LL.M. Fisc., F.Pl.
Towards some degree of normalcy
The gradual easing of the lockdown will result in a resumption of your professional activities and a return to some degree of normalcy. However, this relaunch will involve a number of challenges, including the rehiring of employees whom you had to lay off during the more acute phase of the health crisis.
How can you encourage your employees to return without penalizing them, while protecting your financial health, which the crisis may have weakened?
How can you synchronize this recovery with the various economic support measures from which you and your employees may have benefited?
Even with a rehire offer, some employees may be reluctant to return to work before the end of the current reference period, i.e. June 6, 2020. They will want to avoid having to repay the Canadian Emergency Response Benefit (CERB) if their income for this period exceeds $1,000.
|Reference periods (CERB and CEWS)|
|Period 1||March 15, 2020 to April 11, 2020|
|Period 2||April 12, 2020 to May 9, 2020|
|Period 3||May 10, 2020 to June 6, 2020|
|Period 4||June 7, 2020 to ? (Details to come)|
For your part, as an employer, know that the salary paid to an employee who returns to work is not necessarily eligible for the Canada Emergency Wage Subsidy (CEWS).
Taking into account the issues involved in this recovery, for both employers and employees, we would like to clarify certain details concerning the CEWS and the CERB, in particular their potential impact on eligibility for the support measures or the requirement to repay, as well as the best strategies to adopt.
Conditions to comply with
At the rehiring stage, some overlap with the support measures is to be expected.
- As an employer, the salary of the rehired employee will not be eligible for the CEWS if they have not been paid for at least 14 consecutive days during the reference period (see above table) for the CEWS.
- If you choose to pay the employee a salary retroactive to the start of the period in question, you can then claim the CEWS. However, an employee who claimed the CERB for this period will have to repay it in full if their earned income is more than $1,000.
B.A.A., M. Fisc., Fin. Pl.
Points to consider
To optimize the resumption of your activities, both for you the employer and for your employees, consider the following aspects:
- The employee’s gross salary and net salary
- The amount of CERB after taxes
- The number of days during the period for which the employee was not paid.
To maximize the CEWS
It may be appropriate to rehire your employees within the first 14 days of a reference period, which would make the employee’s salary eligible for the CEWS. Note that the next period should start on June 7, 2020.
To ensure that your employees remain eligible for the CERB
If one of your employees had already applied for the CERB for a given period and you told them that you intend to rehire them for that period, it may be appropriate to limit the duration of their work week, or distribute the work among several employees. This way, your employee won’t lose their eligibility for the CERB or have to repay it because their earned income exceeds $1,000.
Some scenarios to illustrate:
1. Overlap of rehire and CERB periods
Dr. Tremblay decides to rehire his two employees on June 1, 2020. Since they had been temporarily laid off, they were able to claim the CERB for period 3 (May 10 to June 6).
|Impact on the employees||Impact on the employer|
|They will have to repay the CERB in full for period 3 if the wages earned are more than $1,000 for the week they were rehired.||The wages paid will not be eligible for the CEWS since the employees were not paid for at least 14 consecutive days during the period.|
2. Rehire and wages paid retroactively
Mr. Laroche decides to rehire his three employees and pay them retroactively to the start of period 3 (May 10 to June 6).
|Impact on the employees||Impact on the employer|
|They will have to repay the CERB in full for period 3 if the wages earned during this period exceed $1,000.||The wages paid will be eligible for the CEWS since the employees will have been paid for at least 14 consecutive days during period 3.|
3. Rehire at the start of a reference period
Dr. Bertrand decides to rehire his employee on June 7.
|Impact on the employee||Impact on the employer|
|She will not be eligible for the CERB. If she already received the CERB, she will have to repay it in full.||The wages paid will be eligible for the CEWS.|
A smooth transition for all
As you can see, the key is to properly plan the resumption of your professional activities. To ensure a smooth transition, feel free to call upon the Financial’s experts. Your advisor works with a team of tax specialists who have extensive knowledge of the financial and tax issues of your profession. We’re here for you and ready to help you.
If you have any questions regarding your portfolio, feel free to contact your advisor. He remains your best resource for achieving your life plan and is easily accessible.
Alexandre Hunault, LL. M. Fisc.
Émilie Beaudoin, B.A.A., M. Fisc., Fin. Pl.
The information contained herein has been obtained from sources deemed reliable, but we do not guarantee the accuracy of this information, and it may be incomplete. The opinions expressed are based upon our analysis and interpretation of this information and are not to be construed as a recommendation. For any questions, don’t hesitate to contact your wealth management advisor or your tax specialist, accountant or legal advisor.