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Ottawa hikes wage subsidy to 75% for small and medium-sized businesses

Prime Minister Justin Trudeau addresses Canadians on the COVID-19 pandemic from Rideau Cottage in Ottawa, Canada, Thursday, March 26, 2020. The new coronavirus causes mild or moderate symptoms for most people, but for some, especially older adults and people with existing health problems, it can cause more severe illness or death. (Sean Kilpatrick/The Canadian Press via AP)

The federal government is hiking its wage subsidy for small and medium-sized businesses to 75 per cent, a move aimed at helping businesses deal with the severe economic fallout of the coronavirus pandemic.

Prime Minister Justin Trudeau announced the increased payroll subsidy – something that business leaders have been calling for for days – as well several additional measures to support small businesses on Friday.

“With these new measures, our hope is that employers who are being pushed towards laying off people because of COVID-19 will think again,” Prime Minister Justin Trudeau said.

“For those of you who’ve already had to lay off workers, we hope you will consider rehiring them given this payroll support.”

Under Ottawa’s original $82 billion support package that was unveiled last week, small businesses could receive a 10 per cent wage subsidy for 90 days, up to a maximum of $1,375 per employee and $25,000 per employer.

While the subsidy rate has increased, it is unclear whether the cap will change, or how long the subsidy will apply for. Trudeau said the government will have more details to come on the small business measures “hopefully by Monday.”

The 75 per cent subsidy will be retroactive, and apply as of Sunday March 15.

Many businesses and industry groups had criticized the government’s initial 10 per cent subsidy, saying it fell significantly short of providing assistance to small businesses that are struggling across the country.

Dan Kelly, the chief executive of the Canadian Federation of Independent Business (CFIB), said Friday that the payroll subsidy increase will save jobs.

“I’ve already heard from some small businesses who report they will rehire laid off workers to keep them on payroll,” Kelly said on Twitter.

“This is significant.”

However, Kelly noted that many questions remain regarding the subsidy changes, including ones that pertain to what type of businesses qualify, and whether there is a cap per employee and per employer.

The government also announced that it will launch a “Canada Emergency Business Account”, which will allow banks to offer $40,000 loans that are guaranteed by the government to qualifying businesses. The loan will be interest-free for the first year and, if certain conditions are met, $10,000 of that loan will be forgivable.

Trudeau also said the government will provide an additional $12.5 billion to Export Development Canada and the Business Development Bank to help SMEs with operational cash flow requirements. GST and HST payments, as well as duties and taxes owed on imports, will be deferred until June.

“This is the equivalent of giving $30 billion in interest-free loans to businesses,” Trudeau said.

Charles Fallon, president of LIDD Supply Management Consultants in Montreal, said the increased subsidy will be “extremely helpful” for businesses that were considering laying off employees, as the 10 per cent subsidy was inadequate.

“The key will be to execute this action swiftly and avoid the issues currently faced by the unemployed in accessing the EI program,” Fallon said.

“If they can achieve that, it will be significantly helpful. If they cannot execute swiftly, i.e. next week, then this will be more headline than help.”

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