Proposed draft changes to the Canada Emergency Wage Subsidy would enhance SME relief

News today that the federal government is, indeed, considering changes to the new Canada Emergency Wage Subsidy to aid organizations struggling in the wake of the COVID-19 crisis, was lauded by many in the business community.

As we reported previously, the $71 billion program 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.

Under the existing proposal, Ottawa would require employers to demonstrate a 30 per cent year-over-year revenue loss based on March, 2020 revenue to qualify for the wage support. Business owners immediately voiced their concern, pointing out that many of them bill in arrears, or simply don’t prepare monthly profit and loss statements, making it next to impossible to quantify a substantial loss in sales.

But as reported in the Globe and Mail, the federal government’s draft legislation provides enhanced flexibility to businesses, potentially making a great number more eligible for the benefit:

“The draft bill gives companies the option of using January and February as reference periods instead, under certain conditions. It also includes a section that reduces the threshold for March to 15 per cent. The proposed threshold would remain at 30 per cent for April and May.

Businesses had warned that many would not qualify for the program using March, 2020, revenue figures because the full brunt of the economic impact of COVID-19 did not hit until the latter half of the month.”

Dan Kelly, president of the Canadian Federation of Independent Business, called the potential changes “ … a major improvement. These are big fixes. It is absolutely critical that we get all parties aligned to move forward on this quickly.”

According to a recent CFIB survey, 37 per cent of Canadian small- and medium-sized business owners said the wage support, as originally proposed, would not help them retain or rehire employees—the government’s chief goal in introducing the benefit.

Ottawa’s insistence on including a substantive test to quantify monthly revenue loss is understandable. The Trudeau government is desperate to provide relief to businesses in the face of this unprecedented pandemic, but it is likely equally concerned over potential future headlines decrying abuse of the program by some companies. However, their primary concern should be efficiently and effectively distributing support to companies that need it most. The draft changes to this legislation may not be enough to keep every struggling business afloat, but they are definitely an improvement.

We’ll wait to pass judgement on the potential efficacy of the Canada Emergency Wage Subsidy once the final legislation is tabled for review. In the meantime, the business community has its collective fingers crossed this added flexibility around eligibility makes it into the bill and past Parliament.

Armando Iannuzzi, Co-Managing Partner

Armando Iannuzzi

905-946-1300, x. 239