“Critical” perspective: experts believe that companies that use subsidies should raise wages

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Companies using Canada’s Emergency Wage Subsidy Program should weigh not only the long-term viability of their business and the well-being of their employees, but also the impact on their reputation and stakeholder confidence if they choose not to increase staff salaries, according to experts in corporate governance.

The federal program covers up to 75% of the salary of employees of eligible businesses of all sizes. However, there is no need to increase the remaining 25% of salary, and the Department of Finance simply states that employers expect their employees to do their best to raise employees’ wages to 100% of the level. before the crisis.

“If you want to maintain the trust of your employee base, which is absolutely essential; if you want to maintain the trust and reputation of your customers and shareholders, it’s important to think about the long-term implications of not doing the same, “said Rahul Bhardwaj, CEO of the Institute of Corporate Directors , during a telephone interview. .

He said the first step that boards or management should take is to map various financial forecasts. After that, it’s about “doing the right thing,” said Bhardwaj.

“I think a responsible board would examine the availability of financial support from the government to maintain support for its employee base, knowing that revenues are dwindling and to be able to keep people on board, they want take advantage of these wage subsidies. And of course, these wage subsidies come with light conditions such as the expectation of companies to supplement them, “he said.

York University Professor of Governance, Law and Ethics, Richard Leblanc, agrees that the treatment of employees by businesses during this economic recession will have an impact on his reputation and his future relationships with employees.

“The optics are critical right now,” he said in an email to BNN Bloomberg.

“Boards of directors should lead by example and if they cannot or do not want to fund the top-up, the total salary of directors and officers should be cut by 25% at the same time.”

Leblanc noted that the government could have provided more incentives to companies to supplement the subsidy, for example by requiring a supplement in order to receive funding from Ottawa.

Suncor Energy Inc., CAE Inc., Indigo Books and Music Inc. and most Canadian airlines are among the thousands of companies that have applied for the grant.

For Transat A.T. Inc., not completing the subsidy was a difficult but necessary decision.

“Our flights and tour operator activities have stopped temporarily, but completely. So we have to take all possible steps to preserve our cash, and that was one of them. It was the best way to maximize our chances of being able to offer [employees] their jobs come back at some point, ”said Christophe Hennebelle, vice president of human resources and corporate affairs at Transat, in an email to BNN Bloomberg.

Hennebelle added that the wage subsidy provides more financial support than the Canadian emergency response benefit and employment insurance. He also points out that Transat’s officers and directors have made a voluntary salary cut.

The wage subsidy is legislated by the Income Tax Act, so the Canada Revenue Agency will have its regular application tools to detect any fraudulent claims by businesses.

The federal government has also introduced a new, separate financial penalty of up to 225 percent of the money received and up to five years in prison for companies caught artificially cutting their earnings to qualify for the program. .

“The fact that the government is not actively and intensively monitoring at this time is because it wants to focus on the result by keeping people at work rather than going out into the field and tracking down the companies involved” said Bhardwaj.

“If there are outliers or bad actors, there will be a potential downside, but we will settle that on the other side of the equation when we get there.” “



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