Apr 7, 2020
Business skeptical of Trudeau’s 75% pay subsidy
Ottawa's wage subsidy plan still short on details for business owners: CFIB
Prime Minister Justin Trudeau has staked much of Canada’s virus response on a plan to subsidize wages by 75 per cent. Many businesses say it isn’t going to work for them.
Trudeau’s government announced the subsidy plan on March 27 in an effort to stem a huge wave of layoffs. At $71 billion, the program represents more than one-quarter of the government’s emergency fiscal plan to date.
But the money will take six weeks to roll out, a long time for companies running low on cash. Businesses also need to show they’ve suffered at least a 30 per cent drop in revenue. That hurdle has been criticized by the tech industry for disqualifying startups and by small businesses that fear they can’t prove the decline.
“It is the most important measure at this time, but it must be designed in a way that’s really effective,” said Jasmin Guenette, a vice president for national affairs at the Canadian Federation of Independent Business. “Currently, the 30 per cent threshold and the six weeks delay are problematic.”
Some entrepreneurs say the subsidy, capped at $847 a week per worker, will make a difference. A CFIB survey found divided opinion: 29 per cent of business said it would help them avoid further layoffs and 37 per cent said it wouldn’t.
In many cases, businesses won’t bring back workers they’ve already let go. Tom Antonarakis has laid off all 20 staff who work at his two restaurants in downtown Toronto. He says he will consider the subsidy, but “because we don’t know how long this will go on for,” it’s more likely the staff will just draw unemployment benefits.
Ontario: All options to save a brewery
Josh Hayter’s craft beer factory has increased sales to Ontario government-owned alcohol stores since the start of the crisis. Even so, the president of Spearhead Brewing Co. had to cut 12 of his 30 employees in recent weeks as revenue from his taproom and retail outlet dried up.
The company has stopped paying rent to keep disbursing salaries and Hayter, 42, is considering every government program that will help save his Kingston, Ontario-based business. Tax filing delays and exemptions have helped conserve cash and he is discussing loan options with two government-backed lending agencies.
Hayter expects the wage subsidy to help him keep his current staff employed. He’s grateful for the government’s help, but the six-week delay is a problem.
“From a government standpoint, they’re turning things around pretty fast but from a reality standpoint, we need the cash faster,” he said.
Quebec: Startups need not apply
LeadFox, a four-year-old software company in Sherbrooke, Quebec, had been growing fast before the pandemic, adding small business clients in North America and Europe and extending its workforce to 32 people.
That expansion now disqualifies it for the wage subsidy because March revenue was up compared with a year ago. And yet, the company is feeling the bite, Chief Executive Officer Alexandre Paquet said. Many existing clients canceled or put their subscription for LeadFox’s marketing automation software on hold, while new prospects are impossible to reach. He had to resort to temporary layoffs for almost half of his staff.
The subsidy “would make a big difference,” enabling the company to retain staff and re-hire some, Paquet said.
Some 94 per cent of CEOs surveyed by the Council of Canadian Innovators said they wouldn’t be eligible for the funds because of the revenue metric. The business group has urged the government to look at different criteria for the tech sector.
British Columbia: An R.V. dealer hangs on
Dale Howes, who owns four recreational vehicle dealerships in British Columbia and Alberta, says the subsidy will be critical in keeping a majority of his 314 employees, including all his mechanics, after laying off about two dozen people and losing some more to self-quarantine.
His company, Langley, B.C.-based Traveland RV, also offers rentals and has retained some work servicing vehicles. With tax payment deferrals, Howes has enough cash flow to wait six weeks and pay the remaining 25 per cent of the wages the subsidy won’t cover -- though he worries the government will later say he doesn’t qualify for assistance.
The lack of visibility on the end of the crisis is making it hard on the whole industry, which still hopes part of the summer vacation season can be salvaged.
“If this gets into September and October and we can’t move around, then we’ve really got some serious trouble for winter,” he said.
Alberta: A consultant feels the time crunch
Linda Miller employs nine people at her Edmonton-based ergonomics consultancy and training company, EWI Works, which is facing a 95 per cent drop in business. She had already applied for another federal program, which she expects to be combined with the new subsidy plan -- but the length of time to receive money is an issue.
“I think it’s wonderful the government is looking at these programs, it gives us hope. But every time we hear, another three weeks or another six weeks, we go, ‘Oh! Can I make this work?’” she said.
Miller is also considering one-year loan options from government agencies and her bank. But she’s wary.
“As a small business owner you also don’t want to necessarily go into huge debt,” she said.
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