Last week, the federal government announced that it would provide eligible small businesses a 10 per cent wage subsidy for the next 90 days, up to a maximum of $1,375 per employee and $25,000 per employer. Employers benefiting from this measure would include corporations eligible for the small business deduction, as well as not-for-profit organizations and charities.
My immediate reaction was; does my business qualify? And how does this work?
More information has become available and here is what I have learned.
Does my business qualify?
The wage subsidy is limited to eligible small businesses. The CRA says that includes the following:
If a business is eligible, but not paying employees during the applicable period because it is closed, it does not qualify.
How will the subsidy work?
To calculate the subsidy amount, businesses will need to manually calculate 10% of the gross wages for the period starting March 18th – June 20th, 2020.
Eg. If you remit monthly on the 15th, then your next Source payment will be for the period of March 1st-31st. Jane has a monthly salary of $6,000 and works Monday to Friday. There are 22 working days in the month of March, so $6,000/22 = $272.73 per day. The period from March 18th – 31st includes 10 working days, so $272.73 * 10 = $2,727.28 in Gross wages eligible for the wage subsidy. The subsidy for Jane would be $2727.28 * 10% = $272.73 which will then be deducted off the Federal, Provincial or Territorial tax in the April 15th Source payment.
The subsidy does not reduce the CPP or EI amounts.
You cannot reduce your payment by more than the total amount of Federal, Province or Territorial tax owing for that period. However, if your subsidy exceeds the amount of income taxes collected, you can reduce future remittances (beyond June 20th) to benefit from the subsidy.
You will need to manually track the balances for each employee as there is a limit of $1,375 per employee to a maximum of $25,000 per employer. I have attached a spreadsheet that may be helpful with your calculations and running totals.
Please feel free to contact me at 905-840-2521 x102 or firstname.lastname@example.org if you would like any help in calculating your COVID-19 Payroll Subsidy and have any other payroll related questions.
Kathy Tuitt, President & CEO