10 Changes in 2021 Federal Budget that Immediately Affect HR
Phase out of CEWS, a new wage subsidy and a federal $15 minimum wage are some of the big-ticket items.
As it does every year, the new federal budget includes a number of items of immediate, monetary impact to employers and employees. Here are the 10 items that HR directors need to know about.
1. New $15 Federal Minimum Wage
After years of talk, the federal minimum wage is about to come to fruition. And it won’t be just any minimum wage, either. The budget establishes the rate at the magical and controversial $15 per hour with future annual adjustments indexed for inflation. Federally regulated employees who work in a province or territory with a higher minimum wage, would get the higher wage. Currently, Nunavut is the only jurisdiction with a minimum wage above $15.
2. CEWS Extension & Phase Out
As expected, the government extended the Canada Emergency Wage Subsidy (CEWS), which was due to expire on June 5, to September 25, 2021. However, the phase out will begin on July 4 when the maximum combined CEWS wage subsidy and top-up subsidy for active employees is reduced from its current rate of 75%:
- Period 18 (July 4 to July 31, 2021): 60%;
- Period 19 (August 1 to August 28, 2021): 40%;
- Period 20 (August 29 to September 25, 2021): 20%.
In addition, as of July 4, only employers with a revenue decline of over 10% will be eligible for the wage subsidy.
3. New CEWS Claw-Back Duty
Publicly listed corporations with highly paid executives, that is, those whose specified executives’ aggregate compensation for the 2021 calendar year is higher than during calendar year 2019, will also have to start repaying their CEWS subsidies, starting with Period 17 (June 5 to July 3, 2021) by whichever whichever of the following is less:
- The total of all wage subsidy amounts received for active employees for qualifying Periods starting after June 5, 2021; and
- The amount by which the corporation’s aggregate specified executives’ compensation for 2021 exceeds its aggregate specified executives’ compensation for 2019.
4. New Canada Recovery Hiring Program (CRHP)
Even as the CEWS sunsets, employers will be eligible to receive a new CRHP subsidy of up to 50% on incremental revenue paid to eligible employees (subject to a $1,129 per week maximum) between June 6 and November 6, 2021, as compared to baseline remuneration paid from March 14 to April 10, 2021. Eligible employers may claim either the CRHP or CEWS for a particular qualifying period, but not both.
- 50% for Periods 17 to 19 (June 6 to August 28, 2021);
- 40% for Period 20 (August 29 to September 25, 2021);
- 30% for Period 21 (September 26 to October 23, 2021);
- 20% for Period 22 (October 24 to November 20, 2021).
5. Enhancements to Canada Workers Benefit (CWB)
To enhance the CWB for low-income workers, the budget increases:
- The phase-in rate for both families and single individuals without dependents from 26% to 27% for working income over $3,000;
- The phase-out thresholds for single individuals without dependents to from $13,194 to $22,944 and from $24,815 to $32,244 for individuals who also qualify for the disability tax credit;
- The phase-out thresholds for families from $17,522 to $26,177 and from $37,548 to $42,297 for families also eligible for the disability tax credit; and
- The phase-out rate from 12% to 15% of adjusted net income above the phase-out threshold (7.5% per individual in a couple if each is also eligible for the disability tax credit).
The budget also introduces a “secondary earner exemption” to the CWB, for individuals with an eligible spouse, which allows the lower income earner to exclude up to $14,000 of working income in calculation of the CWB phase-out, also starting in 2021.
6. Extension of Canada Recovery Benefit (CRB)
As previously announced, the government is extending the individual benefits put in place to replace the Canada Emergency Response Benefit (CERB), including:
- The CRB, which will be extended up to 12 additional weeks to a maximum of 50 weeks, with the first 4 weeks paid at $500 per week and the remaining 8 weeks at $300 per week; and
- The Canada Recovery Caregiving Benefit (CRCB), which will be extended 4 weeks, to a maximum of 42 weeks, at $500 per week.
7. New COVID-19 Benefit Repayment Tax Deduction
The budget gives individuals an option to claim a tax deduction for repayment of a COVID-19 benefit amount in computing their income for the year in which they received the benefit amount (by requesting an adjustment to the return for the earlier year), rather than the year it was repaid. This option would be available for amounts repaid at any time before 2023, for CERB, CRB, CRCB, Canada Recovery Sickness Benefits (CRSB), Canada Emergency Student Benefits and Employment Insurance Emergency Response Benefits.
8. Employment Insurance (EI) Changes
EI changes in the budget include:
- Maintaining uniform access to EI benefits across all regions via a 420-hour entrance requirement for regular and special benefits, a 14-week minimum entitlement for regular benefits and a new common earnings threshold for fishing benefits;
- Supporting multiple job holders and people who switch jobs by ensuring that all insurable hours and employment count towards eligibility (as long as the last job separation is found to be valid);
- Letting claimants start receiving EI benefits sooner by simplifying rules on treatment of severance, vacation pay and other monies paid on separation;
- Extending temporary enhancements to the Work-Sharing program, which may include allowing longer work-sharing agreements and a streamlined application process.
The budget also gives the government money to hold consultations on long-term EI issues, like income support for self-employed and gig workers and workers in seasonal industries.
9. Correction of Defined Contribution (DC) Pension Plans Contribution Errors
The budget allows administrators of DC plans to take actions to correct:
- Under-contribution errors made in any of the last 5 years, via additional contributions to an employee’s account up to a specific dollar limit; and/or
- Over-contribution errors made in any of the 5 years before the year in which the excess amount is refunded to the contributing employee or employer.
Rather than amending T4 slips for previous years, the plan administrator would have to file a particular form relating to each affected employee. The employee’s RRSP contribution room would be altered in accordance with the correction.
10. Electronic Delivery of CRA Assessments
If and when the budget passes, the CRA will be allowed to send certain notices of assessment electronically without the taxpayer having to authorize the agency to do so, for individuals who file their income tax returns electronically.