2020-0856781E5 CEWS - eligible remuneration and outsource staff

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: What are the implications to an outsource staffing company where the outsource staffing company has received the CEWS wage subsidy and the client receiving the staffing services has received an offsetting discount for the subsidy received, in effect providing a cost-subsidy to the end customer?

Position: General comments provided

Reasons: See below

Author: Thibault, Stéphane

Section: 125.7

XXXXXXXXXX                                                                                             2020-085678                                                                                                                                                   S. Thibault, CPA, CA, LL.M. fisc.


October 20, 2020


Re: CEWS – Eligible remuneration and outsource staff      

We are writing to you in response of your e-mail sent to Mr Tracy Annett on June 19, 2020, wherein you are requesting our position regarding different matters related to the Canada Emergency Wage Subsidy (CEWS) under recently enacted section 125.7 of the Income Tax Act (the “Act”).

More precisely, in one of the questions sent to Mr Annett (question 2), you mentioned that contractors are not employees and therefore do not fit within the rules as qualified for 
inclusion in the population of employees on which the subsidy is based. You asked us to comment on the implications to an outsource staffing company where the outsource staffing company has received the CEWS and the client receiving the staffing services has received an offsetting discount for the subsidy received, in effect providing a cost-subsidy to the end customer.

Our Comments

This technical interpretation provides general comments about the provisions of the Act and related legislation. It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC70-6R10, Advance Income Tax Rulings and Technical Interpretations.

An eligible employee, in respect of a week in a claim period, means inter alia, an individual employed in Canada by an eligible entity in the claim period. For the claim periods 1 to 4, it does not include an employee who has been without remuneration from the eligible entity in respect of 14 or more consecutive days in the claim period.

Generally, the eligible entity's wage subsidy amount for an eligible employee is calculated on eligible remuneration paid in respect of a claim period. As you have correctly pointed out, since contractors are not employees, an eligible entity will not qualify for the wage subsidy on remuneration paid to such individuals.

In addition, eligible remuneration of an eligible employee means amounts paid to employee as salary, wages, and other remuneration, certain taxable benefits (provided such amounts are actually paid), and fees, commissions or other amounts paid for services. These are amounts for which an eligible entity would generally be required to make payroll deductions to be remitted to the CRA.

Generally, a staffing company’s staff are employees of the staffing company and not that of its client. Therefore, a payment made by the client to a staffing company would not be considered eligible remuneration paid to an eligible employee of the client. Consequently, the client would not qualify for the wage subsidy in respect of the payment made to the staffing company.

In your question, you mentioned that the client has received an offsetting discount for the wage subsidy received by the outsource staffing company. For the client, the discount offered by the outsource staffing company should not, in and by itself, reduce the amount of its eligible remuneration for the wage subsidy.

We trust our comments will be of assistance.

Yours truly,


Michel Lambert, CPA, CA, M.Fisc.
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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