Dealerships can expect big changes to the Canada Emergency Wage Subsidy (CEWS) program where eligibility and program duration are concerned.
The federal government proposal aims to eliminate the 30 per cent revenue drop threshold that garnered frustration among the business community, and is seeking to extend the program until December 19, according to a July 17 announcement from Finance Minister Bill Morneau.
“We are ensuring that Canadians are able to get back to work as quickly as possible,” said Morneau. “The adjustments we are proposing would ensure that the CEWS continues to address Canadians’ needs while also positioning them for growth as economies continue to gradually and safely reopen.”
Back in April the subsidy was increased from 10 per cent to 75 per cent of the first $58,700 normally earned by employees, equivalent to up to $847 per week. It was made available to eligible employers who suffered a decrease in gross revenues of at least 30 per cent in March, April or May, when compared to the same month in 2019.
The problem with the 30 per cent revenue drop eligibility was that, if revenues rose even slightly above the threshold, the business would no longer be eligible for the subsidy. That is an issue for dealers who are beginning to see increases in revenue, particularly in June as a number of dealerships have experienced a boost in their sales numbers.
“We know that the requirement that businesses have a 30 per cent reduction in revenue is not helpful in that regard,” said Morneau. “So what we are saying is that businesses will get the wage subsidy if they have had any reduction in revenue.”
The proposed changes seek to both broaden the reach of the program and avoid a potential “cliff effect” among businesses if the CEWS is eliminated without a gradual reduction in the revenue drop threshold, as some businesses have requested.
They can broaden the reach with the introduction of a base subsidy, which would be available to all eligible employers “that are experiencing a decline in revenues, with the subsidy amount varying depending on the scale of revenue decline,” said the federal government. In other words: a sliding scale approach. And the bigger the revenue decline for employers, the greater the subsidy may be.
The government is also proposing a top-up subsidy of up to 25 per cent, meant for employers that have been hit hardest by the pandemic. Changes to both the base and top-up subsidy would kick in July 5, 2020. More on that here.
The news was well received by the Canadian Automobile Dealers Association (CADA), who, along with its members, had entered into an intensive strategic lobbying effort to ensure the federal government delivered on the association’s key request: CEWS scaling.
“CADA has been in constant communication with senior political officials at Finance Canada to ensure that the extension would include critical changes to the 30 percent threshold (“cliff effect”),” said Tim Reuss, CADA President and CEO in a Linkedin post. “The new changes mean that there is no longer a 30 per cent revenue decline threshold. Dealers with any revenue declines will be able to access CEWS on a proportional sliding scale.”
A video of Bill Morneau’s announcement was published by CPAC on YouTube, and can be viewed here.
For more updates, visit: “Adapting the Canada Emergency Wage Subsidy to Protect Jobs and Promote Growth.”
