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Today, Prime Minister Justin Trudeau announced that the wage subsidy of up to 75% is accessible to businesses of all sizes with the number of workers employed not being a factor. This a change from last week’s announcement that the subsidy was only applicable for SMBs and an earlier announcement that it would only cover 10% of wages.
To qualify, a business must have seen a decrease in revenue of at least 30% in March, April or May, when compared to the same month in 2019. Non-profits and charities are also eligible for the subsidy.
Will this program be helpful to tech companies?
Overall, it is still unclear to what extent the program will help companies in the tech sector. For businesses that are shuttered, it certainly won’t help as they do not have the ability to open back. For tech companies, there are some that will be able to benefit from this program, and, in combination with the other government incentives, make it through this phase.
For SaaS companies that are charging on a monthly or quarterly basis, it may be very challenging to show the downturn in revenue to qualify. It is also very possible that businesses that have been increasing their month-over-month revenue will not qualify for the program and may therefore have to reduce their headcount to cut costs.
What does the subsidy cover?
The 75% applies to the first $58,700 of salary. This means the maximum amount of the subsidy is $847 per week. How the exact amounts will be calculated and whether the subsidy will come as payroll deduction or a cheque from the government is yet to be revealed. The PM was clear that the subsidy is intended to go directly to affected employees “This is about making sure people still get paid,” said Trudeau. The government is urging businesses to “do the right thing” and top up the subsidy. Details of the program will be announced tomorrow by the Ministers of Finance and Small Business. Among the details that could be announced tomorrow are how to apply for the subsidy and how it will be administered.
When will the subsidy be rolled out?
We don’t have a specific date for when the subsidy will be rolled out yet, but Trudeau said it would be “soon”.
Will the subsidy have an effect on SR&ED?
It is still not clear how this will affect SR&ED. Under normal circumstances, we would assume that the total compensation for SR&ED-eligible employees can only be claimed if other government funding is not compensating these individuals. However, in exceptional times, the government may allow companies to claim SR&ED even if the employee’s salary is being supported by the Canadian Employment Wage Subsidy.
As founder, what should I do now?
Our advice is still to conserve cash, reduce burn and focus on profitability rather than growth until you have a clearer picture of what government support will be available to your company.
Overall, the government seems to understand that cash flow is very important and I expect they will be using the CRA to inject funds into the payroll account. Our advice is to have your direct deposit information complete so that any refund in your payroll account can go directly to your bank account.