Federal wage subsidy to be extended until December, says Trudeau

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OTTAWA – The federal government is extending its wage subsidy program for businesses hard hit by the COVID-19 pandemic for the second time, this time until at least December.

But the government is warned that it may have to move the end date to 2021.

The program is at the heart of the Liberals’ promise to help Canadians return to work, albeit at a slower rate, as the pandemic subsides.

Speaking outside his residence in Ottawa, Prime Minister Justin Trudeau announced the extension to provide “more certainty and support for businesses as we restart the economy.”

Trudeau did not explain how the government would reshape the program’s eligibility rules, which critics say prevent some employers from getting the help they need.

He promised more details in the coming days.

While some companies are back open with the relaxation of restrictions, other parts of the economy are still reeling from the effects of COVID-19.

Some sectors will only start in the fall or even winter and will need help until next year, said Ross Laver, senior vice-president of strategy at the Business Council of Canada. He cited airlines as an example where rehiring can be slow.

“I don’t think anyone expects these industries that have been hit really hard, that everything will be fine by December 31,” he said.

“We have to keep in mind that some of them are going to need help for a long time.”

The wage subsidy was scheduled to expire the first week of June, but the Liberals announced an extension until the end of August in mid-May.

The government has not yet shared the eligibility criteria for July.

Dan Kelly, President of the Canadian Federation of Independent Business, said the extension would be welcomed by many small businesses who have seen costs come back faster than revenues.

He also stressed the need for eligibility rules to understand how to qualify.

“Not a single employer in Canada knows if they are eligible for the July wage subsidy and we are in mid-July. So they have to do a lot better, ”said Kelly.

“It sounds great to have an ad to expand the grant, but companies to use it really need to understand if they would be eligible and what the rules are.”

The program covers 75 percent of salaries, up to a weekly maximum of $ 847, for eligible businesses and non-profit organizations. Businesses must post a 30% drop in revenue, a cliff that can discourage businesses from growing, lest they suddenly find themselves cut off from federal aid.

“You don’t want people to think that you cross the threshold and then automatically lose,” said Hassan Yussuff, President of the Canadian Labor Congress.

Yussuff also said the extension would bring some stability to the reopening phases and likely reinforce the job gains seen in May and June.

Finance Minister Bill Morneau last week alluded to changes to income cutoffs when he talked about reducing the “disincentives to grow” in the program.

Kelly said the government could consider a graduated approach with lower subsidies at lower income loss levels, or drop the requirement altogether, which would give employers the confidence to rehire more quickly, said Kelly.

Liberals originally viewed wage subsidy as key tool to help cushion COVID-19’s economic blow by helping workers stay connected to employers so businesses can get back to normal quickly after lockouts lifted.

Spending on the program was less than expected, with $ 18 billion paid to 252,370 businesses as of July 6.

Instead, the program budget has been cut as more workers have access to the Canadian Emergency Allowance (CERB) for those who have lost their jobs or almost lost their hours.

The benefit of $ 500 per week had, as of July 5, paid nearly $ 54.8 billion to 8.25 million people.

The budget for this program is now $ 80 billion, but it is scheduled to end in the fall. Yussuff said the government will release details soon on how unemployed workers will transition to the EI system, which has been largely supplanted by CERB.

The government’s budgetary and economic “snapshot” last week pushed the cost of the wage subsidy program down to $ 82.3 billion from $ 45 billion, signaling imminent changes.

Perrin Beatty, President of the Canadian Chamber of Commerce, said the changes to the wage subsidy “must encourage Canadians to leave the CERB” and “create a positive incentive to return to work”.

The July 8 tax update noted that small employers account for the largest share of approved wage subsidy applications, with the largest number of employees covered in manufacturing, accommodation and food services.

The “snapshot” also stated that men may be “slightly more likely” to be covered than women, although there are no reliable figures to rely on.

This report from The Canadian Press was first published on July 13, 2020.

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