Wage Subsidy Rules for Furloughed Employees

Summary#

These are final rules called Regulations Amending the Income Tax Regulations, No. 3 (COVID-19 — Wage Subsidy for Furloughed Employees). They set how much an employer can claim under the Canada Emergency Wage Subsidy (CEWS) for employees who were furloughed during two fall 2020 subsidy periods. The rules are deemed to have come into force on October 25, 2020.

What it does#

• For furloughed employees, the weekly CEWS amount for the fall periods is the greater of:
  • $500, and
  • the lesser of 55% of the employee’s baseline pay for that week and $573.
• These rules apply to the two four-week qualifying periods of October 25 to November 21, 2020 and November 22 to December 19, 2020 (periods nine and ten).
• The change aligns the CEWS amount for furloughed workers with benefits available through Employment Insurance (EI) and the Canada Recovery Benefit.
• The regulations are administered by the Canada Revenue Agency (CRA) and are treated as effective from October 25, 2020. The regulations note that period ten still needed to be prescribed or legislated for the rates to take effect for that period.

Who's affected#

• Employers who apply for the Canada Emergency Wage Subsidy (CEWS) and have furloughed employees.
• Employees who were placed on paid furlough during the two specified periods.
• The Canada Revenue Agency (CRA), which applies and enforces the rules.
• Small businesses that use CEWS — they may have minor extra paperwork but stand to receive the subsidy.
• It is unclear from the document whether period ten was already formally prescribed at the time; the rules say the rates for period ten become effective only once that period is prescribed or legislated.

Why it matters#

• The change makes sure furloughed workers get subsidy support similar to what they would get from EI or the Canada Recovery Benefit instead of a higher flat cap used earlier (previously some periods had a $847 weekly maximum).
• That alignment aims to help employers keep their ties to employees, making it easier to bring people back to work as demand returns.
• The government estimated the overall CEWS cost at about $68.5 billion, and that aligning the furloughed‑employee rules for these two periods added roughly $865 million.
• For workers, the rule offers clearer, comparable income support; for employers, it provides a predictable subsidy amount during a period of reduced activity.