Review of Bill C-30 HR and Payroll Measures

On June 29, 2021, the Budget Implementation Act, 2021, No. 1, (introduced as Bill C-30) received royal assent in the Senate and is now law. Provisions in the new law will come into force at various dates and by proclamation. The new law allows the creation of the Canada Recovery Hiring Program, the extended Canada Emergency Wage Subsidy to September 25, 2021, and other HR and payroll measures explained in this article.

CEWS and CRHP:

The Canada Recovery Hiring Program (CRHP), the extended Canada Emergency Wage Subsidy (CEWS) supports wages organizations pay through different phases of their economic recovery. The extension of the Canada Emergency Wage Subsidy (as well as the Canada Emergency Rent Subsidy, and Lockdown Support) until September 25, 2021, is made so the government can continue to protect millions of jobs and provide workers and employers with certainty and stability over the coming months. Amendments include:

  • CEWS: revising and adjusting the eligibility criteria, as well as the level of subsidization under the Canada Emergency Wage Subsidy (CEWS) and Canada Emergency Rent Subsidy (CERS), extending the CEWS and the CERS until September 25, 2021, providing authority to enable the extension of these subsidies until November 30, 2021, and ensuring that the level of CEWS benefits for furloughed employees continues to align with the benefits provided through the Employment Insurance Act until August 28, 2021; and
  • CRHP: creating a new Canada Recovery Hiring Program refundable tax credit to support the post-pandemic recovery. This tax credit helps businesses with the costs of hiring new workers. Employers have to choose between the CRHP and the CEWS. The new Canada Recovery Hiring Program provides an alternative subsidy for businesses affected by the pandemic to help them hire more workers or increase the hours and wages of employees. CRHP opens July 7, 2021. This is the first day employers can apply for claim period 17 (Claim period 17 is the first claim period that the CRHP is available). The first payments should start to be sent the week of July 12.

On June 30, 2021, calculation details for claim periods, 17 to 20 are now available. Period identifiers for the CRHP have been aligned with CEWS for ease of reference. Baseline period March 14 to April 10, 2021. Qualifying period and dates:

  • Period 17/June 6 to July 3, 2021
  • Period 18 July 4 to July 31, 2021
  • Period 19 August 1 to August 28, 2021
  • Period 20 August 29 to September 25, 2021
  • Period 21 September 26 to October 23, 2021
  • Period 22 October 24 to November 20, 2021

Beginning in claim period 18, organizations must have had a revenue drop of over 10% to receive the CEWS or CRHP. The rate of CEWS will gradually decline from claim periods 18 to 20. Eligible remuneration paid to employees on leave with pay is no longer included in the CEWS calculation as of claim period 20.

The amount the employer gets per employee is still based on the organization’s revenue drop. The employer will be able to use the online calculator or downloadable spreadsheet to figure out how much subsidy he or she may receive for periods 17 through 20, and whether the CEWS or CRHP amount is higher. If the employer is eligible, apply for the subsidy that gives him or her the higher amount.

The CEWS rate will gradually decline toward September 2021:

Revenue drop

Claim period 17

Claim period 18

Claim period 19

Claim period 20

70% or more

75% (40% base rate + 35% top-up)

60% (35% base rate + 25% top-up)

40% (25% base rate + 15% top-up)

20% (10% base rate + 10% top-up)

More than 50%, but less than 70%

40% base rate + top-up [(revenue drop – 50%) x 1.75]

35% base rate + top-up [(revenue drop – 50%) x 1.25]

25% base rate + top-up [(revenue drop – 50%) x 0.75]

10% base rate + top-up [(revenue drop – 50%) x 0.5]

More than 10%, up to 50%

Base rate: (revenue drop x 0.8)

Base rate: [(revenue drop – 10%) x 0.875]

Base rate: [(revenue drop – 10%) x 0.625]

Base rate: [(revenue drop – 10%) x 0.25]

10% or less

Base rate: (revenue drop x 0.8)

0%

0%

0%

To compare if the CEWS or CHRP is the better tool for the organization, click here.

Also on June 30, the Canada Revenue Agency (CRA) launched its CRHP online calculator and web page to help eligible employers prepare their CRHP applications. The online calculator integrates the new CRHP with the Canada Emergency Wage Subsidy (CEWS), automatically showing applicants which subsidy will provide them with more support based on the information they enter. The CRHP web page includes detailed information about eligibility requirements, how payment periods are structured and how the CRHP is calculated.

Eligible employers are able to apply for the CRHP starting July 7 through My Business Account and Represent a Client. The CRA will begin to issue CRHP payments to eligible employers during the week of July 12.

As stated before, the new law also amends the Income Tax Act, Employment Insurance Act, and Canada Labour Code, among other laws , to implement the following HR and payroll measures:

Income Tax Act:

  • stock options: introducing a cap of $200,000 on the amount of some employee stock options that may vest in an employee in a calendar year and continue to qualify for the stock option deduction allowed under the federal Income Tax Act. The deduction allows employees who meet specified conditions to deduct from their income one-half of the amount of the taxable benefit that results from stock options that they acquire from their employer. The cap applies to established employers that are corporations or mutual fund trusts. The cap would generally not apply to any Canadian-controlled private corporations (CCPCs) or to non-CCPCs whose gross revenue was no more than $500 million. The cap will apply to employee stock options granted after June 2021. The current rules would continue to apply to stock options granted before July 1, 2021;
  • automobile taxable benefits: allowing employees with an employer-provided automobile to use their 2019 automobile usage to determine if they are eligible for a reduced standby charge for the 2020 and 2021 tax years. Only employees with an automobile provided by the same employer as in 2019 are eligible for this option (more information here). The same change will apply for purposes of using the optional method for calculating the operating expense benefit as 50% of the standby charge;
  • basic personal amount: raising the basic personal amount to $15,000 between 2020 and 2023 for individuals whose annual net incomes do not exceed a specified annual threshold. The maximum amount of the basic personal amount (i.e., $15,000) will be indexed to inflation after 2023. Amendments are also made to provide a corresponding increase in the spouse or common-law partner amount and eligible dependent amount, and to make consequential amendments to various provisions in order to change the reference to the existing basic personal amount to the new increased basic personal amount for the relevant year for purposes of determining financial dependence;
  • Electronic information returns: amend the Income Tax Regulations to allow issuers of T4A (Statement of Pension, Retirement, Annuity and Other Income) and T5 (Statement of Investment Income) information returns to provide them electronically without having to also issue a paper copy and without the taxpayer having to authorize the issuer to do so.

Employment Insurance Act:

  • sickness benefits: increasing EI sickness benefits from 15 weeks to 26 weeks, and
  • applying for benefits: making it easier for applicants to receive EI benefits for a period of one year by implementing a national threshold of 420 hours of insurable employment to qualify for unemployment benefits; having Service Canada only consider a claimant’s most recent separation from employment when determining eligibility for unemployment benefits, and ensuring that earnings paid or payable to a person because of a layoff or separation from employment would not be considered earnings for determining if there has been an interruption of earnings.

Canada Recovery Benefits:

  • provide that the maximum number of two-week periods in respect of which a Canada recovery benefit is payable is 25;
  • reduce the amount of a Canada recovery benefit for a week to $300 in certain circumstances;
  • provide that certain persons who were paid benefits under the Employment Insurance Act are eligible to be paid a Canada recovery benefit in certain circumstances;
  • provide that the maximum number of weeks in respect of which a Canada recovery caregiving benefit is payable is 42; and
  • provide that the Governor in Council may, by regulation, on the recommendation of the Minister of Employment and Social Development and the Minister of Finance, amend certain provisions of that Act to replace the date of September 25, 2021, by a date not later than November 20, 2021.

Canada Labour Code:

  • minimum wage: establishing a $15-per-hour federal minimum wage rate; the rate would be indexed to inflation; if a provincial/territorial minimum wage rate was higher than the federal rate, the provincial/territorial rate would prevail. The change will affect workers in the federally regulated private sector starting December 29, 2021.
  • leave related to death or disappearance of a child: increasing the number of weeks of leave that employees could take if their child disappeared due to a probable crime from 52 weeks to 104 weeks; extending eligibility for the leave to include children between 18 and 24 years old; and allowing employees to take the leave even if their child was a party to the probable crime, as long as the child is under 14 years old;
  • leave related to COVID-19: increasing the maximum number of weeks of leave for COVID-19 related caregiving responsibilities from 38 to 42; and
  • medical leave: increasing the number of weeks of medical leave from 17 to 27; A medical leave of absence as a result of quarantine would also be extended up to 27 weeks (currently, up to 16 weeks).

In addition, amendments will expand the equal remuneration protection for employees who are covered by a collective agreement by amending the definition of “the previous contractor” to include employers who provide:

  • services at an airport to another employer or person acting on that employer’s behalf in the aerodromes, aircraft or air transportation industry (currently, this only applies to “pre-board screening”)
  • prescribed services to another employer or to a person acting on behalf of that other employer in a prescribed industry
  • prescribed services at a prescribed location to another employer, or to a person acting on behalf of that other employer, in a prescribed industry.
    The equal remuneration protection requires an employer who succeeds a “previous contractor” as the provider of services to pay to employees remuneration not less than that which the employees of the previous contractor who provided the same or substantially similar services were entitled to receive under the terms of a collective agreement.

Pensions:

The amendment aims to fix contribution errors in defined contribution pension plan: The rules in the Income Tax Act (Canada) do not currently permit pension plan administrators to accept retroactive contributions to employee accounts under a defined contribution pension plan in order to correct under-contribution errors in respect of prior years. Further, the rules that allow some over-contribution errors to be corrected by refunding the excess to the contributor have been found to be overly cumbersome.

This includes:

  • permitting certain types of errors to be corrected by way of additional contributions to an employee’s defined contribution account to compensate for an under-contribution error made in any of the preceding five years, subject to a dollar limit;
  • permitting plan administrators to correct for pension over-contribution errors in respect of an employee for any of the five years prior to the year in which the excess amount is refunded to the employee or employer who made the contribution;
  • simplifying the reporting requirements by requiring plan administrators to file a prescribed form in respect of each affected employee, rather than amend T4 slips for prior years;
  • limiting transfers of pensionable service into individual pension plans; and
  • establishing rules for variable payment life annuities.

Canada Worker Benefits:

As of June 30, 2021, the Canada Workers Benefit will now be available to about one million more Canadians and help lift nearly 100,000 people out of poverty. The Canada Workers Benefit is a refundable tax credit to help people and families who are working and earning a low income. It is a sizeable tax refund for workers. Until now, the threshold of eligibility left many low-wage workers out of the program and that meant people were still living below the poverty line despite working full-time jobs. With the passage of changes contained in the budget, a million more low-income workers are now eligible for a tax refund of up to almost:

  • $1,400 for workers who are single and without children (a group that does not receive many benefits); and
  • $2,400 for workers with families.

A total of 3.2 million Canadians will now be eligible for this support. The government is expanding eligibility by making the benefit available to those with incomes up to:

  • $32,244 as single Canadians, without children;
  • $42,197 as single-earner families; and
  • $56,197 as double-earner families.

This expansion includes a new provision that allows secondary earners in couples, most of whom are women, to exclude up to $14,000 of their working income when calculating the benefit, allowing them to access a more generous tax refund. These changes mean that, for the first time, most full-time workers earning minimum wage will receive significant support from this important benefit.

This support will increase the disposable income available to low-wage workers and provide incentives for workers to rejoin the workforce and be part of a strong recovery that brings all Canadians along.

The new Sectoral Workforce Solutions Program

The new Sectoral Workforce Solutions Program to help connect up to 90,000 Canadians with the training they need to access good jobs in sectors where employers are looking for skilled workers.

Employee life and health trusts

Transitional measures (with some modifications since their previous release as part of the November 27, 2020 draft legislative proposals) relating to the discontinuation of the administrative positions of the CRA on health and welfare trusts (HWTs), as well as other measures concerning employee life and health trusts (ELHTs). The transitional measures are intended to facilitate the conversion of certain existing HWTs into ELHTs by extending the application of the ELHT rules to trusts created before 2010 and permitting existing HWTs that satisfy certain conditions to elect to continue as ELHTs without having to create a new trust and without any adverse tax consequences, up until December 31, 2022. An HWT that converts into an ELHT will generally be required to notify the CRA (in the prescribed form) of the conversion on or before its first filing due date after 2021. In addition, the existing rules (in paragraph 144.1(2)(h) of the Act) that prohibit an ELHT from making certain loans or investments are replaced, effective retroactive to 2014, with a new Part XI.5 tax equal to 50% of the fair market value of a prohibited investment (and any income from it or taxable capital gain from its disposition) when such an investment is acquired by an ELHT. Finally, various other measures are introduced to enhance the existing ELHT rules (effective retroactive to February 27, 2018), including changes relating to added employee benefits, the purpose-of-the-trust test, nonresident trust eligibility, the class-of-beneficiaries 25% and 75% tests and key employees, ELHT income deductions, the majority-of-trustees requirement, the deduction of employers’ contributions, and the carryforward of non-capital losses.

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