Survey finds 82 percent of tech CEOs plan to make layoffs after being left out of federal wage subsidy

A new survey from the Council of Canadian Innovators (CCI) estimates that around 39,000 Canadian information and communications technology companies are currently ineligible for the federal government’s 75 percent wage subsidy, first announced in late March.

Eighty-two percent of Canadian tech CEOs surveyed are planning layoffs in the coming weeks.

Of the 651 CEOs surveyed by the CCI, 94 percent said that their companies would be ineligible for the subsidy because of the revenue criteria.

Under the current terms of the subsidy program, companies are eligible if they can demonstrate that they have experienced a 30 percent year-over-year (YoY) revenue decline compared to this same time of year in 2019, due to COVID-19.

The CCI conducted the survey right after the Finance Minister Bill Morneau announced more details on the program on April 1. The survey heard from CEOs from small- and medium-sized businesses in Canada’s information and communications technology sector, which includes SaaS, e-commerce, IT services and consulting, and hardware.

“Without being eligible for the wage subsidy, layoffs will happen,” said one unidentified CEO that participated in the survey.

RELATED: Government drafting legislation on wage subsidy ahead of recalling parliament says Trudeau

CEOs surveyed said they do not measure a decrease in business activity by revenue loss. Instead, they track activities like billable hours and receivables, units shipped, gross bookings, net new subscribers, monthly recurring revenue, or subscriber churn.

The CCI’s survey also found a staggering forty percent of Canadian tech CEOs surveyed have already laid off employees since the beginning of the pandemic, and 82 percent of Canadian tech CEOs are planning layoffs in the coming weeks.

“Without this subsidy, we will have to lay off talented, highly skilled individuals who are not able to go into work as a result of the current situation,”another unidentified participant was quoted as saying in the report.

“Further, our path to market will be dramatically slowed, and growth of the company largely stalled. This wage subsidy can allow us to retain our team, which includes difficult- to- find, specialized talent. We will need to know soon and get some certainty, as we are on the brink of laying off people next week,” they added.

In total, only six percent of respondents said they would be able to meet the eligibility test and demonstrate a 30 percent YoY decrease in business revenue, 39 of whom were from scale-ups, and three from startups.

RELATED: Mogo lays off 30 percent of staff, makes company wide cuts citing COVID-19 uncertainty

The CCI’s report also comes as the Canadian Federation of Independent Business (CFIB) is releasing the results of its own survey on the wage subsidy. CFIB’s report found that 37 percent of all small Canadian businesses, beyond ICT, do not believe the subsidy will help them. Of that 37 percent, 21 percent said they are worried they may not be able to prove the 30 percent drop in revenue required to qualify.

“It seems the focus should be on job preservation and if jobs existed pre-crisis and that the business keeps these people employed, they should be supported until the end of the Summer,” said another anonymous CEO as part of the survey’s report. “It seems the 30 percent is arbitrary and in many respects lacking in terms of understanding the realities of Canadian businesses at various stages and in various configurations.”

The release of the report follows the CCI submitting recommendations to the federal government that suggest the government expand the eligibility criteria for the subsidy in order to better support the country’s tech sector. Waterloo companies have also banded together to implore the government to make similar changes.

Image source Burst

Isabelle Kirkwood

Isabelle Kirkwood

Isabelle is a Vancouver-based writer with 5+ years of experience in communications and journalism and a lifelong passion for telling stories. For over two years, she has reported on all sides of the Canadian startup ecosystem, from landmark venture deals to public policy, telling the stories of the founders putting Canadian tech on the map.

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