The full details of the Canada Emergency Wage Subsidy are here but there are concerns
Details on the Canada Emergency Wage Subsidy are here, but professionals are already flagging major concerns over Prime Minister Justin Trudeau's latest COVID-19 economic measure.
As a quick review, the CEWS will provide qualifying Canadian businesses with a 75 per cent wage subsidy for three months, backdated to March 15, in a bid to keep employees on the payroll.
According to Finance Minister Bill Morneau, the subsidy will cost an estimated $71 billion.
We know that businesses want to support their employees during this difficult time. We will be there to help. The new Canada Emergency Wage Subsidy would cover 75% of employee wages – up to $847 per employee, per week. 1/2 pic.twitter.com/dPNpJnvZYj— Bill Morneau (@Bill_Morneau) April 1, 2020
The first major problem?
The sum of money.
CEWS will provide working Canadians up to $847 per week. In contrast, Canadians that are out of a job will be entitled to EI (up to $573 per week) or the Canada Emergency Response Benefit ($500 per week).
As one employment lawyer pointed out, this means that businesses have unprecedented power to determine how social welfare is distributed among Canadians.
Despite the govt spending billions on the subsidy, terminated or laid off workers who are not recalled will only have access to EI/CERB. Because these benefits are, by govt design, significantly lower, workers could miss out on over $1000 a month and suffer unnecessarily. (4/7)— geetha (@ggeethaaa) March 31, 2020
And by setting the cap for CEWS at $3,388 per month, Canada is acknowledging that earning $2000 a month through EI really isn't enough to live off for most people.
Between paying for rent, groceries, transportation and other living expenses, the average Canadian household spends closer to $5,300 per month — making it clear that the EI cap should really be revised.
But workers who are not recalled by their employers will have paid into EI, only to be hung out to dry by a govt that has ceded control over access to the wage subsidy to private corporations! What should the govt do? Remove/increase the EI cap permanently! (6/7)— geetha (@ggeethaaa) March 31, 2020
The second — and more pressing — concern with the Canada Emergency Wage Subsidy is the timing of the program.
According to Canadian senior finance officials, the money from the subsidy won't be available for up to six weeks.
That means that Canadian businesses will potentially have to come up with funds to pay their employees until mid-May, at a time when 33 per cent of businesses say they won't survive until the end of April under current economic conditions.
Senior Finance Canada officials now give tech briefing on Canada Emergency Wage Subsidy (CEWS). One says money might flow to biz sooner than 6 weeks, as Min said in presser. Could be 3-6 weeks. 6 weeks the ‘upper bound’ of moving CEWS to employers.— David Akin 🇨🇦 (@davidakin) April 1, 2020
The government has set up programs that small businesses can access for loans in the interim, of course, such as the Canada Emergency Business Account, but these will only provide businesses with up to $40,000 in loans.
Most Canadian companies have less revenue coming in, and even though banks have agreed to suspend their mortgage payments, they're still expected to pay thousands of dollars in interest each month.
With all of that in mind, it seems unlikely that many businesses can afford to keep all of their employees on the payroll until the wage subsidy arrives in May.
TBH @TD_Canada isn't much better. They'll defer your mortgage principle by up to 6 months, you still have to pay your interest for the 6 months of deferral. And of course, 6 months of principle and interest is added. This is actually a money-maker for them.— Derek FoReal (@dpodca) March 31, 2020
This isn't to say that the Canada Emergency Wage Subsidy isn't an admirable measure; overall, the subsidy will allow Canadians across the country some degree of economic stability during a period of global uncertainty.
It could, however, be tweaked.
And at a time when thousands of Canadian businesses are facing bankruptcy in a matter of weeks, those tweaks are more essential than ever before.
Join the conversation Load comments