10% Temporary Wage Subsidy

Many small businesses are struggling with the decision to keep their employees or lay them off to save their company, and that’s not fair.

We know that a business is like a family and making the decision to lay someone off can be heartbreaking.

McLenehan and Associates CPAs has provided this quick summary of Canada's 10% Temporary Wage Subsidy for employers to remove your confusion about the program and help you get access to the cash you need to keep your team happy and employed.

Below you will have free access to the 10% Temporary Wage Subsidy Tracker spreadsheet. Share this article with your accounting department or bookkeeper so they can begin tracking your 10% Temporary Wage Subsidy today.

What is the 10% temporary wage subsidy for employers?

The 10% temporary wage subsidy is a three-month measure that will allow eligible employers to reduce the amount of payroll deductions required to be remitted to the Canada Revenue Agency (CRA).

This subsidy will reward eligible employers for paying their employees for the next three months by compensating the employer for a portion of salaries and wages paid to employees between March 18, 2020 and June 19, 2020.

The subsidy available to employers during that period is 10% of salaries and wages paid, up to a few limits imposed by the program. Employers will receive an immediate benefit from the program by reducing their monthly remittance of income taxes withheld from employee salaries and wages. The subsidy cannot be offset against CPP and EI.

As a small business owner, you are entitled to the lesser of three amounts, as follows:

1. A total subsidy of up to $25,000 per employer.
2. 10% of salaries and wages paid to eligible employees between March 18, 2020 and June 19, 2020; or
3. $1,375 per eligible employee paid between March 18, 2020 and June 19, 2020.

The subsidy does not exclude salaries and wages paid to you as owner of the business, so your personal income is also eligible. However, net income of sole proprietorships and partnerships is not eligible.

Are you eligible for the 10% temporary wage subsidy?

For your small business to be eligible for the temporary wage subsidy, you must meet three criteria:

1. Pay one or more employees in Canada (eligible employees) between March 18, 2020 and June 19, 2020;
2. You must have been registered with Canada Revenue Agency with a payroll remittance account on or before March 18, 2020;
3. Be one of the following types of small businesses:
   1. A Canadian-controlled private corporation eligible for the small business deduction;
   2. An individual operating your business as a sole-proprietorship;
   3. a partnership, whose members are Canadian-controlled private corporations or individuals.

When is the 10% temporary wage subsidy available?

The first payroll remittance that you can reduce by the subsidy is your remittance due to Canada Revenue Agency on April 15, 2020.

How do I apply for the 10% temporary wage subsidy?

The 10% temporary wage subsidy currently has no formal application process.

The subsidy must be calculated manually, and your payroll remittance for employee income taxes, but not CPP or EI, should be reduced by 10% of the value of salaries and wages paid to your eligible employees when you make your payroll remittance each month.

For example, if you have 5 employees earning monthly salaries of $4,100 for a total monthly payroll of $20,500, the subsidy would be 10% of $20,500, or $2,050.

We are advising our clients to track the temporary wage subsidy claimed per eligible employee to ensure that they don’t exceed the maximum subsidy available (as described above), and with the expectation that at some point in the future there will be a requirement to report the subsidy that you have claimed.

We have provided a Temporary Wage Subsidy tracking spreadsheet which you can download here:

For instructions on how to use the Temporary Wage Subsidy tracking spreadsheet, please watch the following video.

The 10% Temporary Wage Subsidy tracker spreadsheet will help you keep record of the following information:

1. Gross salaries and wages paid between March 18, 2020 and June 19, 2020;
2. The income taxes that were deducted from those gross salaries and wages;
3. The amount of the subsidy that was claimed per employee;
4. The number of employees paid in that period.

Still have questions? We’re here to help. Send an email to success@mclenehan.com and our team of professional accountants will be happy to clarify the temporary wage subsidy for you.