The federal government has vastly expanded the 75-per-cent wage subsidy for small businesses to include large companies as well as charities and non-profits to encourage them to keep workers on the payroll during the COVID-19 pandemic.
Prime Minister Justin Trudeau told his daily news conference Monday that the generous subsidy will be open to any business or organization that has suffered a 30-per-cent drop in revenue as a result of the coronavirus.
"The number of employees you have will not determine whether you get this support. It will apply to non-profit organizations and charities as well as companies both big and small,” Mr. Trudeau said.
Widespread business shutdowns related to COVID-19 have caused an unprecedented surge in layoffs. A government source said new claims for unemployment benefits totalled 1.55 million in the 10 days from March 16 to March 25, the latest data available. The Globe and Mail is not identifying the source because the official was not authorized to share the information.
The source said that as of the middle of last week, there were no signs of claims tapering off – an indication that the number of unemployed has likely continued to swell.
Ottawa is expecting an additional four million applications to a new $2,000 monthly relief payment for workers who have lost income because of the pandemic.
Mr. Trudeau said further details on the new wage subsidy program, including its estimated fiscal cost, will be announced by Finance Minister Bill Morneau and Small Business Minister Mary Ng at a news conference Tuesday. Ottawa said Friday that it was boosting the wage subsidies to business from 10 per cent to 75 per cent, but provided few details.
An earlier version of the program, announced on March 18, was restricted to small businesses and covered 10 per cent of wages for up to 90 days. That smaller program was estimated to cost $3.9-billion.
A recent report by the C.D. Howe Institute said a 75-per-cent wage subsidy for all businesses facing significant drops in revenue from COVID-19 could cost $6.3-billion a week, which works out to more than $80-billion over three months.
Mr. Trudeau said the aim of the massive wage subsidy program is making sure people are getting paid whether they work for a business that employs 10 people or 1,000. He said the program will cover up to 75 per cent of an employee’s salary on the first $58,700 in earnings, or up to $847 a week.
The wage subsidy will be backdated until March 15. The Finance Department is preparing technical information for employers, Mr. Trudeau said.
Mr. Trudeau acknowledged there is a risk that the new program could be misused, but urged business leaders to show “good faith” and ensure every dollar of the new program goes to workers.
“If you think this is a system you can take advantage of and game, don’t. There will be serious consequences for those who do,” he said.
News that the wage subsidy program will be expanded won widespread praise from business organizations.
“The wage subsidy is the single best measure to help Canada prepare for a quick recovery the minute the emergency phase of the pandemic is over,” said Dan Kelly, president of the Canadian Federation of Independent Business.
Goldy Hyder, president of the Business Council of Canada, said the wage subsidy will help to prevent further layoffs, conserving as many jobs as possible through the pandemic.
One group that lobbied for the wage subsidy says that it solves only part of the problem facing entrepreneurs. Save Small Business brought together more than 20,000 entrepreneurs to ask for wage relief this month, but many still have other fixed costs and little or no revenue as they face April 1 rent bills.
“There needs to be some kind of strategy for commercial rents, commercial property tax and commercial utilities,” said Jon Shell, one of the group’s organizers.
The Emergency Coalition of Canadian Charities said the initiative is unlikely to help most charities because their revenue are based on anticipated projections from various fundraiser streams that have dried up.
Dr. Samantha Nutt, founder of War Child Canada, said the coalition, which includes United Way, the Canadian Cancer Society, and Women’s Shelters Canada among many others, is reaching out to Ottawa to recognize the sector’s unique needs.
“To be able to establish a 30-per-cent threshold up front is not going to work for the vast majority of the stakeholders who have very different revenue streams," Ms. Nutt said. “We want to look at this 75-per-cent wage subsidy and try to figure out with government how it can better reflect the realities of the sector."
Ms. Nutt said the charity sector needs an income stabilization fund and access to credit, especially for organizations that do not receive the bulk of their money from government.
Economist Toby Sanger, director of Canadians for Tax Fairness, said Ottawa should not be paying a 75-per-cent wage subsidy for large companies unless strong rules are in place.
“It’s a massive cost and there doesn’t seem to be many constraints on it,” he said. “I’m just very concerned that this could be a massive boondoggle.”
Mr. Sanger said he hopes Ottawa will impose strict conditions on large companies to qualify, including public reporting.
Bill Robson, president and chief executive officer of the C.D. Howe Institute, said he’s pleased with the new wage-subsidy details released Monday. He also played down concerns that the payments could be misused by large companies, noting that the program will likely be short-lived.
Mr. Robson suggested company executives should be required to sign an attestation that the money will be used only for salaries.
“Over time, if you as a CEO have signed something like that and you do something different that’s not consistent with that, that could be potentially fatal to your business,” he said. “I think that public opinion will be very unforgiving of that.”
With reports from David Parkinson and Josh O’Kane
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