Both economic and industry experts agree; the federal government’s wage subsidy should prevent mass layoffs across Canada. However, there are three crucial problems with the program. 

  1. The funds may not start being distributed for 6 weeks.
  2. It only covers wages, it doesn’t provide financial relief from any other bills.
  3. Many companies – startups and fast growing companies – don’t qualify.

In order to qualify for the subsidy, businesses must have suffered “at least a 15% decline in revenue” due to the pandemic, which would then enable them to claim a maximum subsidy of $847 per worker per week. Payments will be made to businesses through direct deposit or cheque. 

On April 6, the Canadian Federation of Independent Business released survey results revealing that just  29% of firms say the program will help them avoid further layoffs or recall staff. “There’s no question that there will be thousands of firms and hundreds of thousands of employees that will be helped by the wage subsidy,” said CFIB president Dan Kelly. “But it is definitely not the system-wide fix that we need without some changes. It is, for many, too late because they have already taken the actions that they’ve needed to on staffing. For others, it’s too slow because the three to six weeks [before launch] will not deliver the support that they need quickly enough to hang on to workers.”

The wait for funds.
Business organizations were left in shock at the announcement by the federal finance minister that funds for the subsidy may not start flowing for another six weeks. “It renders a great concept useless for so many of those most in need of it,” said Rocco Rossi, president and CEO of the Ontario Chamber of Commerce. The long wait for getting access to the subsidy will also likely mean more people having to apply for EI in the meantime, the exact scenario a wage subsidy is designed to avoid, Rossi pointed out. 

“The cash crunch is right now,” said Corinne Pohlmann, senior vice-president of national affairs at the Canadian Federation of Independent Business. “That is a big concern for us. We like the wage subsidy … I’m not sure (businesses) can wait another three to six weeks.”

Subsidy may not make much of a difference for many small businesses, because their costs aren’t just wages, but include things like rent.
Tens of thousands of small businesses across Canada are struggling to keep afloat while facing the prospect of shutting down entirely in the wake of the COVID-19 pandemic, according to the Canadian Federation of Independent Business (CFIB), and government subsidies aren’t going to help them stay alive, say many of them.

The economic slowdown is posing a crisis of gargantuan proportions for this critical segment of the economy, one that as of early 2019 comprised roughly 1.15 million businesses, mostly in the service sector, employing approximately 10 million people.The overwhelming majority of small-business owners the Financial Post spoke to said the wage subsidy will definitely help in making sure more people have an income over the next few months, but it will not help them stay in business.

A survey conducted by the CFIB found that 32% of the small businesses that have had to close are unsure if they will ever be able to open. Even in normal times, according to Business Development Bank of Canada data, only half of small businesses survive  into their fifth year of operation. “It’s absolutely true that there are loads of businesses now that have zero revenue and even if the wage subsidy was 100 per cent, the employer would still struggle because their costs are not entirely wages,” said Dan Kelly, CFIB’s chief executive.

Wage subsidy rules leave startups and fast-growing companies out in the cold.
Companies across the innovation economy quickly realized that one of the qualifying criteria — that a business has suffered a 30% decline in revenue since last March — might not apply to them.  A survey of 651 CEOs by the Council of Canadian Innovators, released on April 5, found 94% said their companies would be ineligible for the wage subsidy because of the program’s criteria.

Jason Young, the president of Toronto-based Advantage Forensics, said his company had a good year last year, and expanded its staff from seven to 12, but now that growth is creating hard decisions. He said even if revenue is flat, it will be impossible to make ends meet.“We’ve doubled in expenses and we’ve doubled in revenue. So when our revenue drops this month from last month by 50%, we’re still going to end up the same as 12 months ago, if you’re looking at March to March.”

In the startup community, there is similar consternation. For technology companies getting off the ground, it’s not uncommon for management to plan on triple-digit revenue growth, scaling dramatically to keep up with increases in expenses. Other firms have little to no revenue and are relying on venture capital investment, which has almost completely dried up.

Federal government to continue adjusting benefit plans.
Since these complaints have been aired, Trudeau has responded that the government will continue to adjust plans as things continue. “We recognize that any time we’re doing big measures like this, there will be gaps. There will be challenges in implementation and unforeseen consequences,” Mr. Trudeau said on April 5. “These are things we are going to be continuing to work on and we will have more to say in the coming days.”

Source: The Star
Source: Financial Post
Source: Financial Post
Source: Globe & Mail
Source: Financial Post