Financial Support for Businesses in Canada from the Government of Canada |

Canada has been on the economic fast-track for the past few years. But in January 2019, with the cloud of COVID-19 just beginning to emerge, the country saw the first signs of poor economic performance. Domestic growth stood at a mere 0.1% in January 2020 as international trade came to a standstill.

Businesses in Canada have been one of the worst-hit victims of the COVID-19 pandemic. Stifled trade, regional labour unrest and declining oil prices together created a massive negative impact on business performance.

In an effort to prevent filings of insolvency, the Canadian Government has put in place a slew of financial support schemes. If you have a business registered in Canada, then you will benefit from the following financial support schemes:

Work-Sharing Program

The Work-Sharing Program (WSP) is an effort by the Government of Canada to help employees of financially-struggling Canadian businesses to retain their employment during the COVID-19 pandemic.

Here, the employer, employees and Service Canada agree to share the limited/reduced work availability between all employees and give every employee an opportunity to earn a living. Employees receive Employment Insurance (EI) benefits because of their reduced ability to earn.

Employers can seek this facility for 6-38 weeks. You can increase this to a total of 76 weeks. However, for an extension of coverage, Service Canada’s approval is necessary.

The WSP program will be available between March 15^th, 2020 and March 14^th, 2021.

Which businesses are eligible for the Work-Sharing scheme?

Companies (private/public/GBEs/not-for-profit) that have been operating in Canada for one year.

Companies that have experienced a minimum 10% shortage in business activity in the past six months due to COVID-19.
The shortage of work is:

Temporary
Beyond the employer’s control
Not a cyclical/recurring slowdown

Not due to a labour dispute
Not as a result of a recent recruitment cycle that has increased the workforce and reduced the work.

Companies that have a recovery plan in place to bring their businesses back on track.

Which employees will be covered by the Work-Sharing scheme?

A full-time, permanent employee working on day-to-day tasks year-round.
An employee eligible for EI benefits.
Someone who is okay with sharing work with colleagues as part of the scheme.
Key personnel essential to the recovery and viability of the business (R&D staff, sales agents, and so on).

Employees who are not covered under the scheme are:

Seasonal workers.
Interns.
Temporary/contract hires.

Employees who find/generate work and who help with business recovery.
Staff who hold more than 40% of voting shares in the business.
Employees responsible for running a government program/activity.
Self-employed individuals.

How to set up a work-sharing unit at your company?

Club all employees who belong to the same role/JD in the same unit (minimum of two employees).
Reduce working hours and the amount of work to-be-done equally for all.
Direct the employees to choose a representative who will speak on their behalf to the employer.

If business activity increases, divide the extra work-to-be-done and the working hours equally amongst all employees in the unit.

Once the unit is set-up, the employer has to fulfill a few duties towards this group:

Furnish a copy of the Employee Guide to each unit member.

Provide regular on-job skills training to keep employees relevant.
Stop all unnecessary hiring and hire only for jobs where core employees resign.

How much work should employers reduce?

Weekly work schedules can be reduced by 10%-60%, depending on the number of expected layoffs. The objective is to fend-off or reduce the layoffs.

The Work Sharing agreement has to be at least six consecutive weeks long and can last up to 26 weeks. You can extend it up to 76 weeks if there’s a need.

How can companies apply for the WSP?

Employers who wish to be part of the WSP will need to submit their applications – EMP5100 and EMP5101 – ten calendar days prior to the requested start date. They will undergo a review by a Service Canada Program Officer.

You can submit the applications to:

Atlantic Provinces

Email: ESDC.TP-ATL-WS-TP.EDSC@servicecanada.gc.ca

Quebec

Email: QC-DPMTDS-LMSDPB-TP-WS-GD@servicecanada.gc.ca

Ontario

Email: ESDC.ON.WS-TP.ON.EDSC@servicecanada.gc.ca

Western Canada and Territories

Email: EDSC.WT.WS-TP.ESDC@servicecanada.gc.ca

The application review process

Business recovery plan

Your business recovery plan should contain the following sections:

Information about the business – products/services sold, company background, office locations, leadership and staff description, union information, background about clients, past work-sharing agreements.
Business recovery measures taken before applying for the WSP.

Detailed description of the type of activities and training that will be done as part of the WSP to help the business recover.
Evidence and justification of how your proposed measures will help the business recover.
Brief explanation of why Service Canada should select your company for the program and the impact of your application being rejected.
Concluding section of the positive impacts you expect to see after the successful completion of the WSP.

Cost analysis

Justify with evidence how the WSP will financially benefit the company and the economy in the long-run.

Social/community impact

Justify how you being selected for the WSP will be a benefit for the entire community.

Post-approval activities

If your company has been selected for the WSP, the agreement must be signed within 60 days of receiving the approval.

Please note: There is no appeal process in case of application rejection.

Temporary Wage Subsidy [10% Wage Subsidy]

The 10% Temporary Wage Subsidy for Employers (TWS) is a provision to help vulnerable employees safeguard their incomes during COVID-19. Through this provision, the Government of Canada has reduced the payroll deductions to be made to the CRA for three months.

Who is eligible for the TWS program?

Individuals (except trusts)
Partnership firms
Registered charities & non-profit organizations

Canadian-controlled private corporations

These entities must

Be based/employed in Canada.
Have a business number and payroll account with the CRA as on March 18^th, 2020

Pay salary, wages, bonuses, or other remuneration to eligible employees.

How much subsidy do companies get?

The deduction as per TWS is 10% of the employee’s remuneration from March 18^th, 2020 to June 19^th, 2020. This is limited to a maximum subsidy of $1,375 per employee or $25,000 per employer.

This calculation will be made based on the number of eligible employees in your company during these three months.

Receiving the subsidy & making the remittances

Deduct federal and provincial/territory IT, CCP, EI and other contributions from the employees’ remuneration. Then deduct the subsidy from the money-to-be-remitted and remit the remaining amount to the CRA.

You can start deducting the subsidy from the remittance any date after March 18^th, 2020, for the next three months. You can reduce future payroll remittance after June 19^th, 2020. If you choose not to reduce payroll remittances during this year, the CRA will return the amount to you or transfer it to your next year’s remittances.

Recording your TWS subsidies

TWS subsidies are taxable. You need to keep a record of the total

Employees hired
Remuneration paid
Deductions made

Subsidies claimed
Remittances made from March 18^th, 2020 to June 19^th, 2020.

Canada Emergency Wage Subsidy (CEWS)

Canadian businesses are laying-off workers to meet the financial crisis caused by COVID-19. To stop this, the Government of Canada is offering financial support in the form of the Canada Emergency Wage Subsidy (CEWS).

Here, employers can avail 75% wage subsidies retroactive for a period of 12 weeks from March 15^th, 2020 to June 6^th, 2020 (This program will be extended for another 12 weeks to August 29^th, 2020).

Which employers are eligible for CEWS?

Individuals
Partnership firms
Taxable corporations
Non-profit organizations
Trusts & registered charities

Agricultural organizations
Boards of Trade & Chambers of Commerce
Organizations for scientific research and experimental development
Labour organizations/societies
Benevolent societies or orders

Please note: Public institutions like federal and provincial/territory corporations and governments are not eligible for the subsidy.

How to check if your revenue is eligible for CEWS financial support?

To do this, compare your eligible revenue (what you have earned from business activities – sales, service provision, resource-sharing, and so on) with the baseline revenue (the revenue earned in the month of January/February/March 2020).

There should be a reduction in revenue by 15% in the first month of comparison and a reduction of 30% in the succeeding months.

How do you calculate eligible revenues?

Choose the baseline revenue option

The revenue you earned in the corresponding month in 2019, or
The average of the revenue you earned in January and February 2020.

Calculate using your normal accounting method

Accrual method or cash method – whichever method you choose now must be used throughout the CEWS application process.

Exclude revenues from extraordinary items, on account of capital.
Multiple non-arm’s length companies that are working together and whose revenue performance is affected by one another can consolidate their revenues and test eligibility together.

How to calculate the subsidy amount under CEWS?

The subsidy under CEWS is taxable. Subsidy depends on:

The type of employees who are eligible

Currently employed and eligible
Laid-off employees and eligible retroactively

The remuneration they are being paid (all remunerations excluding ESOPs and severance pay)

For an eligible employee on eligible remuneration, the subsidy will be the highest of the following payments:

Actual pre-crisis remuneration for the period of January 1^st, 2020 and March 15^th, 2020.
75% of the remuneration paid (up to $847 per week)

75% of the employee’s pre-crisis weekly remuneration or $847 per week (whichever is lesser)
$0 – if non-arm’s length employee (only available to NAL employees employed before March 15^th, 2020)

The Government of Canada has proposed to cover 100% of employer-paid contributions for eligible employees for each week, during which time the employees are forced to be off work.

How to calculate eligible periods?

To identify for which periods you are eligible to get CEWS, check for year-over-year changes in the specific month’s revenue. So, for March 2020, you will need to compare with March 2019.

How to apply for CEWS?

Visit the Government of Canada’s CEWS website (if you are unable to do this, get an online web access code and access the application through it).
Upload the documentation and payroll records of your eligible entities and eligible employees in the payroll account.
Provide your Business Number and details.
Calculate the estimated subsidy for your business.

Wait for approval of the application.

Please note: For payments over $25 million, employers need to have a direct deposit on their payroll accounts and be registered with the large value transfer system (LVTS).

Employers found making fraudulent claims will be subjected to severe penalties – they must repay any subsidy amounts received + a penalty equal to 25% of the total value.

CEWS’s interaction with other subsidies

Emergency Wage Subsidy – The value of EWS will be reduced.
Canadian Emergency Response Benefit – CEWS limited to employees who have not been compensated for more than 14 consecutive days in the eligible period.

Work-Sharing Program – CEWS value will be reduced, as EI benefits will remain the same.
Refunds of payroll contributions will also be deducted.

Canada Emergency Business Account (CEBA)

The Canada Emergency Business Account (CEBA) is by the Government of Canada. It helps companies manage the losses caused by COVID-19. Businesses will be able to seek up to $40,000 interest-free loans from financial institutions to meet operating costs.

If the loan is repaid by December 31^st, 2022, the Government will forgive 25% of the loan amount. However, if repayment exceeds this time, it will be converted into a 3-year term loan at the rate of 5% pa.

Who is eligible?

Companies operating from Canada as of March 1^st, 2020.
Companies with an annual payroll of $20,000 to $1.5 million.
Companies having a primary bank account with a Canadian bank.
Companies who have made good on all payments to date.

What documentation should companies provide?

2019 T4SUM Summary of Remuneration Paid.
15-digit CRA number also shown on the T4SUM.
Business contact information and identity proof.

The application process for CEBA started on April 6^th. Companies can apply through their primary bank/financial institution.

Regional Relief and Recovery Fund (RRRF)

If you are not eligible for CEBA interest free loan, Regional Relief and Recovery Fund (RRRF) may be your next alternative. For example, if you are located in British Columbia, Alberta, Saskatchewan or Manitoba, you may apply RRRF funding via Western Economic Diversification Canada (WD).

WD will provide eligible small and medium size enterprises with an interest-free loan of up to $40,000. The objective is to assist businesses that do not qualify for the CEBA program.

Please visit https://www.ic.gc.ca/eic/site/icgc.nsf/eng/h_07682.html for more information.

Loan Guarantee for SME

This financial support scheme by the Government of Canada is designed to provide credit and cash flow term loans to cash-strapped Canadian SMEs across all sectors. Loans of up to $6.25 million will be provided under this scheme from mid-April onward. 80% of these funds are guaranteed by the EDC.

This scheme is meant to be used only to fund business operating expenses and not any other payouts or refinancing schemes. Contact your bank/financial institution for more information.

Co-lending Program for SMEs

If your company requires term loans for liquidity and operations, then the BDC Co-Lending Program for SMEs can help. Companies who were financially very strong prior to the onset of COVID-19 can apply for this program.

Based on their revenue limits, companies are eligible for financial support:

Revenues less than $1 million – Loans up to $312,500.
Revenues between $1 million and $50 million – Loans up to $3.125 million
Revenues above $50 million – Loans up to $6.25 million

The repayment period is ten years, and interest is payable only in the first 12 months. You can contact your bank/financial institution in mid-April to find out about this scheme.

Businesses in the Territories

This COVID-19 financial support scheme by the Government of Canada has been designed for territories that have not been covered by other GOC provisions and schemes.

Up to $15 million in non-repayable funding will be provided to businesses in territories to help them cover operating costs. Speak to your bank/financial institution for more information.

Bank assistance for Canadian Businesses

Business Banking Principal Payment Deferral

Under this scheme, your bank/financial institution will:

Defer up to four monthly principal payments on your business term loans.
Defer up to six monthly principal payments on your real estate secured business term loans.

New Credit Requests

In this scheme, your bank/financial institution will offer new or additional credit facilities for cash flows. Speak to your institution for details.

The Government of Canada is in talks to implement many more financial support schemes for businesses in Canada. We will be updating our list of financial support schemes as and when they are announced. Keep an eye on our blog for the latest information.

To find COVID-19 support and other programs and services from the government, please go to this Government of Canada website: https://innovation.ised-isde.canada.ca/s/?language=en

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