Federal Wage Subsidy Information
Dear Valued Clients,
The federal government just announced additional information regarding the hot topic of the previously mentioned wage subsidy which is supposed to provide financial assistance to help struggling businesses deal with the stressful situations arising from the COVID-19 pandemic.
The purpose of this type of financial assistance is thought to conserve jobs and retain employees. Here are the details we know so far:
This wage subsidy will now be available for small, medium-sized, and large businesses, including charities and not-for-profit organizations. However, the criteria surrounding an application for this type of financial assistance from the government still lacks clarity. Businesses will have to be prepared to show that they have suffered at least a 30% decline in revenue because of the COVID-19 pandemic, but the time frame of that financial decline is unknown at this time.
Amount of Subsidy
The wage subsidy will now cover “up to 75%” of employees’ wages, instead of 10%, but only for the first $58,700 worth of salary. This could translate into maximum weekly payments of $847. The exact calculations are still being finalized.
It is uncertain whether applications will require specific assessments before the subsidy is granted and to determine which businesses will be entitled to receive the maximum amount of the newly increased wage subsidy. There could be tiers of amounts of subsidies announced.
Accessing the Subsidy
How this wage subsidy is going to be administered is still unclear. When the previous 10% wage subsidy was announced, companies were informed that they would receive a reduction in the amount of taxes they submit to the CRA. As of now, this could change to the subsidy arriving in the form of a cheque payable to the company, or not. The model for receiving these payments is yet to be defined.
No clear answer has been provided about when this wage subsidy will be rolled out. The details are still being finalized by our government. The one thing we can be certain about for now is that any companies trying to take advantage of this financial supplement will suffer “severe” consequences at the hands of the federal government.
There are still many unanswered questions such as:
- What happens if a business shuts down, and there is no revenue generated and no working employees to pay? Can and/or how will this type of wage subsidy help?
- What happens if the business’s revenue declines by less than 30%? Will said business then be bypassed for this type of financial assistance?
- What happens if there is more substantial impact on working capital instead of revenues? Will this wage subsidy even be valid for such businesses?
We understand that these are frustrating times and we are here to help. We will let you know if we have further information as we continue to hear updates regarding eligibility criteria and subsidy accessibility.
This newsletter and the details provided are solely shared for informational purposes and does not constitute legal advice or opinion. Please do not hesitate to reach out to your manager with any questions.
Pramen Prasad CPA, CA, CMA Managing Partner
Prasad & Company LLP