CEWS vs. CERB: How the two benefits fit together and who may have to return payments

Click to play video: 'Coronavirus outbreak: Trudeau warns Canadians receiving CERB, wage subsidy they will have to pay one back'
Coronavirus outbreak: Trudeau warns Canadians receiving CERB, wage subsidy they will have to pay one back
WATCH: Trudeau warns Canadians receiving CERB, wage subsidy they will have to pay one back – Apr 27, 2020

First there was the Canada Emergency Response Benefit(CERB), a $2,000-a-month benefit designed to quickly put cash into the pockets of millions of unemployed Canadians amid the novel coronavirus pandemic.

Now, Ottawa has also rolled out the Canada Emergency Wage Subsidy, for which applications opened April 27.

The CEWS, which has a much more complicated design, covers 75 per cent of employee wages for eligible businesses that saw dramatic declines in revenue after provincial governments forced many businesses to close in an effort to curtail the spread of the virus.

The subsidy is capped at $847 per week per worker for a period of up to 12 weeks, starting retroactively on March 15 and ending on June 6.

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Click to play video: 'Coronavirus outbreak: Applications open for federal wage subsidy'
Coronavirus outbreak: Applications open for federal wage subsidy

By design, the CERB and the CEWS overlap to a degree.

“We really want employers to hire people back. We want people to switch back from the CERB to the wage subsidy,” Minister of Employment, Workforce Development and Disability Inclusion Carla Qualtrough recently told reporters.

While the CEWS is meant to help stem further layoffs amid the health emergency, it’s also intended to allow companies to put workers who have been laid off or furloughed back on payroll, the federal government has said.

“We want to make sure there’s an ongoing attachment between the employer and the employee so we can get the economy going and wrapped up as soon as we’re able to do so,” Parliamentary Secretary to the Minister of National Revenue Francesco Sorbara told Global News.

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But the federal government has been clear: workers cannot receive funding from both programs at the same time.

“It is one or the other,” Prime Minister Justin Trudeau said on the day CEWS launched.

While it’s possible some Canadians will have received both, “they will have to, over the course of the coming months, pay one of them back,” Trudeau continued.

Click to play video: 'Applications now open for Canadian Emergency Wage Subsidy program'
Applications now open for Canadian Emergency Wage Subsidy program

Here’s what we know so far, along with some of the major questions the combination of the two programs raises:

Who is eligible for CERB?

The benefit is open to Canadians who have lost all or most of their income because of COVID-19, whether they have lost their job as a result of the economic repercussions of the health emergency or can’t work because they are sick with the virus, under quarantine, caring for for someone who has the novel coronavirus, or had to stop working to provide childcare.

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The CERB, which runs for up to 16 weeks with the period from March 15 to Sept. 26, is available to wage earners, contract workers and the self-employed.

It is also open for those who normally qualify for employment insurance (EI) as well as those who don’t.

To qualify, you must have earned no more than $1,000 before taxes for at least 14 consecutive days in the first four-week payment period for which you apply for CERB. For follow-up periods, you must earn no more than $1,000 for the whole four weeks.

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Some Canadians who have recently exhausted their EI benefits qualify as well.

Other qualifications include: being a resident of Canada and having had an income of at least $5,000 from work or benefits related to maternity or parental leave for 2019 or the 12-month period prior to applying.

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Coronavirus outbreak: Jean-Yves Duclos discusses details of government’s wage subsidy

Who is eligible for CEWS?

The wage subsidy program is open to businesses large and small, including individual employers, non-profits and registered charities.

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To qualify, employers must have experienced a revenue decline of at least 15 per cent for March or at least 30 per cent for April or May 2020.

The program, which is administered by the CRA, has detailed criteria for how employers can re-hire employees or take on new hires.

The subsidy covers 75 per cent of “eligible remuneration,” which includes salary, wages and taxable benefits, but excludes things like stock option benefits and severance pay.

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Coronavirus outbreak: Manitoba hires company to help small businesses access federal programs

When will I get any CEWS money?

The CRA will start processing applications on May 4, with the first payments starting to flow to employers on May 5, according to federal officials.

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The funding is retroactive to March 15 and will end by June 6. This gives employers three separate four-week periods to claim the benefit.

When employers receive the funds, they will have to direct it to employees “much like a normal accounting process,” said Sorbara.

How soon an employee sees their payment will also depend on a business’s cashflow during this time, said Steven Van Alstine, vice-president of education at the Canadian Payroll Association.

Some businesses are completely closed, he explained, while others are operating at a reduced capacity, which will impact how employers organize the aid.

“It will depend on how the organization is situated for funds as to how quickly this is going to start being flowed to the employee,” he said.

“It will all depend on the employer to communicate that with the employee once that gets into motion.”

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Coronavirus outbreak: Scheer says delay returning to parliament due to ‘weaknesses’ in wage subsidy bill

Does my employer have to pay me the rest of my salary?

The CEWS covers 75 per cent of wages up to a cap of $847 per worker, per week.

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Sorbara said that while employers are strongly encouraged to pay the remaining 25 per cent, they’re not required to.

We’re leaving it up to the employers to decide whether they are able to or unable to,” he said.

Ultimately, the benefit is a subsidy, Van Alstine said. Footing the remaining 25 per cent is an option for employers, but the government is not paying for the entirety of a worker’s wage.

“Then it’s not really a subsidy,” he said.

“Some employers may choose to do that. The government’s not saying you’re breaking the requirements of the subsidy, but they’re really recommending that this is the whole idea behind the subsidy.”

Click to play video: 'How to best use your CERB cheque during the COVID-19 outbreak'
How to best use your CERB cheque during the COVID-19 outbreak

What if you received CERB and are being re-hired or hired?

One of the goals of the CEWS is to move some Canadians off the CERB and put them back on payroll.

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If an employer hires or re-hires you through the CEWS, this will impact your eligibility for CERB. This may mean that you should stop applying for further CERB payments, but you may also have to pay back benefits you’ve already received.

In general, if you go back to work and your earnings exceed the maximum allowed under CERB rules, you lose your eligibility. Being hired or re-hired through the CEWS is no different.

Am I going to have to pay back my CERB money? How will that work?

It depends.

If your CEWS payments cause you to become ineligible for the CERB for periods for which you’ve already received the benefit, you’ll have to pay that back. Many Canadians may find themselves in this situation because CEWS payments can be made retroactively to March 15, which is also the start date of the first CERB payment period.

The responsibility to return any CERB payments is yours, not your employer’s, the government has said. However, the CRA will reach out individually to every CEWS recipient who must return CERB payments, Sorbara told Global News.

You should pay back any benefits to the CRA, regardless of whether you originally applied through CRA or Service Canada. More information on that is available on the CRA’s CERB page.

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How do taxes and deductions work for the CEWS vs. the CERB?

Both the CEWS and the CERB are taxable. However, if you get paid through the CEWS, employers will withhold all applicable income taxes and payroll deductions, just as they would on any other of your paycheques, said Van Alstine.

That’s not the case with CERB. Ottawa isn’t withholding any tax at source on these benefits, meaning Canadians are getting the full $2,000 a month. Also, CERB payments aren’t subject to deductions like those for the Canada Pension Plan or Employment Insurance either.

Instead, any tax you may have to pay on CERB payments will depend on your total taxable income for 2020.

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I’m a business owner. Can I use the CEWS to pay my own wages?

It’s possible, but there are qualifications involved.

Individual employers are among those who may be eligible for the CEWS, but they must have been paying themselves as an employee of a corporation prior to March 15, the start date of the first CEWS claims period.

Business owners who pay themselves in dividends are not eligible, nor will those employers who changed the legal structure of their business after March 15, according to the Canadian Federation of Independent Business (CFIB), as reported by the Canadian Press.

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How many people have applied for the CEWS vs. the CERB so far?

On its first day, the CEWS attracted more than 44,000 unique business applications, Sorbara said. Nearly 10,000 of those applied in the first few hours.

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It’s not yet clear, though, how many employees that involves, Sorbara said.

As of April 24, more than seven million Canadians had applied for the CERB. The federal government reported that $22.4 billion have been paid out so far through the $2,000-a-month benefit.

— With files from the Canadian Press

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