What is the 10% Temporary Wage Subsidy (TWS)?

The 10% Temporary Wage Subsidy for Employers (TWS), allows employers to reduce their payroll deductions paid to the Canada Revenue Agency (CRA). The subsidy is equal to 10% of salaries and wages paid from March 18 to June 19, 2020 , up to $1,375 for each employee and no more than $25,000 per employer .

The subsidy is only for the amount of income tax that you held from the employee and would be remitted to the CRA (not the Canada Pension Plan (CPP) or Employment Insurance (EI), that was withheld from the employee).

These amounts are considered taxable income and should be reported as such.

Am I eligible?

You’re eligible for the TWS if you’re one of the following:

A self-employed individual, sole proprietor (excludes trusts), or partnership
A non-profit organization
A registered charity
A Canadian-controlled private corporation (CCPC), (including a cooperative corporation)

And you:

have a CRA payroll program account as of March 18, 2020
paid salary, wages, or bonuses to an employee from March 18 to June 19, 2020

Note: If your business was closed due to COVID-19 and you didn’t pay any wages or salaries from March 18 to June 19, 2020, you can’t claim the TWS.

How do I calculate my TWS?

The CRA won’t figure out your TWS for you; you must calculate it on your own. Here’s how:

Determine the total number of eligible employees employed from March 18 to June 19, 2020. This includes employees who worked for any length of time during this period.
Multiply the number of eligible employees by the maximum of $1,375 per eligible employee. Make sure this amount does not exceed the maximum of $25,000 per eligible employer.
Calculate your gross eligible remuneration from March 18 to June 19, 2020 (total of the 3-month salary for each eligible employee).
Multiply your gross eligible remuneration by 10% to get your allowable subsidy amount. Make sure this amount does not exceed the maximum of $1,375 per eligible employee or $25,000 per eligible employer.

Example: You pay 6 eligible employees monthly salaries of $4,000 for a total monthly payroll of $24,000. Your wage subsidy for the month will be 10% of $24,000, or $2,400.

For the three-month period, if all your payroll information remains the same in each month, you will pay $72,000 of remuneration. Therefore, 10% of the remuneration you pay in the three-month period is $7,200.

Since this amount is below the maximum allowable amount of $8,250 ($1,375 x 6 employees), your total wage subsidy for the 3-month period will be $7,200.

How do I receive the TWS?

You don’t need to apply for the TWS. Instead, after you calculate your TWS amount, you can then reduce your payroll remittance of federal, provincial, or territorial income tax sent to the CRA by that amount.

You must fill out and submit form PD27 for each payroll account. You don’t need to wait until you file your T4 information return to submit it. You can go here to learn more about where and how to submit it.

How does the Canada Emergency Wage Subsidy (CEWS), impact the TWS?

If you’re eligible, you can take advantage of both the TWS and the CEWS. However, you must reduce your CEWS claim amount by your TWS claim amount for any overlapping time periods.

You can also opt to only use the CEWS and leave your TWS amount as 0%.

Related information:

COVID Tax Info Centre for Employers

What is the Canada Emergency Wage Subsidy (CEWS), and who can apply for it?

Covid-19 Tax Info Centre