WAGE SUBSIDY CHANGE COULD MEAN RESTAURANT LAYOFFS.

Layoffs possible in hardest-hit sectors

TORON TO • A change to the federal wage subsidy program has led to confusion among the hardest-hit sectors in Canada, surprising some business owners with added payroll costs that may force major layoffs, industry advocates say.

After overhauling the Canada Emergency Wage Subsidy (CEWS) this summer, the government granted a grace period during which business owners would get at least as much money as they received under the old system. That grace period expired at the end of August, but the Canadian Chamber of Commerce said it was poorly communicated, if it was communicated at all.

The chamber said business owners are only now realizing the change as they attempt to claim wage subsidies for September and find that thousands of dollars in payroll costs are no longer covered by the government.

“It’s going to force businesses to make really tough decisions,” said Alla Drigola, the chamber’s director of parliamentary affairs. “A lot of these businesses are going to have to look at, 'Do I keep my employees?'"

The changes to CEWS in July brought in a tiered system because some recovering sectors no longer needed Ottawa to cover 75 per cent of payroll. But the government also promised that a “safe harbour” provision would allow badly impacted businesses to still get wage subsidies that were “at least as generous” as they were previously.

Drigola said the changes also meant that wage subsidies would be based on current pay, rather than what employees earned before the pandemic.

For example, if an employer was paying an employee $847 per week in September — the maximum wage eligible and only available to businesses suffering revenue declines of 70 per cent or more — it would only be covered for 75 per cent of that salary.

Under the previous system, which was effectively extended by the safe harbour rule, no top-up was required, so an employer only paying staff the maximum eligible wage would have received the entire $847 per week.

“You apply for your $847 per week for your salaries, but you get this surprise that you're only actually going to get $635 per employee back,” Drigola said. “So that leaves these businesses with a $211 difference that they have to pay out of pocket. When you have 20 employees, that's more than $4,000 a week.”

The end of the grace period, she added, will lead to more Canadians being laid off. “Restaurants and other businesses that have been really hard hit are now saying, `I can't afford to pay $4,000 out of pocket when I'm down 80 per cent in revenues and I don't see a path in the next six months where that's going to change,'” Drigola said. “This is something that was definitely not communicated well.”

Katherine Cuplinskas, a spokesperson for Finance Minister and Deputy Prime Minister Chrystia Freeland, on Monday directed Financial Post to a July 17 briefing document on the ministry's website that notes the safe harbour provision would be in effect “through August 29.”

In a statement, Cuplinskas said “government's top priority is supporting Canadians and businesses as we weather the COVID-19 pandemic.” She also pointed to a slate of new supports for hard-hit businesses, which included extending the CEWS program.

Andrew Oliver, CEO of Oliver & Bonacini Hospitality Inc. — the restaurant network that includes Canoe in Toronto and Alchemy in Edmonton — said the safe harbour matter “defies common sense.” Oliver said he recognized the government signalled in July that the safe harbour provision would expire on Aug. 29, but he noted the outlook for restaurants and other struggling sectors has dramatically changed since summer, with parts of the country reverting to earlier restrictions on dining.

Oliver said he was hopeful the government would extend the safe harbour provision, but warned that with each day, the industry will see more layoffs. “The longer they wait, the worse it's going to be,” he said.