Trudeau Bends to Pressure, Changes Rules on 75% Pay Subsidy
Canada to Loosen Wage Subsidy Qualification Rules
(Bloomberg) -- The Canadian government will make it easier for companies to qualify for a wage subsidy program aimed at companies hit by the coronavirus after business groups said the rules were too restrictive.
Prime Minister Justin Trudeau said changes will include lowering the threshold of revenue loss a company must meet to qualify. The subsidy pay as much as 75% of a worker’s wages, capped at C$847 a week.
The government will also change calculation rules to allow new firms to receive benefits. Previously, only companies in business for at least a year could qualify.
Trudeau’s government has been under pressure to make the changes and broaden the universe of companies that can receive money. A survey by the Canadian Federation of Independent Business earlier this week found only 29% of business owners were confident the wage subsidy would help them avoid further layoffs.
At C$71 billion ($50 billion), the wage subsidy has become the government’s flagship fiscal program to counter the impact of the pandemic -- representing about 70% of direct stimulus spending.
The government is making three changes to the program:
- To qualify, companies need to show a 15% reduction in gross revenues for March. Previously, the threshold had been a 30% loss. The threshold will be 30% in April and May
- A firm can now use revenue from January and February as a base of comparison, if it chooses. Previously, only year-over-year comparisons were allowed. This will help new firms
- The government will allow the option to use cash accounting, instead of accrual accounting
“Based on our early review of these changes, we believe that thousands of additional small businesses will be able to access this program,” CFIB President Dan Kelly said in a statement.
Finance Minister Bill Morneau provided more details of the changes at a press conference Wednesday afternoon. It’s the third time the program has been adjusted. Initially, the plan was to give a 10% subsidy and only to small businesses. The new rules introduced Wednesday will increase the cost of the subsidy by C$2 billion to C$73 billion, said Morneau.
Air Canada said it will use the program for 36,000 Canadian employees, nearly half of whom were furloughed last week.
Small businesses will also be able to apply for C$25 billion in loans through the Canada Emergency Business Account, which provides companies C$40,000 in interest-free loans. Banks are preparing for an onslaught of applications for the fund, which will be rolled out by mid April.
©2020 Bloomberg L.P.