Thumbs-up from CFIB for Ottawa’s COVID-19 wage subsidy

The subsidies ‘will maintain the link between the employer and the employee,’ says Canadian Federation of Independent Business

Martin C. Barry

Despite the fact some small and medium-size businesses across the country remain dissatisfied with Ottawa’s subsidy package for employers and employees impacted by the COVID-19 crisis, the Canadian Federation of Independent Business is giving an overall thumbs-up to the federal government for its efforts.

The CFIB issued a statement last week praising the Liberal government for the emergency measure to bolster the country’s economy during the economic pandemonium taking place as COVID-19 continues to keep businesses closed and workers home.

Bar set at 30 per cent

While the CFIB isn’t being overly critical, it did point out that the main criteria for businesses to qualify for federal assistance is that they must have suffered at least a 30 per cent drop in revenue compared to the previous year because of the COVID-19 crisis.

The Canadian Federation of Independent Business’ senior policy analyst Gopinath Jeyabalaratnam says the lobby group is pleased overall with Ottawa’s COVID-19 wage subsidies, although they still have some reservations.

For this reason, the lobby group is urging Ottawa to drop the qualifying condition for businesses that have fewer than 500 employees, as well as those which are currently being obliged to remain partly or completely closed by provincial authorities.

Still some not happy

Although most business owners are happy with the government’s offer to cover 75 per cent of lost wages, a segment of the business community finds the 30 per cent rule problematic, according to Gopinath Jeyabalaratnam, the CFIB’s senior policy analyst.

“Where we and others see a problem is on the criteria of 30 per cent loss that qualifying businesses will have to prove,” he said in an interview with Newsfirst Multimedia. “And that is indeed a problem because it will in time discriminate against many businesses we believe.”

CFIB sees discrimination

Despite this, he said the response by the CFIB to Ottawa’s move is generally positive because the organization hopes to persuade the federal government to change the rule. “The program has to go to parliament and has to become a law before being adopted. So we still hope that we can nudge the government in the good direction so that they correct the program in order to discriminate less.”

Jeyabalaratnam cited several examples of small and medium-size businesses that will not be able to benefit from the federal government’s salary subsidies with the current rules in place.

Startup businesses

“A lot of small and medium businesses will have to prove for the month of March, April, May and June that they have had a 30 per cent loss in comparison to those same months last year,” he said.

“But how would that be possible for a new business that has a startup debt and that has been functioning only since June or July last year maybe? So they would not be able to prove that.”

Another example he gave involves seasonal businesses. “Hotels or other businesses in the touristic domain must make money during summer,” said Jeyabalaratnam.

Bias against tourism

“But summer is not yet here, and so they won’t be able to prove they had a 30 per cent loss because the high season isn’t here. So we are concerned that they also will be discriminated against by the measures.”

Despite these shortcomings, Jeyabalaratnam said the CFIB looked upon the federal government’s wage subsidy as good news. “We’d been asking for that for several weeks,” he said, maintaining that the CFIB was the first interest group in Canada to suggest the subsidy program as a way of reviving the country’s economy during a post-COVID-19 recovery phase.

Employer/employee link

“It will maintain the link between the employer and the employee,” he continued. “And that will be very important when the economy will be starting up and resuming its activities. If businesses don’t have employees on the payroll, they won’t be able to start their activities. So maintaining the link is very important and the subsidy helps to do this.”

He said the subsidy program will also be helping businesses that are currently closed or are suffering from reduced activities to pay salaries until the COVID-19 crisis recedes and the economy returns to a normal pace.

Last week, the CFIB reacted favourably to changes announced on April 8 to the wage subsidy program by the federal government.

To access the subsidy in March, April and May 2020, a firm will be able to compare their sales to the same month last year or January and February, 2020. This will help new and growing firms who may not have qualified based on a comparison to 2019.

The federal government will also now require firms to demonstrate only a 15 per cent reduction in gross revenues for March. A 30 per cent reduction will still be required to receive the subsidy in April and May.

Some businesses reported that their regular accrual accounting method would mean their books would not show a loss of 30 per cent, despite a deep effect on cash flow. Now the government is proposing to allow an option to use cash accounting.

Martin C. Barry, Local Journalism Initiative Reporter for the Laval News,