Businesses large and small say Ottawa’s dramatically expanded wage subsidies are a financial lifeline that will allow them to minimize layoffs at a time when unemployment claims in Canada are rising at a record rate.
The federal government has expanded the scope and scale of 10-per-cent wage subsidies it announced earlier this month. On Monday, it said any business that has seen a 30-per-cent drop in revenue is now eligible for wage subsidies of 75 per cent. The subsidies stop beyond $58,700 in income, amounting to a weekly maximum payout per worker of $847.
Some expressed concerns about the 30-per-cent threshold, how it will be calculated and, more pointedly, that it could exclude businesses that are just short of the mark. And it would not offset other fixed costs, such as rent, that smaller businesses worry could bankrupt them. But there is broad relief the government is now offering significant aid across a wide swathe of the economy.
“It takes a ton of pressure off everybody," said Duncan Fulton, chief corporate officer of Tim Hortons’ parent company, Restaurant Brands International Inc. “And allows companies to make the right long-term decisions for the business, and their customers, without that short-term financial gun to their head.”
He said he and other executives spoke on the weekend with government officials in the Department of Finance and the Office of the Privy Council to encourage a wage subsidy measure that would apply to Tim Hortons. The company argues its franchises, while part of a large chain, are small businesses. Applying the subsidy to any company with a revenue decrease of 30 per cent or more is “a really sophisticated way to look at it,” Mr. Fulton said.
Layoffs across Canada continue to swell. Claims for unemployment benefits rose by 620,000 from March 23 to 25, pushing the total number of claims since March 16 to 1.55 million, according to a government source, whom The Globe and Mail is not identifying because the official is not authorized to share that information. The source said claims were still pouring in as of the middle of last week.
Craig Alexander, Deloitte Canada’s chief economist, said the expanded wage subsidies are not a “silver bullet” that will prevent all economic pain, and that other measures, especially for the oil and gas sector, are still needed. But he said the subsidies play an important role, particularly in dissipating a sense of fear among employers. “This will most assuredly restrain how high unemployment becomes."
In a statement, the Canadian Federation of Independent Business said the new subsidies represent “significant relief” for companies, but sounded a caution over the need for a 30-per-cent revenue decline. The association said businesses with tight margins could be forced to lay off staff with even a modest reduction in sales. Other members have indicated that rising costs, rather than falling sales, are more significant.
Brent Pooles, president of WD Industrial Group Ltd. in Winnipeg, said his company has seen a 20-per-cent to 25-per-cent drop in its business of manufacturing products used in municipal construction projects. His company’s fiscal pain, while substantial, isn’t bad enough to qualify for wage subsidies. “That makes no sense,” he said, adding that his company has not yet laid off any workers but will have to make a “month by month” determination.
Peter Farrell, chief executive of Citron Hygiene LP, a hygiene and pest control company in Markham, Ont., said it was unclear how the 30-per-cent revenue threshold would be determined – especially for companies that operate across provinces and countries. Each day matters, Mr. Farrell added. “We have to provide some certainty to our employees,” he said.
Mr. Trudeau urged companies to not just avoid new layoffs but to rehire workers already let go. Palliser Furniture Ltd. is looking at doing that. The Winnipeg-based manufacturer has seen demand from its retailer clients drop significantly amid the pandemic, and on Monday announced it would shut down its Winnipeg facility and temporarily lay off 72 per cent of its employees. In an e-mail, the company said it would use the wage subsidy and then make further decisions once it had more details.
The Ottawa-area Kunstadt Sports retail chain laid off 55 staff on March 18, but plans to gradually bring people back. But its controller, Monica Kunstadt-Landon, says there’s still some confusion with the program: “At this moment, there’s still no procedure for how to file for this.”
Dennis Darby, president and CEO of Canadian Manufacturers and Exporters, echoed that sentiment, saying more details are needed before companies can fully determine whether subsidies will be of use, and whether employees would be better off receiving the emergency unemployment benefits announced last week.
Wage subsidies may not be enough to prevent or reverse job losses in the hardest hit sectors of the economy. According to an internal memo obtained by The Canadian Press, Air Canada will start to lay off more than 15,000 workers this week. Porter Airlines, which has suspended flights and laid off almost its entire staff of 1,500, said it is too soon to say if it would reverse any layoffs.
Mr. Trudeau also expressed hope on Monday that employers would top up subsidies to the full amount of workers’ regular wage. Mr. Fulton echoed that.
“I know that all Tim Hortons restaurant owners will hold each other accountable to uphold the spirit of this generous assistance by the government,” he said. “That certainly means that any employee working a shift should be fully paid – as they always have been.”
The weekly cap is high enough not only to include most hourly wage earners, but may also allow companies to add on small payment premiums for some workers, as grocery stores and other high-demand retailers have done, Mr. Fulton said. He expects such premiums are likely in the restaurant industry as well.
With reports from Eric Atkins, Mark Rendell and Sean Silcoff
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