Business federal wage subsidies aren’t a one-size-fits-all solution
Plan doesn’t consider nuances of tech firms Hongwei Liu, founder of MappedIn, feels the federal government’s wage subsidy could be less restrictive.
When the impact of COVID-19 led Hongwei Liu to temporarily lay off some employees and slash company forecasts, the founder of Waterloo-based technology startup MappedIn hoped he might qualify for a helping hand under the federal government’s emergency wage subsidy.
Like many other small businesses across the country, the indoor digital mapping developer expects to be hammered by the economic fallout caused by the virus — except proving it on the financial books isn’t so simple right now.
MappedIn operates like many software-as-a-service technology firms do, by “aggressively scaling” the size of their business based on minimum growth forecasts and hiring more staff to keep that growth trajectory, Liu said. The problem is, none of his forecasts could’ve anticipated how a virus would slam the economy, or how it’ll likely trickle down into his company’s results sometime later this year.
He expects new client growth to slow as retailers, shopping centres and sporting arenas tighten spending across the board, including on new technologies like digital maps. It shows up in forecasts, but not in the financials.
“We went from our best year ever to a nuclear winter forecast,” he said. “Our new signups have completely stopped, we went from 100 to zero on that, and now we’re just we’re battening down the hatches and going to ride out the storm.”
None of this nuance would be recognized by the federal government under the Canada Emergency Wage Subsidy, and that’s left many entrepreneurs feeling as if the lifeline being offered to some doesn’t extend to everyone who needs it.
In order to qualify for Ottawa’s emergency wage subsidy, companies need to prove their revenues have dropped 30 per cent from a year ago. That will open the gates to financial relief that would cover up to 75 per cent of an employee’s wages for 12 weeks, retroactive to March 15, around when COVID-19 first began to seriously affect Canadian businesses.
The wage subsidy will be embedded in the Income Tax Act, Prime Minister Justin Trudeau said on Tuesday, and so it will require legislation approved by Parliament. The goal is to encourage companies to re-hire workers and help the recovery, but the subsidy still hasn’t rolled out, and not everyone is happy with what they’ve heard so far.
Asurvey conducted by the Canadian Federation of Independent Business of its members released April 6 showed that small businesses are divided over the effectiveness of the subsidy, with 29 per cent saying it will help them avoid further layoffs, while 37 per cent said it will not help them at all. Another 21 per cent of businesses surveyed said they aren’t even sure it would help.
Liu said for MappedIn, the wage subsidy qualifications don’t recognize the financial hurdles he expects to face months from now as malls, retailers and other industries reduce in their spending as they attempt to reopen stores.
He’s confident MappedIn will survive, since they’re already near breakeven partly from staff reductions, but he feels if the government is looking to help businesses get back on their feet, the subsidy could be less restrictive.