[Canada] COVID-19 Ten-percent Temporary Wage Subsidy for Employers

This article outlines the Temporary Wage Subsidy for Employers that has been released by the Canadian Revenue Agency (CRA) amid the COVID-19 outbreak and how to use Wave to apply this subsidy to your payroll. Note that this is different from the Canadian Emergency Wage Subsidy.

For information on the 75 percent Canadian Emergency Wage Subsidy and how it interacts with the ten-percent Temporary Wage Subsidy for Employers, please visit:

 

Wave is continuing to work to make this feature even better - this article will be updated as the feature is updated.

Here are some quick links:

How do I know if I’m an eligible employer for the Temporary Wage Subsidy?

How will Wave help me with the subsidy?

How does Wave calculate my subsidy amount?

What if my subsidy from a pay period exceeds the income taxes from the same period?

How do I track this subsidy and report it to the CRA?

How will this affect my employees?

What if I’m eligible but didn’t opt-in right away in Wave?

What if I said I was eligible in Wave but now I know I am not?

Is the subsidy considered taxable income for my business?

What if I don’t pay any wages between March 18 - June 19, 2020?

What if I was using this subsidy but am now eligible for the Canada Emergency Wage Subsidy? 

How do I know if I’m an eligible employer for the Temporary Wage Subsidy?

The Canadian Revenue Agency's FAQ outlines the eligibility requirements as:

"You are an eligible employer if you:

  • are a(n):
    • individual (excluding trusts),
    • partnership (see note below),
    • non-profit organization,
    • registered charity, or
    • Canadian-controlled private corporation (including a cooperative corporation) eligible for the small business deduction;
  • have an existing business number and payroll program account with the CRA on March 18, 2020; and
  • pay salary, wages, bonuses, or other remuneration to an eligible employee.

An eligible employee is an individual who is employed in Canada.

Note: Partnerships are only eligible for the subsidy if their members consist exclusively of individuals (excluding trusts), registered charities, or Canadian-controlled private corporations (CCPCs) eligible for the small business deduction.

For more information on whether your corporation is a CCPC, see Type of Corporation.

For more information on whether your CCPC is eligible for the small business deduction, see Small Business Deduction in the T2 Corporation Income Tax Guide."

How will Wave help me with the subsidy?

If you are eligible for the subsidy, you will be able to mark your business as such within your Wave Payroll account. You will see a notice at the top of your Run Payroll page that will allow you to opt-in to the subsidy calculation.
If you are using automatic tax payments (remittances) with Wave, Wave will calculate your subsidy per payroll and automatically deduct this amount from your withdrawal and next remittance.
If you are handling your remittances outside of Wave, Wave will still calculate your subsidy per payroll, and you will be able to follow the CRA’s instructions on how to make your remittances.

Once marked as eligible, you will see the subsidy amount in your Payroll Summary when you review and approve your next payroll.

How does Wave calculate my subsidy amount?

Wave will calculate your maximum subsidy as it is prescribed by the CRA:
“The subsidy is equal to 10% of the remuneration you pay between March 18, 2020, and June 19, 2020, up to $1,375 per employee and to a maximum of $25,000 total per employer.”

Following the CRA guidelines, the calculation will take place as follows:

  1. Wave will take the total amount of gross wages paid to each employee on a pay date that falls within the period of March 18 - June 19, 2020 and multiply this amount by ten percent.
  2. The result of the Step 1 is then deducted from the total amount of income tax (federal/provincial/territorial) you are required to remit to the CRA from the payroll.

When you approve your payroll, you will see the subsidy amount in your Payroll Summary with the line item “CRA Temporary Payroll Subsidy for Employers.” You will see the subsidy appear on the Employer Portion of the Summary as this only affects the employer remittance, but do note that it will only be deducted from the income tax portion of the remittance - your Canada Pension Plan (CPP) contribution and Employment Insurance (EI) premiums will not be affected.

Wave will continue to calculate your subsidy amount until one of the following happens first:

  • you have reached the limit of either $1,375 per employee paid within the prescribed time frame; or
  • you have reached $25,000 per employer

What if my subsidy from a pay period exceeds the income taxes from the same period?

You may run into a situation where your subsidy amount is greater than the amount of income taxes withheld in a specific pay period. In this case, you are allowed to reduce future remittances to account for the value of your subsidy, even if it is past June 19, 2020.

If you are on automatic tax payments and this situation occurs, Wave will continue to reduce your remittances until you have received the full value of your subsidy based on the wages paid with March 18 - June 19, 2020.

If you are not on automatic tax payments and this situation occurs, Wave will continue to reduce your tax liabilities until you have received the full value of your subsidy based on the wages paid with March 18 - June 19, 2020.

How do I track this subsidy and report it to the CRA?

The CRA has yet to outline all of the reporting requirements but has suggested that you maintain the following records in the meantime:

  • Total gross wages paid to employees between March 18 - June 19, 2020
  • The amount of federal or provincial/territorial income tax deducted from those wages; and
  • The number of employees you have paid within that period

To help keep track of the subsidy amount you've received, Wave will record all subsidy amounts that you claim on your remittances as "Uncategorized Income." You can add an account to your Chart of Accounts called "Wage subsidy income" and categorize all subsidy amounts there for clearer bookkeeping.

Wave is continuing to monitor closely any new information provided from the CRA on how to report this subsidy and will update this article as needed.

How will this affect my employees?

This will have no effect on your employees as you are not withholding less tax from your employees.
You are to continue to pay your employees and make payroll deductions (federal and provincial/territorial income tax, CPP contributions, EI premiums) from their pay as you would normally.

At year end, your T4 summary and slips will report employee wages and remittance amounts as normal.

The subsidy deduction only affects the remittance amount you are to send to the CRA from pay dates within the prescribed period of time.

What if I’m eligible but didn’t opt-in right away in Wave?

Once you select that you are eligible, Wave will look to see if you have any pay dates on or after March 18 to see if any adjustments need to be made. If you do, Wave will retroactively calculate your subsidy from these past dates and apply it to future remittances.

If you are eligible, using automatic tax payments, already had approved pay dates prior to this subsidy feature and do not intend on running any future payrolls, please contact support to have your current remittance updated. 

What if I said I was eligible in Wave but now I know I am not?

Please contact support right away to let us know to turn the subsidy off and correct any remittance amount in a timely fashion.

Is the subsidy considered taxable income for my business?

Yes. It is very important to maintain a record of the subsidy amount as you will be required to report it as income in the tax year it is received.

What if I don’t pay any wages between March 18 - June 19, 2020?

If you don’t pay any wages, including bonuses, between March 18 - June 19, 2020, you can not receive the subsidy.
Please note that you must have pay dates within this period in order to receive it. This means that even if you have employees working during this period, if you do not pay them within March 18 - June 20, you will not receive the subsidy.

What if I was using this subsidy but am now eligible for the Canada Emergency Wage Subsidy? 

From the CRA's webpage on the Canada Emergency Wage Subsidy:

"For employers that are eligible for both the Canada Emergency Wage Subsidy and the 10 per cent wage subsidy for a period, any benefit from the 10 per cent wage subsidy for remuneration paid in a specific period would generally reduce the amount available to be claimed under the Canada Emergency Wage Subsidy in that same period."

This means that you can continue to use this subsidy either until the new Canada Emergency Wage Subsidy is passed and implemented, or continue to use it while also receiving the new 75 percent subsidy. You will have to account for the ten-percent subsidy being applied in order to not over-claim the new 75 percent subsidy. 
For an overview on the Canada Emergency Wage Subsidy by Wave, please see Canada Emergency Wage Subsidy .

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