The federal government is extending the Canada Emergency Wage Subsidy (CEWS) program until the end of August after it was initially set to expire at the beginning of June. But the much-ballyhooed economic response measure has seen a lot less interest and engagement than the feds initially expected.
When the Canadian government set out to help the country’s economy absorb the devastating impact COVID-19 wrought upon it, many believed the CEWS would be the main program that Canadians would be receiving emergency benefits through. That hasn’t been the case. Take-up for the program has been well below what was expected from Justin Trudeau’s Liberal minority government, with more people accessing the Canada Emergency Response Benefit (CERB) instead. In our article this week, we’ll take a closer look at why that’s been the case courtesy of our small business accountant in Chestermere.
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Feds Extend Emergency Wage Subsidy
With the CEWS now set to run until the end of August, many people are curious to see whether the gradual return of businesses across the country will finally see the program utilized as intended. According to the latest numbers from the federal government, the $73 billion program has seen less than $4 billion in benefits paid out to 1.7 million workers. In contrast, as of June 1, the CERB has paid out $42 billion worth of benefits after processing more than 15 million applications. That’s $7 billion more than what was initially budgeted for the program.
Speed over scrutiny
One of the main reasons experts believe the CERB has been much more popular than the CEWS is the fact that the federal government has prioritized speed over scrutiny when it comes to doling out the benefit. In May it was made known that federal staffers tasked with processing applications were being instructed to ignore red flags and suspected fraud in favour of approving applications and getting money into people’s hands as soon as possible. Prime Minister Justin Trudeau has said they will “clean up after the fact.”
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Uncertainty, high threshold hamper CEWS
Compared to the simplistic and unscrutinized rollout of the CERB, the CEWS has been modified multiple times since it was unveiled, leaving businesses hoping to use it uncertain of what the parameters are or will be in the future. Initially a 10 per cent subsidy — which has now become its own entity — the CEWS covers 75 per cent of an employee’s pay up to a maximum of $847 per week, so long as the business using the subsidy has seen at least a 30 per cent decrease in its gross revenues in the months of April or May. That 30 per cent threshold has kept many businesses from using the CEWS, especially startups or younger companies who don’t have the financial history to determine if their revenues have dropped that much. That being said, the feds have confirmed they are considering whether they should lower the 30 per cent threshold in the near future.
LATEST DETAILS ON CANADA’S COVID-19 ECONOMIC RESPONSE PLAN
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Trouble hiring workers
A truly unintended consequence of the success of the CERB has manifested itself in the form of low-paying businesses having trouble hiring workers or bringing their previous ones back as things slowly resume. With people allowed to make up to $1,000 a month while still remaining eligible for the CERB, there are many out there who now have more money than they did working their old jobs. As the CERB is set to run until the end of October, that means a lot of people could simply choose to receive benefits for the foreseeable future instead of returning to work.
While the federal government succeeded in its plan to get money out fast to those who immediately needed it once COVID-19 shut down the economy in March, there are now a whole bunch of unexpected and unintended consequences for lawmakers to sort out in the coming months. Meanwhile, the CRA snitch line just opened up for people to report suspected fraudulent CERB or CEWS claims. Looks like that clean up is starting sooner than some may have thought.
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If you’re concerned about the state of your personal or business finances in light of the ongoing pandemic, book a free consultation with one of our trusted Chartered Professional Accountants today and let us help guide you through this uncertain economic time.
