The federal government's 75% wage subsidy proposal

Paul: Good afternoon everyone and welcome to the Gowling WLG webinar on the Federal government's 75% wage subsidy. My name is Paul Carenza. I'm a tax partner at Gowling, practicing primarily out of the Toronto office. I'm joined today by Laura Gheorghiu, a tax partner in our Montreal office, as well as by Neena Gupta, a partner in our employment group based out of the Waterloo office, and also by Shannon Wadsworth from our marketing group, who's efforts made this a reality and who's technical expertise of putting this together far surpassed mine. A few notes about the Zoom protocol. The chat function is disabled simply because it's unworkable with the number of people we understand have subscribed to this. We do have the Q&A function enabled. We will attempt to answer questions at the end of the webinar. We have allotted some time for that. We suspect we won't get to all of the questions but we will address them after the webinar and post the Q&A to our website and likely email each of you a link to that Q&A. The agenda we have for today is as follows. First off, we're going to do an overview of the subsidy program and talk a bit about the gaps and difficulties that we've identified from speaking with likely many of you. We'll move on to the mechanics of computing a subsidy, including the lack of some detail in accurately computing remuneration in particular instances, for particular employees and the manner in which they are compensated. We'll touch on the mechanics of applying for the subsidy based on what we know today and last, but not least, talk a bit about the interaction with other support measures that the government has, vis a vis employees, based on the employment law side. Supplementary employment benefit plans, work sharing programs, EI, of course, and the CERB or the emergency response benefit.

About 2 weeks ago, if you recall, the House of Commons reconvened and passed the COVID-19 Emergency Response Act which contain about amendments to about 15 to 20 different statutes, including the Income Tax Act. That's where the earlier announced 10% wage subsidy was contained. That statute received Royal Assent on Wednesday, March 25^th, and as you recall 2 days later at a press conference on the 27^th, it was announced that a broader wage subsidy would be brought in. Following that Friday announcement we had Minister Morneau release two press releases on April 1^st and pretty much that's what we're going to be talking about today. We're not talking about draft legislation, let alone legislation, we're talking about whatever detail was contained in two press releases. It makes it a bit difficult.

The policy that's been put forth by the government for this wage subsidy, in our view, is important to keep in mind. The policy is to maintain employment relationships, and avoiding layoffs, and to reduce the strain on the EI system on the CERB benefit. Those two overriding policy features ought to be kept in mind, certainly have been kept in mind by us, in going through what we know today based on the press releases and announcements. We hope also kept in mind by the drafters as they're drafting and the legislature as it comes to adopt. Some of you may have heard that there was a recent announcement just today, again a press release, pardon me, a news conference, not a press release. I believe now it's been followed up with a press release. In any event, so many people have said this situation is moving so quickly, changing day by day. We're in the same boat with this because we're dealing with press announcements that release details in drabs. Sometimes not enough detail and it leaves us guessing. All to say I hope the policy goals are followed through.

One point about the notion of bail out, and I've heard from some of our clients, multi-national clients, that were looking at what they had heard through the news about this subsidy in relation to what they know of the US Care Act. I'm not an expert by any stretch on the US legislation but I understand there are some restrictions on corporate actions that can be taken by a recipient of assistance under those US rules. For instance, they couldn't do a share buy back, they couldn't pay a dividend, do those kinds of things. Based on what we know right now there are absolutely no ties between taking advantage of this wage subsidy as there are with the US rules. That makes sense because this wage subsidy is not a grant, it's not a forgivable loan, as we'll get to later in this presentation, it represents temporary funding which is fully taxable to the employer/recipient and eventually tax will be paid on it. This bail out notion should not be a concern

As I think I said a moment ago, this program is a cash subsidy to employers for 3 separate periods. The employer will have to apply for the assistance in each of those three periods. We have on this slide setting out the 3 periods; the claiming period and the reference period and the percentage revenue drop out. We're going to get to this gating issue of revenue reduction in a couple of slides from now and that, obviously, is a key issue for many of our clients and I'm sure many of you.

Just to be clear this is in addition to the 10% subsidy that was enacted 2 weeks ago and fairly radically different from that earlier subsidy. That subsidy was a reduction in payroll remittances whereas the current 75% is a cash in flow from the government. Covered slightly different periods as well. March 18 versus March 15, up to June 19 versus June 6. Generally the same period but slightly different starting and end dates. It was a much more modest program, of course. The maximums were nowhere near what we anticipate the maximums will be under this one. The maximum was $1,375.00 per employee and $25,000.00 per employer under that more modest program. The biggest difference was who could claim the benefit of it, the eligible employers. Clearly at that point in time, giving the government credit, they had not yet perhaps solely appreciated the extent of the economic impact of the virus. That earlier program was limited to, think of them as small businesses, so eligible employers that were individuals, Canadian controlled private corporations that had a taxable capital under $15 million dollars. Again, fairly small, Canadian controlled private corporations. Non-profit and charities were eligible. Partnerships comprised of any of the foregoing were eligible. The big one, of course, was any employer in Canada but having to be part of a multi-national group, or controlled by a multi-national group, they were excluded. Full stop. Because the two programs are different, we understand that the draft legislation that we'll be seeing, hopefully shortly, on the 75% subsidy will make it absolutely clear that employers can claim the benefit of the two programs, assuming they are eligible for the two. Again, no foreign owned corporations under the earlier, more modest program. If assistance is claimed by an eligible employer under both, the assistance received under the more modest program is deducted, if you will, from the assistance that can be received under the 75% program. The eligible employers, in contrast to the more modest program, this one is available to, as I stated, any type of employer in Canada. Whether an individual, partnership, corporation, non-profit or charity. The key for many of our clients is that foreign ownership is irrelevant.

We have this gating issue of the gross revenue reduction. Up until late yesterday, and certainly confirmed in the press conference of Mr. Trudeau today, it had been a 30% revenue reduction, month over month, March 2020 to March 2019, February 2020, February, pardon me, March, April, May going forward, that was changed through announcement today. We will get to that in a couple of slides because that gating issue is one of the most significant issues of this program. So available to all employers but it does exclude some. Interestingly, in the two press releases from April 1^st, it referred to some of the exclusions differently. In the element it said public bodies were excluded. In another one it said public sector entities were excluded and it went on to describe those as such as municipalities, crown corporations, public universities, colleges, schools and hospitals. It's not entirely clear at this point how broad that exclusion is intended to be. It seems clear that they're not going after all tax exempt entities, pardon me, excluding all tax exempt entities because non-profits and charities are eligible employers, but the breadth is unclear. We've had questions about, for instance, Aboriginal band owned entities, we've had entities that are owned by a university and if the entity is carrying on a business and it happens to be owned by a university, should that be excluded? Those details will be interesting to see when they come out. The employer's also intended to make its best efforts to top up the salary of the employee following receipt of the subsidy. We're looking very much forward to a detail on that because it's not clear what best efforts are, whether it's to the current salary which may have been reduced or is it up to the pre-crisis remuneration level. It's not entirely clear based on what's been released to date.

Okay, so the revenue reduction. As I said a moment ago it had been a straight 30%. Today it was confirmed that is intended to be softening a bit but rather than looking at March 2019, for instance as a comparative month, applicants can look to the revenue of January and February of 2020 and compare that to March, compare that to April, compare that to May. In addition, the required reduction level has been reduced from 30% to 15% for the month of March, taking into account that the closures of non-essential services and the closures of most businesses, really kicked in in the middle of the month. That's a helpful reduction and we're looking forward to seeing more details in the draft legislation. The decline in revenues need not be COVID-19 related which is a good thing because I'm not sure how one would necessarily identify revenue reductions that are related to a particular cause. Let's keep in mind that revenue is not profit, it's not income, it's gross revenue, although it's interesting to note that gross revenue typically does not include inability to collect an account rendered. Bad debts, right-offs, right-downs, they don't appear at this stage to be something that is taken into account. The revenue is to be computed as revenue from a business carried on in Canada. That's helpful because there are some employers here who operate as a branch of a foreign company that ought to be eligible based again on the details that happen to be released to date. I would not suspect that that will change with the draft legislation but, again, we will have to see. The revenue reduction has to be from arms length revenue. There's one slide that deals with this in more detail. But that's quite problematic in many situations. The revenues to be computed versus the normal accounting method, said the second press release from April 1^st, and it was an interesting choice of words because it didn't say normal accounting standard use but an accounting method. I'm not sure if the language was intended to mean something else. Again we'll have to see. The revenue in each part of the comparative periods is to exclude revenue from extraordinary items and revenue from amounts on account of capital. But they are obviously intending to get to is operating revenue excluding items such as a sale or disposition of a significant business asset.

Here are some of the difficulties with this. It's been a very common critique, if you will, right from April 1^st, that the month over month, or even now January, February versus March, works well for retail businesses, quite frankly. Businesses where there's no lag between the labour input and the hiring of the labour that goes into that input, and the receipt of payment or the invoicing of the payment. Think of your bar or your restaurant, what have you. It's quite difficult for many others, including manufacturers, that will typically have a lag. Your January, February revenue, for instance, if that's what we're looking at for the comparison, that likely represents production from October, November, December. Your March revenue likely references production from December, January, February. So there's great concern that that time lag, in of itself, will create difficulties for employers who are in the crunch to actually hit the threshold to be eligible for this. Acquisitions and divestitures over the year. I've had a couple of clients who have either grown or sold off a division. It's not clear if you sold off a division, so you're essentially running your business in the normal course at 75 or 70% of what you had last year, you're reduction may have nothing to do with COVID-19. The reduction doesn't have to be due to COVID-19 but I've had clients suggest that they were concerned whether they should not be adjusting their revenues when sells, for fear of after the fact being assessed a penalty for manipulating the system, when they're not manipulating anything at all. Again, it's just an indication of this period over period method of checking how much your business has dropped, is a bit of blunt instrument and it doesn't address a lot of particular business situations. There's also been some question about whether the reduction should be gauged by business line or division of particular employer, and based on what we know now it is to be measured on the entity basis, rather than a divisional basis.

Some timing issues that affect the decision to re-hire or keep your employees. Because of those application periods on the earlier slide, employers are in a bit of bind here because they don't know whether the wages that they pay, say over the next 2, 3 weeks, will actually be eligible for the subsidy because the measurement period hasn't closed yet. I think we have the example here. The wages paid on April 15^th would qualify in the April 11 to May 9 window only if the revenues are down 30% from April 2019 versus perhaps January, February 2020. It's an unknown for a lot of our clients. The revenue reduction, again, is an issue for new businesses that certainly didn't have a March, April, May 2019 comparable. Maybe this new announcement today of the January, February amounts, perhaps that gives them something to compare to, otherwise they were just sitting there not knowing what to do. Similar would be the start-up that's been operating on seed capital with no sales yet. Not clear if they can show any revenue reduction one would be eligible for anything. These are details that we would hope we would see find their way into the draft legislation to provide some guidance to these employers. Charities and not-profits, the April 1^st releases from finance indicated rules were forthcoming, or details forthcoming, as to how to compute. Today they announced that these entities can choose to be exclude or include government funding in the determination of their revenue reduction. This is the arms length revenue's point and I've spoken with a number of clients who manufacture in Canada, goods or components that are sold to other members of a multi-national group, either for inclusion in a larger good that is then sold by that non-resident affiliate, or is used by them in their processes, but bottom line is the Canadian entity is in a position where virtually all of this revenue is coming from those non-arms length sources. Think of manufacturers in a multi-national group are indeed performers for a multi-national group. It's not clear why they should be excluded. I can see that the government may have thought that there were reasons to impose an arms length rule to avoid, to use the word I think the Prime Minister used, gaming the system. But in the examples I've just suggested there's no indication of any untoward, and to shut these employers out of the subsidy is inexplicable in my view. We're hopeful that this is a detail that perhaps we'll see in a future press release and ultimately, hopefully, we'll see it in the draft legislation.

Central paymasters is another similar example. They're lots of corporate groups where essentially all of the workforce is technically employed in one entity and that entity then sells the labour, if you will, to other members of the same corporate group. In that case, the same concerns and the same absence of untoward conduct are present. We would hope that that would be addressed to. At this point I'm going to cede to Laura who's going to walk us through some of the mechanics of the subsidy.

Laura: Thank you, Paul. Next slide, please. Okay, perfect. So the mechanics of the subsidy are different depending on whether the employee is dealing at arms length with his employer. So the criteria is the employee somehow related to the employer. In the test that we apply is the test under the Income Tax Act. Things like family relations or corporations controlled by the other corporation would create a non-arms length relationships. In this case, if the employee was the shareholder of the corporation, then clearly it would not be an arms length relationship. So for the arms length employee, the employee who is cannot control how much remuneration he is paid, the formula is quite flexible and what it says is that as a baseline the employee, the wage subsidy, that can be claimed on the employee's salary is at least 75% of the pre-crisis remuneration up to the cap of $847.00 a week. So therefore if the employee is paid less than that during the period it's possible that the wage subsidy is more than 75% of what is paid. I'm going to just walk you through the formula. It's a little bit mathematical but at the end of the day that's the result. The formula says we must look at the greater of two figures, two numbers. One is 75% of how much you're paying that person now and the other figure is calculated based on the lesser of two amounts. One of the amounts is the 75% of pre-crisis remuneration, which is not a defined term, and the other amount is the full amount that we're paying that person right, up to $847.00. So that means if we pay them less we may be able to claim up to the full amount we paid them and if, for some reason we want pay more, and where that could be a factor is where we want to maximize the wage subsidy we claim and they are not being paid a high enough salary to reach that level, is actually possible to pay more than the pre-crisis remuneration, in which case you would claim 75% of how much you're paying now. As I mentioned pre-crisis remuneration is not defined. You query whether you should be taking the annual salary and dividing it by the number of months or weeks in the year, whether you should be looking at the salary the month before the crisis began and the person, they have been laid off. So that's a question that remains. As I mentioned it is possible that you can get back the full amount that you're paying them now if it's less than what it was before and we'll run through some examples to help you understand that. But you are able to maximize the amount of subsidy claim for employee, the total possible available is $10,164.00 per employee. There is no cap for the employer. In the case of what we call non-arms length relationships between the employee and the employer, the example of the owner, manager, corporation where the owner, the shareholder, was also an employee of his corporation, the test is a lot more stringent because obviously, as a controlling shareholder, he or she is able to determine how much remuneration she or he gets in that period. There's no ability to pay more than before the crisis began and claim any kind of subsidy. It's capped at 75% of pre-crisis remuneration or if you pay less than that now it would be the, sorry, that amount or the amount of actually paid right now up to $847.00, whichever of the two is less.

What does this mean in practice? If a shareholder was not paying himself any salary before was only choosing to pay out dividends. It's not possible to switch to being an employee now and try to benefit from the subsidy. That's not available. Obviously there's no way to bump up the amount that was previously paid in order to benefit from the full amount of the subsidy. Here is an example to help you put into numbers the formula that we just went through. If your employee was at an annual salary of $50,000.00 a year, and we're assuming they're using that method of calculating pre-crisis remuneration, that would mean that they were making $960.00 a week, before the crisis began. If you continue to pay them that amount, let's say you continue to have folks on your payroll and you want, with respect to what you're paying them, to claim the subsidy. The way you would calculate how much you're able to claim per week would be using the formula and it would say, what is 75% of this amount, $962.00, and is it less than $847.00 a week? We see here, at number 1, that 75% of $962.00 is $722.00. So that's less than the cap and you're able to claim the full amount. If you have to reduce how much you pay them now, because of financial constraints, let's say you reduce it by 20%. So you're only paying them 80% of their previous salary, $769.00 a week, right now. You see in the bottom half of that example that 75% of $769.00 is $577.00 a week. But as I said, you are able to claim more if you reduce costs compared to what you're paying before. If you look at the second part of the formula which says, how much are you paying now? $769.00. And what's 75% of how much you were paying before? 75% of how much I was paying before is $722.00 and I'm able to claim the higher of that or 75% of how much I'm paying now. In numbers terms, I'm able to claim $722.00 when I pay $769 per week for this person. So you see that it's a lot more than 75% of what you are paying now because that amount has gone down as compared to before. Now obviously this is an example in the unrelated, arms length scenario where it is not an owner managed business. It's really an employee at arms length with his employer.

What about scenarios where the employee is paid more than the maximum of the subsidy? The subsidy is calculated, or assumes, $58,700.00 of income a year. So in a scenario where the employee's paid more than that, and continues to be paid more than that after the crisis begins, the subsidy is capped at $847.00 a week. We see in the top part that an employee at $100,000.00 would be making $1,923.00 a week. But you could only claim $847.00 as against that wage in that week. But even if you were reduced 20% to $80,000.00 the cap would still be $847.00. The next example is the one in which the modeling was done for the program which is a salary of $58,700.00 a week, 75% of which is $44,000.00. In that case the employee, if he were continued to be paid what he was paid before, the $58,700.00, would be making $1,129.00 a week. In that case the maximum that could be claimed as a subsidy would be $847.00. If, instead, the employee's wages were reduced by 20%, to $903.00 because of the crisis, on the $903.00 it's not just 75% that can be claimed back which would have been only $677.00 a week, rather, because of the formula the employer's able to claim the full $847.00, cap of the subsidy, for that employee. So you see you're paying them $103.00 but you're able to claim back $847.00, almost 100%.

The question is obviously what is an eligible remuneration? The definition that we've been provided, and it's all the same, this all very high level. There's no draft legislation yet to look at. So we are just looking at the documentation published on the finance website to date. But they do mention that all salary wages and other remuneration would apply with certain exclusions. So they say this is an amount on which income tax withholdings would be required. So the normal income tax withholdings of an employer vis a vis his employee's wages. Exclusions are made for things like severance pay, stock option benefits, non-cash benefits, for example, car benefits, phone benefits and so on, but also, and this is an important one that is quite essential and I've seen some questions come up already in the Q&A on this, there is a mention that for any period in which the employee could have, it doesn't mean they did, there's no tracking to what to the employee did, but could have claimed the CERB, Canada Emergency Response Benefit, for that 4 week period in which that person could have received the payment there cannot be also a claim for the CWS, the wage subsidy. As an example, the employee must be laid off for 14 days in order to qualify for the CERB. After the 14 days they are able to apply and receive the CERB, a payment. If the employer on the 15^th day of that period calls back the employee and starts them to pay, so for that 4 week period, 2 weeks the employee's laid off and 2 weeks he's back on the payroll, the employer cannot claim the wage subsidy for those last 2 weeks even though he's paying the remuneration because of this exception. So it's quite unclear what is the intended result because as Paul mentioned, the purpose of this is to get people off CERB and back on the payroll and continuing that employment relationship. And obviously this discourages an employer from doing that. So we're watching this closely to see whether there will be more details or a solution to that.

And another issue that is important is what happens with periodic payments that are dependent on performance, like bonuses or commissions? That's quite important because it determines how much of the subsidy can be claimed. If I can just go to the next slide for a minute. I want to show you an example so you see what I mean. Imagine if you had an employee which had a base salary of $40,000.00 a year but last year we know that they were able to earn another $60,000.00 on commission. Under income tax return and under T4's, they're showing $100,000.00 of employment income. Now you keep them on payroll but they're no longer able to make sales because of the restrictions. They're being paid their base salary of $40,000.00 a year. Are you able, vis a vis that employee, to claim back more subsidy because you are paying them less than last year, or are you only able to claim back 75% of what you're paying them? So right now at $40,000.00 you'd be paying them $769.00 a week and 75% of that it would mean that you could only claim $577.00, if the government does not accept to look at the commissions paid last year. If that commission could also be included pre-crisis remuneration, if you look on the right side of the table here, we see that you could actually claim $769.00 of wage subsidy. If you're looking at this, recognizing there's some uncertainty, you can now at least already conclude that you may claim $577.00 but perhaps, depending on how things are interpreted and how the legislation looks once it is published, perhaps there may be a possibility to claim more. An uncertain point but one that's important at this junction. Can I just go back to the previous slide for a second, please.

I wanted to wrap up some more thoughts on the eligible remuneration. It's important to note that other there is a limit on how much you can claim per employee there is no overall envelope that you have to worry about. As long as their employee qualifies, and you qualify with respect to the reduction in close revenue, you are able to claim it all on your employees. Also, when it's a arms length employee, if you're looking to hire somebody new you are able to claim on that person's wages as well. There's no restriction in adding staff right now. However, if you are sole proprietor, you carry on your own business, you do not qualify for this wage subsidy. The only option available to you is the CERB.

Another point that I think is important, as you're modeling out the cash flow impact to you, is that you are actually hiring back, if they're not already on the payroll, hiring back employees onto your payroll. It doesn't mean there's any requirement that they have to be performing tasks of their employment. But there is a same treatment as you would have if you were paying them regular remuneration. So that means that the regular payroll withholding will apply, but also your employer contributions to things like employment insurance and Canada Pension Plan will also apply, and that needs to be taken into account when you're modeling the cash back to you of this program.

There's some questions about how qualification happens. What we've seen as an announcement is that in about 6 weeks, 3 to 6 weeks, there will be a portal on the CRA MyBusiness Account, to which the employer can apply for the subsidy. That means that you must finance the remuneration and pay the remuneration in the qualifying periods, that Paul showed at the beginning, in order to be able to apply. The application is done each month. For the period of March 15^th to April 11, you will apply and then again for April to May and May to June. So there's three different applications. The qualification is meeting the conditions but there is approval, probably, that will happen. It will probably be a question of audit after the fact. The requirements are that you pay first, you the apply, you certify that you meet the conditions. There should be a payment in more than 6 weeks from the announcement and then you may expect that you will be audited on the claim that you have made. The amount is taxable. As all government assistance, when you are paid the subsidy, you will have to include it in your income for the year. This shouldn't impact your taxable income because you also have an offsetting deduction of the remuneration you actually paid the employees. In most cases you paid more than you were able to claim back. You shouldn't have income tax to pay. But if you're claiming other types of tax credits, for example, research and development credits, then the amount of the wage subsidy will reduce the eligible expenses on which you can claim that subsidy. That's an important point to keep in mind when you're calculating how much threads you might be able to claim in the year.

There's been quite a bit of commentary when this was announced about making sure that there is compliance and that there will be some sort of penalties applied. There isn't a lot of detail about what form they will take. While we would expect that if it's shown after the fact, and admitting that a lot of times you will not be able to know at the time that remuneration is paid, whether there is actually the 30% reduction or the 15% reduction in gross revenues except by forecasting it out. So if it's shown after the fact when there is an audit that the conditions were not met we would expect, at the minimum, that there would be a requirement to pay back the subsidy. Of course, in the case of fraudulent claims, there could be specific anti-abuse rules in this case and, perhaps, even offenses. To make a distinction, a penalty is administrative but if an offense is committed then there could be fines or even imprisonment. But it's all very high level, and we saw the Prime Minister speaking at length about this but also the Finance Minister, but they didn't give details about what exactly would be the forms of this so I think it would be something to follow in the draft legislation.

The things to do right now, one step to making sure that you will get your refund, not the refund but the wage subsidy, as quickly as possible is to make sure you're set up with the CRA for direct deposit. Gather together the information to demonstrate the 15 and 30% reduction in gross revenues and any documentation to support the pre-crisis remuneration paid. And also, and Neena will speak more towards this but, consider whether this is the best program given the other options available to you, and also whether you can integrate this program with others. There is one that was for Quebec participants, or employers with employees in Quebec could be of interest, was announced by the Quebec government on Monday afternoon, which is called the CAPME. This is a training program effectively allowing you to get back up to $25.00 an hour of salary paid to an employee that is in training. So if you're doing online training to get them up to speed on language skills, AI, technology, anything to do with their specific profession or any other kind of skills, it may be possible to get back up to $25.00 an hour of the wages you pay them. That program can be matched with the CWS, this wage subsidy, that we just discussed, so that if you get 75% of the remuneration refunded through the CWS, you could get the other $25.00, if they're spending time training, refunded through the Quebec program. So that's something to keep in mind. Now I'm going to turn it over to Neena who can walk us through some of the other programs and the interactions.

Neena: A couple of things that people have asked me about, including employers, hello everyone, is employment insurance and this is not, of course, something that helps the employer but does help your employee. A couple of things that you need to know is people are talking a lot about CERB and EI and there are a lot of people out there who are surprised that they're getting less from CERB than they did from EI. Just a couple of things, if they're already on here for some reason their current claim continues. If there is a EI claim due to pregnancy, parental, compassionate care, not because of lack of work, regular EI applies. If they were laid off or terminated before March 15^th, that's only regular EI. But if they are laid off or terminated as of March 15^th due to lack of work, COVID related, they are eligible for the CERB benefit. First at 16 weeks and then, if they're still unemployed, they go on to EI. Next slide.

The CERB benefit, and actually people have already received their first CERB benefit cheque, deposited directly. So the portal opened up on Monday and people have already received money on Wednesday. So it's pretty fast. It's for people who've had no income in 14 out of 28 days cycle. There's some suggestion that that might be relaxed to permit some work and hours of work per week. We all know its $500.00 a week. Some people will win on that because it will be better than their EI, or even better than what they were earning before and some people will lose. The best thing to know is that this does not reduce EI benefits. The biggest problem from an employer's perspective is that if they have the ability to top up unemployment they probably could have the ability to top us CERB payments. But unfortunately as the legislation now stands you are not able to top up CERB payments. There's suggestion that that's being reviewed at a high level but right now the legislation is not sympathetic to an employer who's trying to help out an employee. CERB payments are definitely taxable even if there's no withholding taken on at source they are taxable amounts. There is no suggestion of clawback. So if somebody earns lots and lots of money in 2020, despite the pandemic, there's no suggestion that CERB payments will actually be clawed back. That's a good thing about the CERB structure. Next slide, please.

We received a couple of questions about how work sharing might work with the business wage subsidy and up until today our understanding is that you can apply for work sharing, and work sharing is an EI funded mechanism by which employees pull together in a unit, they share the work that's available, and EI essentially is paid for the hours they are not working on a prorated basis. Work sharing itself has been simplified significantly and just a word of caution, not to be too influenced by what you are reading on the web. Go straight to the form because the form has been updated for COVID-19. What's really interesting is that there is a COVID-19 work share rapid response team. They are committed to try and get approval within 10 days. There's no waiting periods so those of you who have done it before may have seen a 30 day waiting period. There's no requirement to prove a downturn. No requirement to submit the written recovery plan although you may be asked for it later. So you can have EI work sharing and, as far as we know as of today, you can use the business wage subsidy to help offset the actual wages that you are paying during the work sharing period. Next slide.

The problem with EI payments that are provided to your employee is that subject to claw back. The claw back starts to be triggered if an employee earns $67,750.00 in 2020 calendar year, from all employment forces. However, there are lots of people for whom work sharing would be a good option for low and middle income earners and we encourage you to consider using work sharing if that's appropriate for you. The government offices are really committed to helping you through the work share application process. Next slide.

I've spoken briefly about supplementary unemployment benefits and so it's essentially a way to get approval to pay your employee when they're unemployed without causing a reduction in the EI benefit otherwise. They would earn what ... quite frankly helpful given the 16 weeks of CERB payments that I gave you the information of where to apply for this sub and I continue to hope that there will be some changes to the CERB regulations that would allow us to use the sub-like vehicle on CERB payments being paid by the government. Next slide.

I just wanted to give warning because we talk about all these government subsidies and assistance, which is great, however, employees who have suffered a loss of income can still go to a lawyer, appointed ... lawyer and argue that a layoff, reduction in pay, or change in duties, are pronounced to a form of breach of contract that can stop the dismissal and seek damages for the period of time that they earned less money than they were expecting. I don't know how the courts are going to react. I know that courts have historically, in Ontario, been quite pro-employee and anti-employer, sensing an imbalance between employer and employee. I'm wondering if the courts, which have largely shutdown themselves and laid off themselves, will be a little bit more sympathetic since lawyers fight, in face of the fact that there is this tremendous worldwide pandemic out of the control of any particular employer. So we will see how those employment issues will pan out. I just wanted to give you a quick look that those still remain live. One other thing. We haven't talked about unionized workers at all. But quite frankly we really should because if you're going to do anything, whether its apply for the business wage subsidy or the like, you have to work with your union rep. Next slide.

I know we got a lot of questions on our Q&A app and I wanted you to read them because I went on last and I'm going to shout out there questions and hopefully one of Laura or Paul will chime in. One of the questions was about the Prime Minister saying that you have to pay the balance of the 25% and is that really voluntary and what if you can't pay it and I'm wondering, Paul, if you want to address that and then have Laura chime in.

Paul: I think the only way to make sense out of that stated requirement is that they must be referring the pre-crisis remuneration. Because otherwise it makes no sense to me. If you're paying $1,000.00 and your entitled to $750.00 subsidy, you're only entitled to the $750.00 because you're paying $1,000.00. You're paying that extra 25%. So I think the only way it makes sense is if the reference to best efforts to top up is a reference to the pre-crisis remuneration. That's my take at this point but we're waiting on detail.

Neena: Laura, do you have anything else to add?

Laura: I think that's right. We saw some examples in going through that. It's possible that you would get the full amount of what you paid back in subsidy. Obviously that's not necessarily the desire. They would prefer that the person be paid their full pre-crisis remuneration where the top up would be coming in.

Neena: Okay. We're at 3:58 and we did commit to end at 4:00 so we've got probably 100 questions here. We're going to try to look at them and see if we have some themes that we can deal with in sort of an agglomerative way. So it's not specific legal advice. It's not specific answers for your companies positions, but just some themes that have emerged. One question I do want to answer is if you had to do some partial layoffs but you're still working with, let's say 50% of your workforce, can you still claim the wage subsidy? You can absolutely claim the wage subsidy based on the actual wages of remuneration you are paying. So obviously the people you laid off and haven't paid any money to, there's no subsidy for that, because you have not paid wages to them. But for the balance of the people you have kept and you can absolutely claim the wage subsidy. Then the one other question I wanted to ask is some employers are contemplating clawing back and retroactively paying some employees and claiming the wage subsidy, which is better than CERB, but these people have already applied for CERB or received CERB. Laura, do you know if there is a way of dealing with that situation? Is the employer just disentitled from claiming the wage subsidy for that period of time or what happens?

Laura: Based on what we have now as information, there is a risk. Now, we may have more clarity, and we hope to have more clarity in the coming days, and remember the application will only be available in 6 weeks from the announcement. So we're maybe 5 weeks away from the application being live. But certainly there's a risk for the 2 week period that the person overlaps with the CERB qualification that they may not be qualifying for the subsidy on those 2 weeks. After that though they should be qualifying if they meet the other conditions.

Neena: Okay. Alright.

Laura: Neena, one more comment because a I did go through, and we're glad we have so many questions. I mean that what we're saying is resonating with the folks and we will try to answer them all as best we can in an agglomerative way in the Q&A that we publish afterwards. But there's something that's important that we were explaining earlier which is that this is a really a paying of wages and then later the employer claims the subsidy. This is not a way that the employer, on behalf of employees, is trying to get funding into the employees hands. You continue to pay people. They may or may not be able to work for you because obviously if the store is closed or the factory's closed, they cannot be working for you in terms of physically rendering any kind of employment services but you pay them now like before, maybe at a reduced rate, and then you, as employer, get to compensate yourself with this subsidy after the fact. I think that's really important in terms of the mechanism.

Neena: Yes. That has been the concern for many businesses. There's a question and we're going to end with that one which is the government says 6 weeks, can it be sped up? Prime Minister Trudeau was pretty hopeful that they might be able to get that portal going as soon as 3 weeks. But we don't know anything more than what you read in the papers or hear on the news.

Thank you for joining us. Thank you to Paul Carenza, Laura, to the entire marketing team that works invisibly in the background to put these together. Thanks for all of you. I truly believe that together we flatten that curve and we will get through this together. Thank you for joining us. One last thing, if you want to receive our COVID-19 updates, please go on our site to register because of the ... regulations it is much easier for us if you have actually indicated that you want to receive our COVID-19 updates for us to keep you aprised. Thank you and have a great afternoon.

Paul: Thank you.

Laura: Thank you.