Canada Emergency Wage Subsidy (CEWS) – 40-week program

Published: August 13, 2020
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Abstract

Introducing a wage subsidy for employers with reduced revenues. The subsidy is available for wages paid in ten 4-week periods from 15 March 2020 to 19 December 2020. The parameters for the tenth period have not yet been announced but were assumed to be the same as the parameters for the ninth period for the purposes of this analysis.

For Periods 1 to 4, employers are eligible for the subsidy if they have a qualifying revenue decline. Revenue declines are calculated based on calendar months, rather than the 4-week periods, with the first period corresponding to March 2020. Revenues in the corresponding calendar month are usually compared to revenues in the same calendar month in the prior year. The revenue decline required for eligibility is 15% for March, and 30% for April, May and June. For July onwards, employers are eligible for the subsidy if in a period they have any revenue decline.

For Periods 1 to 4, the subsidy is 75% of wages up to the lesser of the weekly cap and wages actually paid. For new employees, the subsidy is 75% of wages paid up to the cap. For Periods 5 to 10, the subsidy rate that an employer will receive depends on the extent of the employer’s revenue losses in the corresponding calendar month (for the base subsidy) and the preceding three calendar months (for the top-up). The level of subsidy declines over periods 7 to 9 as shown in the annexed tables. The employee remuneration eligible for subsides is capped at $1,129 per week. For employees on leave with pay, employers can also recover 100% of employer-paid contributions to Employment Insurance, the Canada Pension Plan, the Quebec Pension Plan, and the Quebec Parental Insurance Plan. Eligible employers include individuals, taxable corporations, and partnerships as well as non-profit institutions and registered charities. Public bodies are not eligible.

The PBO estimates the total net cost of this measure to be $59.2 billion - $67.9 billion in wage subsidies and $0.5 billion in forgone employer payroll contributions, offset by $9.1 billion in corporate income tax revenues from wage subsidies.

Additional Details on the Cost Estimate Update

The PBO updated the cost estimate of the Canada Emergency Wage Subsidy (CEWS) because:

  • The CEWS was extended from six 4-week periods to ten 4-week periods;
  • New program parameters were announced for periods 5 to 9; and
  • Additional economic and operational data permit a more accurate estimation.
The updated estimate reflects the above in calculating the expected subsidies for ten four-week periods from 15 March 2020 to 19 December 2020. The PBO estimates the total net cost of CEWS to be $59.2 billion. This includes:
  • $67.9 billion in gross wage subsidies;
  • $0.5 billion in forgone employer payroll contributions;
  • $9.1 billion in corporate income tax revenues.
This revised estimate of gross subsidies is $14.4 billion less than the $82.3 billion allocated for this program in the federal government’s Economic and Fiscal Snapshot published on July 8. The key difference is that the PBO’s estimate reflects the expected cost of the program based on the recently announced new parameters and the PBO’s economic model, whereas the Economic and Fiscal Snapshot allocation is intended to reflect a prudent amount set aside for CEWS, given significant uncertainty at the time surrounding not only economic forecasts but also program design.

Description of the CEWS

The subsidy is available for wages paid in ten 4-week periods from 15 March 2020 to 19 December 2020. The parameters for the tenth period have not yet been announced but were assumed to be the same as the parameters for the ninth period for the purposes of this analysis.

For Periods 1 to 4, employers are eligible for the subsidy if they have a qualifying revenue decline. Revenue declines are calculated based on calendar months, rather than the 4-week periods, with the first period corresponding to March 2020. Revenues in the corresponding calendar month are usually compared to revenues in the same calendar month in the prior year. The revenue decline required for eligibility is 15% for March, and 30% for April, May and June. For July onwards, employers are eligible for the subsidy if in a period they have any revenue decline.

For Periods 1 to 4, the subsidy is 75% of wages up to the lesser of the weekly cap or wages actually paid). For new employees, the subsidy is 75% of wages paid up to the cap. For Periods 5 to 10, the subsidy rate that an employer will receive depends on the extent of the employer’s revenue losses in the corresponding calendar month (for the base subsidy) and the preceding three calendar months (for the top-up). The level of subsidy declines over periods 7 to 9 as shown in the tables below. The employee remuneration eligible for subsides is capped at $1,129 per week.

For employees on leave with pay, employers can also recover 100% of employer-paid contributions to Employment Insurance, the Canada Pension Plan, the Quebec Pension Plan, and the Quebec Parental Insurance Plan.

Eligible employers include individuals, taxable corporations, and partnerships as well as non-profit institutions and registered charities. Public bodies are not eligible.

Base Subsidy Rates

Timing

Period 5*:
July 5 – August 1

Period 6*: August 2 – August 29

Period 7:
August 30 – September 26

Period 8: September 27 – October 24

Period 9:
October 25 – November 21

Revenue drop in prior calendar month

50% and over

60%

60%

50%

40%

20%

0% to 49%

1.2 x revenue drop

1.2 x revenue drop

1.0 x revenue drop

0.8 x revenue drop

0.4 x revenue drop

* In Periods 5 and 6, employers who would have been better off in the CEWS design in Periods 1 to 4 would be eligible for a 75% wage subsidy if they have a revenue decline of 30% or more.

Top-up Subsidy Rates

Timing

Period 5*:
July 5 – August 1

Period 6*: August 2 – August 29

Period 7:
August 30 – September 26

Period 8: September 27 – October 24

Period 9:
October 25 – November 21

Revenue drop in prior 3 calendar months

70% to 100%

25%

50% to 70%

1.25 x (revenue decline-50%)

0% to 49%

0

Monthly profile of CEWS

Month-by-month, the cost of the CEWS is expected to be the highest in Periods 5 and 6 (5 July to 29 August).

Figure 1-1 CEWS Payments by Qualifying Period

Source: Parliamentary Budget Officer

This is largely because subsidies will become available to firms with revenue losses of less than 30% from 5 July onwards. While these firms receive lower subsidy rates, they account for a larger share of employment. The top-up also increases the subsidies for companies with large revenue losses.

Figure 1-2 CEWS Payments by Revenue Loss Range

Source: Parliamentary Budget Officer

After Period 6 (ending 29 August), the cost of subsidies gradually declines as the subsidy rates decrease and projected economic conditions continue to improve.

For Periods 1-4 (15 March to 4 July) the PBO’s estimates reflects subsidies being paid in relation to the wages of approximately 3 million employees. The extension of the CEWS to employers with revenue declines of less than 30% dramatically expands the scope of employees whose wages are being subsidized to approximately 10 million. However, the lower level of support for these employers with lower revenue losses means there is not a proportionate increase in cost.

Figure 1-3 Employees supported by period

Source: Parliamentary Budget Officer

Sector profile of CEWS

By sector, the largest share of subsides have gone to employers in manufacturing, who received 20% of all subsidies. Subsidies per person vary depending on the salaries of employees in each industry (up to the maximum under the program). For example, average subsidies for mining, oil and gas extraction are more than double those for accommodation and food services.

Figure 2-1 Total CEWS payments and average CEWS payments per employee per period by industrial sector

Industrial Sector

Total amount of CEWS payments since launch

Average amount of CEWS per
employee per period

Manufacturing

$ 4,738,004,000

$ 2,565

Accommodation & Food Services

$ 1,656,290,000

$ 1,264

Retail Trade

$ 2,179,952,000

$ 1,946

Construction

$ 2,523,418,000

$ 2,542

Professional Scientific & Technical Services

$ 2,205,369,000

$ 2,599

Wholesale Trade

$ 2,187,483,000

$ 2,602

Administrative Support Waste Management & Remediation Services

$ 1,162,406,000

$ 2,028

Health Care & Social Assistance

$ 1,164,065,000

$ 2,044

Transportation & Warehousing

$ 1,362,175,000

$ 2,608

Other Services except Public Administration

$ 1,039,936,000

$ 2,140

Arts Entertainment & Recreation

$ 464,031,000

$ 1,877

Information & Cultural Industries

$ 643,826,000

$ 2,650

Mining Quarrying & Oil & Gas Extractions

$ 746,973,000

$ 3,095

Not Assigned

$ 382,482,000

$ 2,012

Real Estate & Rental & Leasing

$ 379,583,000

$ 2,419

Education Services

$ 301,108,000

$ 1,992

Agriculture Forestry Fishing & Hunting

$ 224,548,000

$ 2,210

Finance & Insurance

$ 259,990,000

$ 2,634

Management of Companies & Enterprises

$ 269,600,000

$ 2,818

Public Administration

$ 11,864,000

$ 2,345

Utilities

$ 9,714,000

$ 2,874

Source: Parliamentary Budget Officer. Based on CEWS claims detailed data up to 26 July 2020.

Geographical profile of CEWS

Most CEWS payments have been paid to businesses in Ontario, followed by Quebec, Alberta and British Columbia.

Figure 3-1 Total CEWS payments and average CEWS payments per employee per period by province or territory

Province/Territory

CEWS Amount Approved Since Launch

Average amount of CEWS per employee per period

Ontario

$9,711,885,000

$2,246

Quebec

$5,237,142,000

$2,260

Alberta

$3,649,975,000

$2,411

British Columbia

$2,897,948,000

$2,159

Manitoba

$708,757,000

$2,172

Nova Scotia

$447,141,000

$2,087

Saskatchewan

$403,058,000

$2,169

New Brunswick

$332,092,000

$2,039

Newfoundland and Labrador

$219,116,000

$2,144

Missing

$182,795,000

$1,939

Prince Edward Island

$69,055,000

$1,802

Yukon

$32,173,000

$2,311

Northwest Territories

$16,895,000

$2,400

Nunavut

$4,788,000

$2,206

Source: Parliamentary Budget Officer. Based on CEWS claims detailed data up to 26 July 2020.

Relative to size of their labor force, Yukon, Alberta, Ontario and Manitoba have the most CEWS claims. This likely reflects the different impact of COVID-19, public health measures, and oil price shocks in different regions.

Figure 3-2 Employees in relation to whom wage subsidies have been paid as a share of total 2019 employment by province or territory

Province/Territory

Period 1: March 15 to April 11

Period 2: April 12 to May 9

Yukon

19%

19%

Alberta

19%

19%

Ontario

17%

16%

Manitoba

16%

16%

British Columbia

15%

15%

Prince Edward Island

14%

12%

Nova Scotia

13%

12%

Quebec

12%

15%

New Brunswick

12%

13%

Newfoundland and Labrador

12%

12%

Northwest Territories

12%

10%

Saskatchewan

10%

10%

Nunavut

6%

5%

Source: Parliamentary Budget Officer. Based on CEWS claims detailed data up to 26 July 2020 and Statistics Canada Table 14-10-0090-01 Labour force characteristics by province, territory and economic region, annual