Helping Hard-hit Businesses Hire More Workers with the Canada Recovery Hiring Program

For businesses that have been hit hardest by the pandemic, hiring the workers they need to grow is a cost they may worry about taking on. The federal government wants these businesses to be able to recover and grow by hiring more people.

June 2, 2021

For businesses that have been hit hardest by the pandemic, hiring the workers they need to grow is a cost they may worry about taking on. The federal government wants these businesses to be able to recover and grow by hiring more people.

The recent federal budget proposed the new Canada Recovery Hiring Program to provide support to eligible employers that continue to experience qualifying declines in revenues relative to before the pandemic. The proposed Hiring Program is included in Bill C-30, An Act to implement certain provisions of the budget tabled in Parliament on April 19, 2021 and other measures, which is currently before Parliament. The program would offset a portion of the extra costs employers take on as they reopen, either by increasing wages or hours worked or hiring more staff. This support would only be available for active employees and will be available from June 6, 2021, to November 20, 2021. The aim is to make it as easy as possible for businesses to hire new workers as the economy reopens.

As the rates for both the Wage Subsidy and the Hiring Program will slowly ramp down over time, employers will have a strong incentive to begin hiring as soon as possible and maximize their benefit. The program is also designed so that employers can hire at their own pace, as different jurisdictions reopen at different paces.

The Hiring Program will help eligible employers hire the workers they need so that the economy can fully recover more quickly and without leaving people behind. The program will be available through the Canada Revenue Agency, just like the Wage Subsidy and Rent Subsidy. The application portal will open following Royal Assent of Bill C-30, the Budget Implementation Act.

It is estimated that this program will cost $595 million in 2021-22.

How the Canada Recovery Hiring Program Works

The proposed Canada Recovery Hiring Program would provide eligible employers with a subsidy of up to 50 per cent of incremental remuneration paid to eligible active employees between June 6, 2021, and November 20, 2021.

Eligible Employers

Employers eligible for the Canada Emergency Wage Subsidy would generally be eligible for the Canada Recovery Hiring Program. Eligible employers must be Canadian-controlled private corporations (including a cooperative corporation that is eligible for the small business deduction), and also include individuals, non‑profit organizations, registered charities, and certain partnerships.

Corporations and trusts that are ineligible for the Canada Emergency Wage Subsidy because they are public institutions would also not be eligible for the Hiring Program. Public institutions generally include municipalities and local governments, Crown corporations, wholly owned municipal corporations, public universities, colleges, schools, and hospitals.

Eligible employers, or their payroll service provider, would be required to have had a payroll account open with the Canada Revenue Agency on March 15, 2020.

Eligible Employees

An eligible employee must be actively employed by an eligible employer throughout a qualifying period (or the portion of the qualifying period throughout which the individual was employed by the eligible employer) and are primarily employed in Canada.

The Hiring Program would not be available for furloughed employees, meaning those who are on leave with pay but do not perform any work for the employer. An employee would not be considered to be on leave with pay for the purposes of the Hiring Program if they are on a period of paid absence such as vacation leave, sick leave, or sabbatical.

Eligible Remuneration and Incremental Remuneration

The types of remuneration eligible for the Canada Emergency Wage Subsidy would also be eligible for the Hiring Program.

Eligible remuneration generally includes salary, wages, and other remuneration for which employers are required to withhold or deduct amounts on account of the employee's income tax obligations. However, severance pay, stock option benefits, or the personal use of a corporate vehicle are not eligible. The amount of remuneration for employees would be based solely on remuneration paid during the qualifying period.

Incremental remuneration for a qualifying period is the difference between total eligible remuneration paid to eligible employees during the qualifying period and total eligible remuneration paid to them during the baseline period. For calculation of total eligible remuneration paid for both the qualifying period and the baseline period, eligible remuneration for each eligible employee would be subject to a maximum of $1,129 per week.

As with the Canada Emergency Wage Subsidy, the eligible remuneration for a non-arm's length employee for a week could not exceed their baseline remuneration determined for that week. More information on baseline remuneration is available in Annex 6 of Budget 2021.

Table 1, below, outlines the dates used for calculating incremental remuneration.

Revenue-Decline Threshold

To be eligible for the Hiring Program an employer would have to demonstrate a decline in revenues sufficient to qualify for the Canada Emergency Wage Subsidy during a qualifying period. If an employer is applying during a period when the Canada Emergency Wage Subsidy is no longer in effect, they would have to demonstrate a revenue decline of more than 10 per cent. As such, an eligible employer's decline in revenues would have to be:

• More than 0 per cent, for the qualifying period between June 6, 2021 and July 3, 2021.
• More than 10 per cent, for qualifying periods between July 4, 2021 and November 20, 2021.

An employer's decline in revenues would be determined in the same manner as under the Canada Emergency Wage Subsidy. This method compares the employer's revenues in a current calendar month with its revenues in the same calendar month, pre-pandemic. An employer can also elect to use an alternative approach, which compares the employer's monthly revenues relative to the average of its January 2020 and February 2020 revenues. An employer's decline in revenues for any particular qualifying period is the greater of its decline in revenues for the particular qualifying period and the immediately preceding qualifying period.

Employers that had chosen to use the general approach for prior periods of the Canada Emergency Wage Subsidy would be required to continue to use that approach for the Hiring Program. Similarly, employers that had chosen to use the alternative approach would be required to continue to use the alternative approach.

Table 2 sets out the reference periods used to determine an eligible employer's revenue decline or the qualifying periods.

Employers seeking access support from the Hiring Program must apply no later than 180 days after the end of each qualifying period.

An eligible employer would be permitted to claim either the hiring subsidy or the Canada Emergency Wage Subsidy for a particular qualifying period, but not both.

Subsidy Amount

If an eligible employer meets the revenue-decline threshold for a qualifying period, its subsidy amount would be equal to its eligible incremental remuneration multiplied by the Hiring subsidy rate (e.g. 50%, 40%, 30% or 20%) for the qualifying period. The rates for each period are shown below, in Table 3.

Example

Max and Chinmay run a bookstore whose storefront was shut down sporadically through the winter and spring due to public health restrictions. While their business survived, they had to lay off three of their 10 employees, each of whom they pay $600 per week. Their baseline payroll from March 14 to April 10 was $16,800 (i.e., seven employees x $600 x four weeks).

As public health restrictions are lifted and the vaccination campaign continues, their business begins to recover. In May, their revenues were still down 50 per cent from their level before the pandemic, but are only down 20 per cent in June, and by July are close to their pre-pandemic level. As a result, they are able to hire back their three laid-off employees starting June 6, and are even able to add an additional employee starting July 4.

As a result of proposed measures in the federal government's recovery plan, Max and Chinmay's business will benefit from either the extended Canada Emergency Wage Subsidy or the new Canada Recovery Hiring Program:

• For June 6 to July 3, their payroll is $24,000. Their business would be eligible for a wage subsidy rate of 40 per cent (based on a 50-per-cent revenue decline), resulting in a wage subsidy of $9,600. Alternatively, the business would be eligible for a hiring subsidy rate of 50 per cent, which would be applied to the difference between its current payroll and its baseline payroll, resulting in a hiring incentive of $3,600. They are better off claiming the wage subsidy of $9,600 for this period.
• For July 4 to July 31, their payroll is $26,400. Their business would be eligible for a wage subsidy rate of 8.75 per cent (based on a 20-per-cent revenue decline), resulting in a wage subsidy of $2,310. Alternatively, the business would be eligible for a hiring subsidy rate of 50 per cent, which would be applied to the difference between its current payroll and its baseline payroll, resulting in a hiring incentive of $4,800. In this instance, they are better off claiming the hiring incentive of $4,800 for this period.

In total, Max and Chinmay will be eligible for at least $14,400 in support from these two measures to help their business rebuild as the economy recovers.