Federal government promises to fill ‘gaps’ in Canada Emergency Wage Subsidy

It’s challenging to design a multibillion-dollar piece of legislation at the best of times. Factor in the raging global coronavirus pandemic, a collapsing national economy and a business community in desperate need of support due to COVID-19 business closures, and we can all appreciate the uphill battle facing the federal government as it works to draft legislation to enact the Canada Emergency Wage Subsidy.

Now try to imagine that same feat being carried out in less than a week, while trying to account for every possible relief requirement and business scenario facing small and medium-sized business owners across the country. Shortcomings are bound to emerge—and be plentiful.

Not surprisingly, Prime Minister Justin Trudeau today promised to improve this and other relief programs announced in recent weeks.

“We recognize that any time we’re doing big measures like this, there will be gaps,” the PM told Canadians during his daily press availability, as reported by the Globe and Mail. “There will be challenges in implementation and unforeseen consequences. These are things we are going to be continuing to work on and we will have more to say in the coming days.”

As we noted in a previous blog, the $71 billion Canada Emergency Wage Subsidy would provide a subsidy of up to 75 per cent of the first $58,700 earned by employees of qualifying companies—for up to three months—retroactive to March 15, 2020. The program would be in effect until June 6, 2020, and would cover up to $847 per week per employee. The subsidy would be based on the actual salary or wages paid to employees. The government is asking qualifying employers to make every effort to cover the remaining 25 per cent of employee salaries, but it seems that doing so is not compulsory.

Employers that don’t qualify for the 75 per cent wage support can still take advantage of the 10 per cent subsidy for remuneration paid from March 18 to before June 20, up to a maximum subsidy of $1,375 per employee and $25,000 per employer.

However, the federal government’s proposed requirement that employers be able to demonstrate a 30 per cent year-over-year loss in revenue to qualify for the wage support immediately raised the ire of many across the business community. A great number of SMEs—particularly service providers, business advocacy groups argued—invoice in arrears and won’t be able to prove a marked loss in revenue for months. The vast majority don’t prepare monthly profit-and-loss statements, therefore making it difficult to meet the government’s reporting requirements. While others simply won’t be able to hold out for six weeks until the subsidy can be distributed.

A new survey of entrepreneurs by the Canadian Federation of Independent Business underscores their anxiety.

Fully 37 per cent of respondents said the subsidy would not help their businesses retain staff either because layoffs have already occurred (38 per cent) or because they wouldn’t be able to prove the 30 per cent decline in revenue (21 per cent). Seventeen per cent felt the amount of the wage support was insufficient and wouldn’t enable them to retain jobs, while the same number said current business conditions would disqualify their organizations from receiving support.

The CFIB has called for an elimination of the 30 per cent test for SMEs, as well as developing a specific test for newly-opened start-up companies that may not be able to demonstrate a year-over-year revenue loss. Revisions such as these would be a good start and may well be in the government’s plans. We should know more in the coming days. Across our network, as well, business owners have been expressing concern that the eligibility criteria would disqualify their organizations from acquiring much-needed financial aid.

These are extraordinary times and the federal government can be forgiven for overlooking the needs of some business owners. But at a time when balance sheets are being battered by the day, the scope of any support program must be matched by the swift disbursement of funds. Protracted delays simply can’t happen. Ottawa must adjust the proposed legislation to help save as many companies as possible until this pandemic subsides.

Armando Iannuzzi, Co-Managing Partner