ADC Guide to the Canada Recovery Benefit

Most designers are self-employed freelance contractors, making them ineligible for Employment Insurance benefits.

The COVID-19 crisis is causing mass unemployment in the entertainment industry, including for designers. We expect this period of mass unemployment to last until at least the third or fourth quarter of 2021.

We have prepared this guide as a general tool to help designers (and all freelancers) navigate the Canada Recovery Benefit. However, the ADC is not a lawyer or an accountant: individuals should also conduct their own research, and those with complex financial situations should make their own judgements.

Canada Recovery Benefit (CRB) Links

Information presented on this page is pulled from a variety of sources, including Government of Canada webpages, and other publicly-available information.

The complete text of Bill C-4, which establishes the CRB an other Recovery Benefits.

The Government of Canada's page introducing all Recovery Benefits, including CRB, Caregiving Benefit, and Sickness Benefit.

The Government of Canada's comprehensive guide to the Canada Recovery Benefit.

The Government of Canada's comprehensive guide to the Employment Insurance program, including COVID-19 related changes.

Derrick Chua is a Toronto-based entertainment lawyer, who has also prepared a pretty thorough guide to the CRB.

Introduction to the Canada Recovery Benefit (CRB)

The CRB is designed to provide temporary economic relief for individuals who are unable to work (or have experienced a significant reduction in income) as a result of COVID-19. The program provides $500/week (in two-week increments) for up to 26 weeks.  

 

Note that the benefit is taxable, and some taxes are withheld at source: this means actual payments will be $900 for each two-week period. Depending on your total income, additional payments may be required at tax season.

The various eligibility criteria are discussed below. Please review them carefully to ensure your eligibility, and to ensure that applying for the CRB is appropriate for your circumstances.  Key eligibility considerations include: that you must have experienced an income drop of at least 50%, and that the benefit amount is clawed back on any income above $38,000/year.

Note that individuals are eligible to apply only for a maximum of thirteen (13) two-week periods, even if you are required to pay back a portion of the benefit previously received.

Maximum CRB Periods and Program Duration

Individuals are eligible to apply for a maximum of thirteen (13) two-week periods, for a total of 26 weeks. This maximum applies even if you are required to pay back a portion of the benefit previously received.

The program runs from September 27, 2020 until September 25, 2021, for a total of 52 weeks (26 possible eligibility periods).

Even if you do not apply for the first periods — or any periods in 2020 — you will still be eligible to claim the maximum number of benefit periods in 2021. (There are seven (7) eligibility periods in 2020 and nineteen (19) in 2021.)

Eligibility Criteria for the CRB

Residency, Age, and Social Insurance Number

A few basic eligibility requirements must be met in order to be eligible for the CRB.  You must:

  • be a resident of Canada: this means you must live and have a home in Canada, but you do not need to be a citizen or permanent resident.

  • be present in Canada during the two-week period for which you are applying.

  • be at least 15 years old.

  • have a valid Social Insurance Number (SIN).

Minimum Income

You must have earned at least $5,000 in any one of: 2019, 2020, or the 12 months immediately preceding your application.

Eligible sources of income include: gross employment earnings (before deductions); net self-employment earnings (after expenses); and maternity and parental benefits. This may include: tips; non-eligible dividends; honoraria; and royalties.

Ineligible sources of income include: disability benefits; student loans, bursaries, or scholarships; pension income; and amounts from other COVID-19 benefits (Canada Emergency Response Benefit (CERB), Canada Emergency Student Benefit, Canada Recovery Benefit, Canada Recovery Caregiving Benefit, Canada Recovery Sickness Benefit).

Employment Insurance (EI)

Employment Insurance has been modified to guarantee that the benefit will be not less than $500 per week, but could be more. If you are eligible for Employment Insurance, you must seek assistance from that program first.

 

For the two-week period, you must not have been eligible for Employment Insurance. 

If you have never held any employee-based work, or since at least March of 2017, you will not be eligible for EI, and will be eligible for the CRB. 

 

To be eligible for Employment Insurance, all of the following must be true: 

  • You have worked at least 120 hours of insurable earnings in the past 52 weeks (the period is extended for any weeks you received CERB, or in some circumstances as long as 104 weeks).

  • You have not quit your job voluntarily: your loss of work must be through no fault of your own.

  • You have been without employment for at least seven (7) days. 

  • You be ready, willing, and able to work, and are actively looking for work.

Please visit the Government of Canada website for more information:

https://www.canada.ca/en/services/benefits/ei/ei-regular-benefit/eligibility.html

No Other Benefits

For the two-week period, you cannot have received any of the following alternative benefits:

  • Canada Recovery Sickness Benefit

  • Canada Recovery Caregiving Benefit

  • short-term disability benefits

  • workers' compensation benefits

  • Employment Insurance benefits

  • Quebec Parental Insurance Plan benefits

Cannot Voluntarily Quit Your Job

If, after September 27, 2020, you voluntarily quit your job, you are ineligible for the Canada Recovery Benefit.

Must be Seeking Work

During the two-week period, you must be actively seeking work: either self-employed or as an employee. Attending a course, program, or training referred to you by a provincial government or body may qualify as seeking employment.. 

You are eligible to receive the CRB even while you have other work, as long as you meet the other income criteria (income reduction threshold, and clawback threshold).

You are encouraged to visit the Job Bank, Canada's national employment service: 

https://www.jobbank.gc.ca/findajob/resources/cerb

Cannot Refuse Reasonable Work

You may not refuse reasonable offers of work while claiming the CRB. There is not a concise definition of what constitutes a reasonable offer of work: but you should document any work offers you refuse carefully.

The penalty for refusing reasonable work is the loss of 10 weeks of CRB eligibility, and a 10-week prohibition of making further CRB applications.

Minimum 50% Income Reduction Threshold

To be eligible for the CRB, for the two-week period, you must either: (a) not be working as a result of COVID-19; or (b) have your income reduced by at least 50% as a result of COVID-19.

The 50% income reduction threshold is calculated using your average weekly earnings for the two-week benefit period, compared against the average weekly earnings for 2019, 2020, or the 52-week period immediately preceding the benefit period. You may use whichever calculation produces the most favourable outcome. See below for some examples, and for specific details of the application periods.

Example:

In 2019, you earned $35,000 (after expenses but before taxes).

$35,000 ÷ 52 weeks = $673 average weekly earnings

$673 x 50% = $336.5 maximum average weekly earnings for CRB eligibility.

Your earnings for the two-week period are averaged weekly: so if you earned $600 in one week, but none in the second week, you would still qualify.  You must calculate your average weekly earnings for each period in which you apply.

Example:

In the first half of 2019 you were unemployed, but in the 52 weeks immediately prior to your claim, you actually earned $40,000 ($20,000 in the last three months of 2019, and $20,000 in 2020 before losing work due to COVID.)

Using the calendar-year calculation, your average weekly earnings would be only $385.

However, for the claim period, using the 52-week calculation, your average weekly earnings were $769. ($40,000 ÷ 52).

 

This offers a much higher threshold of income to qualify under the 50% reduction test.

Please remember that the 52-week formula is a rolling calculation which moves for each application period.

If, for the current two-weeks period, you have not experienced an income drop of at least 50% — whether due to employment or self-employment income — you are not eligible for the CRB for this two-week period. However, you may be eligible again for subsequent periods.

Example:

Using the formula, your prior average weekly earnings are $800, allowing you to earn $400 per week (average) while receiving the CRB.

 

During this application period, you receive a design fee instalment of $1,500. Averaged over the two weeks, this represents average weekly earnings of $750.

$750 is greater than $400.

You ARE NOT eligible for the CRB for this period.

Example:

Using the formula, your prior average weekly earnings are $1200, allowing you to earn $600 per week (average) while receiving the CERB. 

You have found a part-time job paying $20/hour for 20 hours per week. Before taxes, you are earning $400 per week.

$400 is less than $600.

 

You ARE eligible for the CRB for this period.

If you are claiming the CRB in 2020, you may use either your average weekly earnings for 2019, or for the 52 weeks immediately preceding the application.

If you are claiming the CRB in 2021, you may use either your average weekly earnings for 2019, for 2020, or for the 52 weeks immediately preceding the application. 

For purposes of calculating both the income reduction, and your current-period income, you should include all of the following:

  • net self-employment income (income after expenses)

  • gross employment income (before tax deductions)

  • tips, non-eligible dividends, and honoraria

  • royalties

Do not include any of the following:

  • pensions

  • student loans and bursaries

  • maternity and parental benefits from EI or similar QPIP benefits

  • any other Canada COVID-19 emergency or recovery benefits

CRB Maximum Income Clawback Threshold

The Canada Recovery Benefit is clawed back at a rate of $0.50 per $1 of earnings for any income above $38,000 in any calendar year.

All income earned in any calendar year count towards this income threshold, including CERB payments, and payments received for cancelled contracts. Only CRB benefit payments do not count towards the income threshold.

The calculation is distinct for 2020 and 2021, and resets on January 1. This means that even if your 2020 earnings are too high to be eligible for the CRB, you may still be eligible in 2021.

Because clawed-back CRB payments do not make you eligible to apply for additional benefit periods, the ADC strongly encourages you to carefully review your income prior to applying for the CRB

Example:

In 2020, you had $10,000 in design income prior to COVID, and received the maximum CERB benefit (28 weeks, $14,000).

You apply for and receive seven periods of CRB (14 weeks, $7,000).

Your total income for 2020 is $24,000 (design income plus CERB. CRB is excluded).

You will NOT be required to pay back any of the CRB.

Example:

In 2020, you had $15,000 in design income, but received an additional $15,000 in cancellation payments, and received six periods of CERB benefit (24 weeks, $12,000).

 

You apply for an receive seven periods of CRB (14 weeks, $7,000).

 

Your total income for 2020 is $42,000 (design income, cancellation fees, plus CERB).

Because your income is greater than $38,000, a portion of your CRB will be clawed back.

$42,000 - $38,000 = $4,000

50% of $4,000 = $2,000

You will be required to pay back $2,000 of the CRB. 

You will not have additional CRB eligiblity in 2021.

Example:

You did not take any CRB in 2020.

In 2021, you have a part-time job, but are still making less than half of your average pre-COVID earnings. 

Your part-time job pays $20/hour for 25 hours per week, and you keep it for the whole year.

In August, you land a design contract worth $7,000 — you keep the part-time job.

Your total 2021 earnings are $33,000

(part time job: $20/hour x 25 hours /week x 52 weeks = $26,000)

Because your annual income is still less than $38,000: you are still eligible to claim the full thirteen (13) periods of CRB without any clawback. 

You may not be eligible to claim CRB during the same period as you are paid for your design contract.

Example:

You did not take any CRB in 2020.

In 2021, you have a part-time job, but are still making less than half of your average pre-COVID earnings. 

Your part-time job pays $20/hour for 25 hours per week, and you keep it for the whole year.

At the beginning of the year, you expect work to be slow all year, and claim the maximum thirteen periods ($13,000)

In August, work picks up, and you end up earning $20,000 in design fees before the end of the year.

Your total 2021 earnings are $46,000

Because your annual income is more than $38,000: you will be required to repay a portion of the CRB.

$46,000 - $38,000 = $8,000

50% of $8,000 = $4,000

You will be required to repay $4,000 of the $13,000 you received through CRB.

Any clawback amount payable will be due along with your taxes, either in April 2021, or April 2022.

The ADC strongly encourages designers to carefully review their 2020 income prior to making any application for the CRB in 2020. Given the likelihood that some designers may have received payouts on cancelled contracts, in addition to taking a substantial number of CERB payments, it is possible that CRB payments taken in 2020 may have to be repaid in April of 2021: long before the industry has begun to recover.

Falling Through the Cracks

We know there are a variety of scenarios in which people may "fall through the cracks" of the CRB system.

Among the most common (and troublesome) will be designers who were either on parental leave or were students in 2019, and thus have very low incomes from that year against-which to apply the 50% reduction threshold.

 

In these circumstances, please carefully review the 52-week income formula, to determine if that may help your income calculation.

We also encourage you to write your Member of Parliament, if cracks in the system prevent you from making application.  The 50% income threshold is fixed by regulation, not by statute: which means that the Government can change this threshold without requiring a legislative change.

OFFICE: 401 Richmond St. West - Suite 350, Toronto, ON M5V 3A8.

Phone number: 416.907.5829. Email: adc@designers.ca

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