CEWS to CRHP: The Hiring Incentive Replacing the Emergency Wage Subsidy

Key takeaways

• The Canada Emergency Wage Subsidy (CEWS) ran from March 15, 2020 through October 23, 2021
• The Canada Recovery Hiring Program (CRHP) replaced CEWS from June 6, 2021 through May 7, 2022
• Both subsidies are taxable government assistance — include them in income for the year received
• CEWS amounts in excess of actual employee wages paid are recoverable by the CRA
• The CRA is conducting post-program audits; keep all supporting documents for at least 6 years

The Canada Emergency Wage Subsidy was one of the largest government subsidy programs in Canadian history, providing over $100 billion in wage support to employers during the COVID-19 pandemic. As the economy reopened, the CRHP replaced CEWS with a simpler hiring-incentive structure.

Tax treatment of CEWS and CRHP

Both subsidies are government assistance and must be included in the recipient's income under the ITA. For corporations, CEWS received is added to taxable income. For unincorporated businesses, the subsidy is business income. The subsidy reduced the employer's deductible wage expense: you cannot deduct wages and also receive a subsidy for those wages without including the subsidy in income.

Repayment and CRA review

The CRA is conducting extensive post-program reviews of CEWS claims. Common issues include: employees who were not at arm's length receiving inflated salaries to increase subsidy claims, revenue figures that were misrepresented to meet the required revenue decline, and calculation errors in eligible remuneration. The limitation period for CEWS assessments is extended under specific provisions — the normal 3-year limitation period may not apply to COVID benefit assessments.

How CRHP differed from CEWS

The CRHP subsidized incremental hiring — the increase in payroll relative to a March 2021 baseline — rather than all wages. The maximum subsidy was 50% of eligible incremental remuneration in the early periods, declining over time. Employers could not claim both CEWS and CRHP for the same employees in the same period; they had to choose the program that provided the larger benefit.