Budget 2021 has some expansive spending plans, and a significant part of that spending is, predictably, focussed on helping the economy recover from the pandemic. We are glad to note that the budget recognizes the important role that charities and non-profits have to play in social recovery, alongside their for-profit counterparts. As such, a lot of the support provided for businesses has been, or continues to be, extended to the non-profit sector. Here are the new budget’s major support programs that charities and non-profits can benefit from.
Canada Recovery Hiring Program
Price tag: $595 Million for 2021-2022
This new hiring program is apparently designed to run parallel to the Canada Emergency Wage Subsidy (CEWS) that began in 2020 and has been extended to at least June 5, 2021. Employers are eligible for whichever of these two programs would provide them with more funds. The program’s purpose is to help organizations hire workers so they can not only recover, but grow. The subsidy helps pay for increased wages, increased hours, and the hiring of new staff. It uses the same “qualifying period” (QP) structure as CEWS, and mostly the same eligibility criteria as well. However, it will only run from June 6, 2021 to November 20, 2021 and will decline as it goes.
Who is Eligible?
Employer eligibility requirements are very similar to CEWS: businesses, individuals, charities, non-profits, and some partnerships. One difference from CEWS is that the only for-profit businesses that qualify are Canadian-Controlled Private Corporations (CCPCs). The employer has to have experienced a decline in revenue that meets the same thresholds as for CEWS. If CEWS is not in effect during a QP, the threshold is a decline of more than 10%. If the employer has previously used CEWS, it will have chosen one of two possible revenue decline calculation methods. That same method must also be used for this new program.
Employees are eligible if they are employed primarily in Canada by an eligible employer throughout a given QP. If the employee was hired during a QP, they are eligible for the portion of the QP that they worked. This is a wide net that catches just about every employee of an eligible employer. The major exception is that furloughed employees are not eligible. Furlough refers to being on paid leave, but doesn’t include paid absences like vacation time, sick leave, or sabbaticals.
What Kind of Remuneration is Eligible?
Again, the eligible kinds of remuneration are essentially identical to CEWS. They include salary, wages, and any other amounts on which the employer has to withhold or deduct amounts for income tax purposes. They do not include things like severance pay, stock option benefits, or personal use of a corporate vehicle.
The subsidy is calculated as follows:
Employee’s total eligible remuneration for the QP (up to $1129/week)
– Employee’s total eligible remuneration for the ‘baseline’ period (up to $1129/week)
= “Incremental Remuneration”
The subsidy will be a percentage of the Incremental Remuneration, based on the following table of QPs:
Jun 6 – Jul 3: 50%
Jul 4 – Jul 31: 50%
Aug 1 – Aug 28: 50%
Aug 29 – Sep 25: 40%
Sep 26 – Oct 23: 30%
Oct 24 – Nov 20: 20%
As you can see, the subsidy amount tapers down, so potential applicants should act fast. An application for the subsidy for a QP has to be made no later than 180 days after end of that QP.
Community Services Recovery Fund
Price tag: $400 Million for 2021-2022
The Budget gives Employment and Social Development Canada $400 Million this year for the creation of a temporary Community Services Recovery Fund. The fund is intended to help charities and non-profits “adapt and modernize” to better support their communities. This appears to refer mainly to helping them adapt to remote work and online programming, and is aimed particularly at small and rural charities. This new initiative reflects the fact that charities reported their revenue as being down an average of 16% at the end of 2020.
Further details on the fund are sparse for now.
Inclusion in the Canada Small Business Financing Program
Price tag (for all enhancements): $153 Million for 2021-2026
The Canada Small Business Financing Act Program is a pre-pandemic initiative that has been providing loans to small businesses to help them operate and expand. The program provides financing for real property/immovables, leasehold improvements, equipment, and registration fees that are being used in the course of the organization’s operations.
Budget 2021 extends the availability of this program to non-profit and charitable social enterprises. Presumably this is to help them survive and thrive under the trying pandemic situation, though it seems their inclusion in the program is intended to be permanent. The Budget discusses the fact that the non-profit sector is made up of 75% women, and that 41% of borrowers under this program are under the age of 40, which are both demographics that the government has identified as being in need of extra support.
The Budget also makes other enhancements to the program, so non-profits and charities are coming on board just in time for the new and improved version. These changes include the ability to lend against intellectual property and startup assets, an increase in the maximum loan amount from $350,000 to $500,000, an increase in coverage period from ten to fifteen years for equipment and leasehold improvements, and a new line of credit to help with liquidity and short-term capital.