** Update as of June 20, 2020 – we've updated our calculation method in Wagepoint so that employers can continue to take advantage of the program on payrolls after June 19 if they still have dollars left to claim.
Note: The CRA will provide the self-identification form for reporting purposes when it is available. Employers are responsible for completing and submitting this form to the government. Wagepoint will not be providing this service. See FAQ 14 for more information.
**Update as of April 1, 2020 – the 10% subsidy program continues to be in place for eligible employers. The government has announced a separate Canada Emergency Wage Subsidy program, and eligible employers can apply for this program directly through the CRA's My Business Account portal.**
What is the Temporary Wage Subsidy (TWS)?
In response to the impact of COVID-19 on Canadian businesses, the Federal government rolled out a Temporary Wage Subsidy (TWS) program.
How is the TWS calculated?
The subsidy is equal to 10% of the remuneration you pay from March 18 to June 19, 2020 claim period — up to $1,375 for each eligible employee. The maximum subsidy amount for each eligible employer is $25,000. Note: The subsidy is not applied on a per employee basis.
Here’s an example from the CRA's TWS FAQ site —
You pay five eligible employees a monthly salary of $4,100, bringing your total monthly payroll to $20,500. Your wage subsidy for the month will be 10% of $20,500 which is $2,050. For the three months, if all of your payroll information remains the same, you will pay $61,500 of remuneration. Therefore, 10% of the remuneration you paid in the three-month period is $6,150.
Since this amount is below the maximum allowable amount of $6,875 ($1,375 x 5 employees), your total wage subsidy for the three months will be $6,150.
In addition to the above calculation, the source remittance for a pay period can only be reduced up to the maximum amount of the income tax being remitted for the company’s total payroll. If the whole amount of the available subsidy being claimed WAS NOT able to be applied against the remittances for that period, future remittances could also be reduced.
For example:
|
Gross remuneration |
Income tax for the payroll |
Available subsidy |
Applied subsidy |
|
$6,000 |
$400 |
$600 (10% of $6,000) |
$400 |
|
$4,000 |
$400 |
$400 (10% of $4,000) |
$400 |
|
$4,000 |
$1,800 |
$400 (10% of $4,000) |
$400 |
Click here for more information from the CRA on how to calculate your TWS amount.
TWS automatic calculation function in Wagepoint
To support this program, Wagepoint rolled out a new function to automate the Temporary Wage Subsidy calculations in the app.
New “Eligible for subsidy” toggle — We’ve added an “Eligible for subsidy” toggle to the Company Company info tab in the “Payroll Details” section.
- The default setting is ‘No’ – which means that we will not reduce your payroll deductions. Our system will continue to calculate and collect the full source deduction amount.
- If you set the toggle to ‘Yes’ – we will apply the 10% subsidy to the total gross payroll and reduce the federal/provincial income tax payable to the CRA by that amount. We will apply this subsidy when the payroll is finalized on our end, and the reduced source deduction amount will be reflected in your Payroll Invoice report.
Things to note:
- Check your eligibility — Wagepoint cannot help determine your eligibility for the program. To check your eligibility, we encourage you to consult the government’s FAQ or contact the CRA directly.
- Reaching maximum allowance — during the application period (March 18 - June 19, 2020), the maximum allowance is calculated as $1,375 multiplied by the number of eligible employees paid in each period, up to a maximum of $25,000 for a company. Note: the toggle is automatically disabled once a company has reached its maximum allowance.
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Reducing remittances on future payrolls —the CRA states, “If the income taxes you deduct are not sufficient to offset the value of the subsidy in a specific period, you can reduce future payroll remittances to benefit from the subsidy. It includes reducing remittances that may fall outside of the application period for the wage subsidy (after June 19, 2020).
- Starting on June 20, our system will calculate the “maximum allowance as 10% of the total gross remuneration paid to eligible employees from March 18 to June 19, 2020."
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If your business falls into either of the two categories below, you can still take advantage of the 10% TWS within Wagepoint and continue to draw down your subsidy amount until it is $0.
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Category 1: You’ve been claiming the TWS within Wagepoint by toggling the “Eligible for Subsidy” switch and your income tax amounts have yet to offset the remaining value of your subsidy. In other words, you still have more dollars to claim.
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Category 2: You haven’t toggled the “Eligible for Subsidy” switch to claim your subsidy — meaning you haven’t taken advantage of the program yet.
-
- Backdating processed payrolls — For payrolls you’ve already processed since March 18 to date, Wagepoint cannot backdate or apply the subsidy reduction. As per the CRA, you can request to have the allowance added to your account at the end of the year. See FAQ #9 for more information.
- Handling the subsidy in your journal entry –
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Reporting the TWS to the CRA — All TWS participants must report their eligibility using Form PD27 10% Temporary Wage Subsidy Self-Identification Form for Employers. Submitting this form lets the CRA properly document the reduction in remittances on the employer’s payroll program account and reduces the potential of the employer receiving a discrepancy notice at the end of the year.
- Wagepoint has created the Temporary Wage Subsidy Calculation by Pay Period CSV Report to help make completing Form PD27 and documenting your reduced remittances easier. Learn more.
- More information about reporting the TWS can be found here.