Regulations Amending the Income Tax Regulations, No. 3 (COVID-19 — Wage Subsidy for Furloughed Employees): SOR/2020-243

Canada Gazette, Part II, Volume 154, Number 24

SOR/2020-243 November 9, 2020


P.C. 2020-877 November 7, 2020

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to section 221 footnote a of the Income Tax Act footnote b, makes the annexed Regulations Amending the Income Tax Regulations, No. 3 (COVID-19 — Wage Subsidy for Furloughed Employees).

Regulations Amending the Income Tax Regulations, No. 3 (COVID-19 — Wage Subsidy for Furloughed Employees)


1 Section 8901.2 of the Income Tax Regulations footnote 1 is replaced by the following:

8901.2 The amount determined by regulation in respect of a qualifying entity for the purposes of clause (b)(iv)(B) of the description of A in subsection 125.7(2) of the Act for a week in a qualifying period described in

Coming into Force

2 These Regulations are deemed to have come into force on October 25, 2020.


(This statement is not part of the Regulations.)


On July 17, 2020, the Government of Canada announced that the Canada Emergency Wage Subsidy (CEWS) would be extended for five additional four-week periods ending on November 21, 2020, with the ability to further extend the CEWS until the end of December 2020. The rules for this extension are set out in An Act respecting further COVID-19 measures (S.C. 2020, c. 11), which received royal assent on July 27, 2020.

The rules specify the CEWS treatment for furloughed employees (i.e. employees temporarily on paid leave) for periods five and six (from July 5 to August 1, 2020, and from August 2 to August 29, 2020, respectively). For these periods, the CEWS provides employers a maximum weekly subsidy of $847 for each furloughed employee who was paid in respect of the week. For period seven (from August 30 to September 26, 2020) and any subsequent period, the CEWS rules provide the authority to prescribe by regulation amounts to be used in the computation of the CEWS subsidy available in respect of a furloughed employee.

On September 23, 2020, and October 14, 2020, amendments to the Income Tax Regulations extended, respectively, to periods seven and eight the treatment of furloughed employees under the CEWS rules for periods five and six, providing the same maximum subsidy of $847 per week in respect of remuneration paid to a furloughed employee.

On October 14, 2020, the Government proposed to align the wage subsidy for furloughed employees with the benefits provided through Employment Insurance (EI) to ensure equitable support to Canadian workers.


Description and rationale

The amendments to the CEWS legislation that were enacted on July 27, 2020, provide that the amount of the wage subsidy paid in respect of a furloughed employee for a week is the least of the amount of eligible remuneration paid to the employee and an amount prescribed by regulation. This amendment to the Income Tax Regulations (the Regulations) provides that the prescribed amount in respect of furloughed employees for periods nine and ten is equivalent to the greater of two amounts:

The subsidy is similar to the amount available under the new Canada Recovery Benefit that was announced on August 20, 2020, which provides $500 per week, for up to 26 weeks, to workers who are self-employed or are not eligible for EI and who still require income support. The cap of $573 represents the maximum amount that may be claimed by a qualifying EI applicant. The objective is to ensure that employers are able to match the benefits available to employees under EI (or under the new recovery benefit) if the employee had been laid off, and to limit situations where the EI system would otherwise be relied upon.

The treatment for furloughed employees, through the amendments to the Regulations, will continue to promote the maintenance of the relationship between employers and employees, especially where businesses are partly shutdown or facing decreased demands for goods or services. It will also ensure that employers have the certainty they require to quickly rehire the workers they need through the pandemic recovery, and could also relieve pressure on the EI system in the coming months. The treatment also ensures that employees that are furloughed as a result of COVID-19 pandemic continue to have timely and efficient support.


Through town halls, round tables, online surveys and correspondence, the Government is continuously consulting with the public, including business and labour representatives, regarding potential adjustments to the measures implemented to support workers as they transition back to work through the recovery phase of the pandemic.

These regulatory amendments incorporate many stakeholder views to the CEWS.

Cost-benefit analysis

Aligning the CEWS for furloughed employees with EI from October 25 to December 19, 2020, will continue to meet the Government of Canada’s priority that Canadians can access the support they need through the COVID-19 crisis. It will also contribute to preserve the employee-employer relationship in situations where employers were ordered to shut down or are facing decreased demand, while maintaining the incentive to work.

The revised cost to Government of the CEWS measures has been estimated to be approximately $68.5 billion, including $865 million with respect to the alignment of the CEWS with EI from October 25 to December 19, 2020, for furloughed employees. However, any additional cost to the Government under the CEWS is equal to the benefits furloughed employees would have derived from EI.

Eligible entities and employers applying for the CEWS for these two four-week qualifying periods for their employees will likely encounter some administrative costs through the process. However, these costs would not outweigh amounts received as a benefit under this program.

Small business lens

Small businesses may, but are not required to, apply for the CEWS. Any small business that does may encounter some administrative costs to apply for these benefits. Nevertheless, these costs should not outweigh amounts received by small businesses as a subsidy under the CEWS. Small businesses may benefit from these measures as they help to preserve the employee-employer relationship while maintaining an incentive to work in this period of reduced economic activity.

One-for-one rule

The one-for-one rule applies, because any employer that becomes, or continues, to be eligible and applies for the CEWS will encounter some administrative costs. The amendments address an emergency circumstance and are exempt from the requirement to offset administrative burden under the one-for-one rule.

Regulatory cooperation and alignment

Due to the urgency and specificity of this measure, there were no requirements regarding the CEWS regulations, and therefore, no steps were taken to coordinate or to align them with other regulatory jurisdictions.


The Canada Revenue Agency (CRA) administers the CEWS. The CRA will apply the amendments in respect of a qualifying period, as defined in the Income Tax Act, for the two additional four-week periods, with respect to eligible employers.

Period 10 of the wage subsidy has not yet been prescribed or legislated. The rates set in these regulations for furloughed employees will only be effective with respect to period 10 once period 10 is prescribed or legislated.

The Regulations are subject to the existing reporting and compliance mechanisms available under the Income Tax Act. These mechanisms allow the Minister of National Revenue to assess and reassess tax payable, conduct audits and seize relevant records and documents.


Lori Merrigan
Income Tax Legislation
Tax Policy Branch
Telephone: 343‑542‑6855

Dominique D’Allaire
Finance Legal Services
Telephone: 613‑668‑6650