Got questions about Ottawa’s $71-billion wage subsidy program? We’ve got answers,
Who qualifies for the money? How do they get it? We answer your questions about Ottawa’s COVID-19 wage subsidies
OTTAWA— At $71 billion, it’s billed as the most expensive program in Canada’s history. And it’s meant to keep tens of thousands of Canadians on the job during a time of unprecedented economic disruption.
Finance Minister Bill Morneau provided more details Wednesday of the Canada Emergency Wage Subsidy to help pay the wages of employees at businesses big and small to stem the tide of unemployment caused by COVID-19.
“We are taking unprecedented measures, introducing emergency support unlike any this country has even seen. This is the largest economic program in Canada’s history,” Morneau said.
What is the program? As part of its initial fiscal response to the virus crisis, the government announced that it would provide a 10 per cent wage subsidy to small businesses, with no requirement to show a decline in revenue.
That program remains. But reacting to business concerns that more generous measures were needed to assist employees throughout the economy, the federal government has since added a program to provide a 75 per cent subsidy to companies big and small that have suffered.
The subsidy will pay 75 per cent of a worker’s pre-crisis wages to a maximum of $847 a week. The government is encouraging employers to pay the remaining 25 per cent if possible but it’s not mandatory.
“We recognize that not every business will be able to do that,” Morneau said.
The program will run for up to 12 weeks, retroactive to March 15 and companies will have to apply each month to get the funding. There is no overall cap on the subsidy amount that an eligible employer may claim.
Which firms are eligible for the subsidy? Any business is eligible that can show a decline in gross revenue of 30 per cent or more for March, April and May, compared to the same month last year. Non-profit organizations and charities that have seen revenue drops will also be eligible. Publicly funded entities such as hospitals, Crown corporations or schools will not qualify.
Officials recognize there will be some hiccups. Startups, for example, won’t be able to show year-over-year revenue declines. In such cases, the businesses will be asked to use a “reasonable benchmark.”
So how will it help? The government is hoping the wage subsidy will encourage companies to hire back workers who have been laid off and that it will deter other companies from downsizing as the virus continues to spread and with it, the economic fallout.
The government is also hoping to shore up confidence, which will be key to an economic rebound when the health crisis recedes.
“Making sure that Canadians feel secure in their jobs is a boost to confidence that we all need,” Morneau said.
The finance minister hopes the measure will reverse some the sweeping layoffs seen in recent weeks. “My message to Canada’s employers is this: get ready to rehire people,” he said.
Analysts aren’t convinced that will happen, at least on a big scale, but say the subsidy could prove key in blunting further economic damage.
“While we do not expect that this will result in a wave of immediate rehiring of workers who have been laid off, we do believe that it will help stem further job losses in coming months and provided needed support to help businesses cope during these unprecedented economic times,” the Conference Board of Canada said in an analysis Wednesday.
When will the money start to flow? Officials say it could take three to six weeks to get the program up and running. That’s a problem for cash-strapped businesses that have seen revenue dry up. There’s concern whether business owners who have been shut down will have the cash flow to hire employees back and wait to be reimbursed.
I lost my job. How will this help me? Ideally, it will mean that you get your job back and your employer tops up your salary for the remaining amount. For that to happen, however, business owners need to be certain they are eligible for the program and have the cash flow to pay wages.
There will also be a stopgap measure for many people who are already out of work. Starting next week, those who have lost income because of the virus will be able to apply for the Canada Emergency Response Benefit. This program will pay $2,000 a month for up to four months.
Prime Minister Justin Trudeau noted Wednesday that people who eventually get a wage subsidy won’t be able to collect the emergency benefit at the same time.
If you are still working but your job has been made precarious by a drop in business, the wage subsidy could provide the assistance your employer needs to keep you on staff.
How much will it cost? It’s an eye-popping sum. Morneau estimates the subsidy program will cost about $71 billion for three months. That’s more than double the country’s annual defence budget. The emergency benefit rings in at $24 billion. All told, the finance minister said the measures announced so far to support businesses and individuals will cost $105 billion. As well, the government is allowing individuals and businesses to defer about $55 billion of taxes and postpone some $30 billion in GST and customs remittances.
Compare that to the $28.1 billion deficit projected for 2020-21 in December’s fiscal update.
How will the government deter cheaters? For now, the government is using tough talk to describe a program that Morneau concedes relies on trust.
“There will be severe consequences for any bad actor that tries to abuse the system,” he said. “We will take decisive action against anyone who breaks that trust.”
What does the business community think? Businesses have applauded the government’s move to open up the wage subsidy to companies of all sizes and make it more generous. “This measure will help the industry ... It will also enable to economy to rebound faster once the crisis is over,” Dennis Darby, president and CEO of Canadian Manufacturers and Exporters, said in a statement Wednesday.
But even after Morneau’s news conference, uncertainty remains about the eligibility criteria.
And the Canadian Chamber of Commerce also warned that many businesses cannot wait six weeks for funding. “Every day that we delay these funds will lead to more businesses shutting down and more Canadians facing unemployment,” it said in a statement.