Wage subsidy extended to end of August
Ottawa to talk with labour, business groups about loss requirements
The federal government is doubling the lifespan of its emergency wage subsidy to the end of August, marking the latest expansion of a program that was already slated to cost more than $70 billion to help businesses keep workers on the payroll through the pandemic downturn.
Prime Minister Justin Trudeau said Friday that the government will also widen eligibility so more organizations can get the subsidy. And Ottawa will start discussions with labour and business groups on whether to change the need for businesses to report lost revenues of at least 30 per cent to qualify for the subsidy — a requirement groups like the Canadian Chamber of Commerce say prevented some firms from applying.
Trudeau warned this aspect of the program could create a perverse incentive for businesses to “hold back” so they lose enough revenue to qualify for the subsidy, which covers up to 75 per cent of a firm’s labour costs by providing a maximum of $847 per week for each employee.
“As the economy reopens, there is a danger of unintended consequences,” Trudeau told reporters outside Rideau Cottage Friday morning.
“We wouldn’t want people … to feel like they have to hold back on their growth, on their expansion, on their rehiring in order to be able to continue benefiting from the wage subsidy,” he said.
The changes are the latest tweak the Liberal minority government has made to its suite of emergency programs for the COVID-19 pandemic. The wage subsidy as first proposed would have covered 10 per cent of labour costs. It was also slated to expire the first week of June.
But now, as provinces ease off health restrictions that have shuttered businesses across Canada to slow the spread of the novel coronavirus, the government wants to help organizations plan to rehire or keep workers on staff by extending the wage subsidy program until Aug. 29, Finance Minister Bill Morneau told reporters by video conference Friday.
The subsidy will now also be available to businesses and organizations with employees that didn’t qualify before. That includes registered athletic and journalism organizations, private colleges and institutions like art and driving schools, and corporations owned by tax-exempt corporations owned by Indigenous governments, the finance department said in a news release.
“The extension, which we think is so important, will enable us to continue to support people and enable us to get carefully back to work, providing the appropriate level of support to make that happen,” Morneau said. “We’re seeing employers come on board, and the extension will give people a greater sense of confidence that they can plan as they move forward to use the wage subsidy.”
In a statement Friday, the Canadian Federation of Independent Business said it is “very pleased” the subsidy was extended, citing potential “major relief” for tourism and other sectors hit hard by the pandemic lock down. The Canadian Chamber of Commerce also applauded the changes, citing how the businesses uptake of the wage subsidy program so far “is far below original expectations” because of restrictive requirements to qualify.
Two weeks into the original 12-week program, less than five per cent of the $73-billion estimated budget been used, according to the Canada Revenue Agency.
“Although we are still in crisis mode across most of the country, as we move to reopening and recovery, we will have to turn our attention to moving away from emergency programs to policies that stimulate growth,” the chamber said in a statement Friday afternoon.
The federal government’s pandemic benefit programs was already expected to cost $151.7 billion in direct payouts from Ottawa, according to the latest tally from the finance department. And that was before the wage subsidy was extended and expanded on Friday.
Morneau said Friday that he can’t “make precise estimates” for how much the expanded wage subsidy will cost because the government still might change the program “to make sure it encourages hiring.”