The federal government has announced plans to waive the criteria of the 75 percent wage subsidy that requires businesses to meet a revenue decline of 30 percent. At the same time, looking to extend the Canada Emergency Wage Subsidy (CEWS) program until December 19.
The Liberals intend to introduce legislation to be considered by Parliament, and has shared draft legislative proposal.
Along with the change to the revenue criteria and extension to December 19, the government is also looking to “tailor” the CEWS to help companies that have had extreme levels of revenue decline. Businesses that have seen more than a 50 percent revenue decline amid COVID-19, could potentially get an additional 25 percent through the subsidy. The Department of Finance called the proposed change a “top-up subsidy of up to an additional 25 percent.”
With these changes, Minister of Finance Bill Morneau noted that companies would receive a proportionate amount of the wage subsidy as compared to the amount of revenue reduction that they have seen.
Morneau made the announcement Friday afternoon, noting that the goal with the extension of the program is to give people and businesses more confidence to apply for the CEWS and support business as they rehire. The proposed changes are part of the Liberal government’s draft legislative proposals, and need to be approved in Parliament. The Liberals intend to introduce legislation to be considered by Parliament, and has shared draft legislative proposals with federal parties.
The announcement follows Prime Minister Justin Trudeau noting on Monday that his government planned to extend the CEWS program until December. He stated at the time that the extension is meant to give “greater certainty and support to businesses” as the economy restarts.
This is the second time the 75 percent wage subsidy program has been extended. In May, the federal government announced it would continue offering the CEWS into August.
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The wage subsidy was been met with some criticism of late, with business groups and other federal parties calling for Trudeau’s government to adjust the CEWS to make it more accessible and easier for businesses to utilize as revenues rebound.
Following the release of Morneau’s fiscal snapshot shared last week, the Conservatives proposed the federal government “slowly” decrease the wage subsidy, noting that businesses should be able to “gently phase out” their need for federal government assistance as their revenues rebound.
As part of the Liberal government’s new proposed changes to the CEWS, it is looking to provide a “gradually decreasing” base subsidy to those receiving the CEWS. A statement from the Department of Finance noted that this would ensure those who have previously received the subsidy could still qualify, even if their revenues recover and no longer meet the 30 percent revenue decline threshold.
The Department of Finance also noted that along with the proposed changes it will “provide certainty to employers that have already made business decisions for July and August by ensuring they would not receive a subsidy rate lower than they would have had under the previous rules,” and “address certain technical issues identified by stakeholders.” Details on what these points mean have yet to be shared.
When asked on Friday whether the government considered expanding the criteria beyond a decline in revenue, something that the Canadian tech community has said would make it easier for startups to apply for the CEWS, Morneau stated his department will continue to review the program, but noted that the goal was to make the CEWS work for a large number of businesses.
“While today’s announcement is welcome news for tech companies who have been calling for the program to expand until December, by keeping the requirement to show a revenue decline instead of a reduction of business activities, 56 percent of the tech sector will continue to be ineligible for the wage subsidy,” said CCI executive director Ben Bergen.
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In May, the federal government launched consultations on the CEWS. The consultation closed on June 5, with the results meant to help inform “potential changes” to the program. Updates to the program had been expected last month, though were held up as the federal parties couldn’t come to agreement.
Since the program was launched, many in Canada’s tech community have criticized the eligibility criteria, arguing that pre-revenue tech companies are less likely to be able to meet the 30 percent revenue decline, making many ineligible for support. While the federal government relaxed that to a 15 percent revenue decline for the month of March and opened up the opportunity to compare revenue to January and February 2020 rather than a year-over-year measurement, a survey of the Canadian tech community in June found that 56 percent of respondents were are still ineligible for the CEWS.
Twenty-five percent of respondents were ineligible for both CEWS and IRAP’s Innovation Assistance Program (IAP), which was meant to provide a wage subsidy specifically for the tech sector.
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The CEWS has seen a lower than expected level of demand. Over recent weeks Trudeau and his Liberal government have touted the program, encouraging businesses to take advantage of the wage subsidy to rehire employees. According to the federal fiscal 2020 snapshot, just under three-quarters of approved applications for the wage subsidy were from small-sized employers with 25 employees or fewer, and less than one quarter came from medium-sized employers with 26 to 250 employees, as of June 29.
A recent Canadian Federation of Independent Business (CFIB) report found that small businesses are continuing to face challenges as they begin to re-open. According to CFIB, more than a quarter (27 percent) of small firms report that some of their laid-off staff have refused to return to work when requested. The top reasons for not returning to work being employees would prefer to stay on the Canada Emergency Response Benefit (CERB) and are concerned about their own physical health or that of their family.
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