to assist eligible employers by reducing the amount of payroll deductions required to be remitted to the Canada Revenue Agency (CRA).
Eligibility: To be eligible you must be a Canadian-controlled private corporation (CCPC), a non-profit organization or a registered charity. Check with your accounting advisor for a detailed definition, but as a general rule, if you qualify for the small business limit, you’ll qualify for this subsidy.
Amount: The subsidy is equal to 10% of the remuneration paid between March 18, 2020, and June 20, 2020, up to $1,375 per employee and to a maximum of $25,000 total per employer.
Example #1: if you have 5 employees, the maximum subsidy you can receive is $6,875 ($1,375 x 5 employees), even though the per employer maximum is $25,000.
Example #2: if you have 5 employees earning monthly salaries of $4,100 for a total monthly payroll of $20,500, the subsidy would be 10% of $20,500, or $2,050.
Calculation: The subsidy is to be calculated manually and by you or your payroll provider. This means it is your responsibility to calculate the subsidy and then remit less each payroll period, up to the maximums above. The subsidy is then ‘received’ by way of your business keeping the cash it would have otherwise sent to CRA. Or if you don’t want to do this right away, you can ask CRA to reimburse you the total (again subject to the maximums) at the end of 2020.
Calculation note: You must keep remitting CPP and EI with no reductions. This subsidy is just a reduction of the income taxes withheld from your employees.
Employee pay note: Your employees do not notice a difference on their net pay. This is an employer subsidy, meaning your business reduces the amount it pays to CRA. Your employees may qualify for other measures recently announced, but this one does not change what you pay them each pay period.
As always, remember to keep detailed records to support your subsidy calculation including: the total remuneration paid between March 18, 2020, and June 20, 2020; the federal, provincial, or territorial income tax that was deducted from that remuneration; and the number of employees paid in that period. The CRA will soon be releasing additional reporting measures.