Wage subsidy leaves startups and fast-growing companies in the lurch

TORONTO Businesses are warning that the Liberal government’s COVID-19 wage-subsidy program is unfairly leaving startups and high-growth companies out in the cold, an oversight that could stunt the development of some of the country’s most innovative firms.

As details of the 75 per cent wage subsidy rolled out this week, companies across the innovation economy quickly realized that one of the qualifying criteria — that a business has suffered a 30 per cent decline in revenue since last March — might not apply to them.

“Any company that had a good year within the last three months or six months is facing a really tough issue with this subsidy rollout, the way that it’s been presented, because there’s no way for them to qualify for that without firing all the new staff that they have (hired) in the last year,” said Jason Young, the president of Toronto-based Advantage Forensics, an eightyear-old firm that provides expert engineering services to lawyers and insurance companies.

Young said his company had a good year last year, and expanded its staff from seven to 12, but now that growth is creating hard decisions. He said even if revenue is flat, it will be impossible to make ends meet.

“We’ve doubled in expenses and we’ve doubled in revenue. So when our revenue drops this month from last month by 50 per cent, we’re still going to end up the same as 12 months ago, if you’re looking at March to March.”

In the startup community, there is similar consternation.

For technology companies getting off the ground, it’s not uncommon for management to plan on triple-digit revenue growth, scaling dramatically to keep up with increases in expenses. Other firms have little to no revenue and are relying on venture capital investment, which has almost completely dried up.

Abdullah Snobar, executive director of the Ryerson DMZ startup incubator, said the COVID-19 economic turmoil could kill a lot of companies that are just getting off the ground.

“There are companies that would have been incredibly high-potential businesses that need more time and need more support,” Snobar said.

“To let it die today is such an unfortunate thing for Canada.”

On a Zoom call organized by the Council of Canadian Innovators with around 1,500 people Wednesday afternoon, Innovation Minister Navdeep Bains acknowledged the issue, but said many startups just won’t qualify.

“The bottom line is that this issue was raised with the minister of finance today as well. I’ve raised this issue. He fully understands this, and we as a government recognize this. And we’re working out the details on this and were going to do our best to see what we can to address this concern,” Bains said.

Financial Post