The Extended Canadian Emergency Wage Subsidy – A Controversial Opinion

It remains a puzzle regarding the relief provided by the federal government.  The CERB (Canadian Emergency Response Benefit) is scheduled to expire September 26, 2020.  This benefit was highly over-subscribed from the beginning in March.

Yet it created unintended consequences drawing employees away from their employers, which ultimately caused the government to present a more robust payroll subsidy CEWS (Canadian Emergency Wage Subsidy) to ensure employees remained connected to their employers rather than government largesse.

The throne speech has now extended the CEWS until the summer of 2021.  Here is an excerpt from the Globe & Mail, September 24, 2020:

Despite the changes, total payments under the program are lagging well behind the government’s projections. As of Sept. 20, those payments reached $37.44-billion – less than half the $82.3-billion cost forecast in the federal government’s limited fiscal update in July.

“It’s been a colossal flop,” said Jerry Dias, Unifor national president, who nevertheless welcomed the extension of the CEWS as “huge” for his union’s members in 20 of Canada’s largest economic sectors.”

If the programme has essentially been ineffective, it is for good reason.  Eligibility rules were certainly problematic, but the programme failed to consider a very important ingredient.  If revenues have dropped precipitously, then the likely need for fewer employees quickly followed.  There is no need for employees if there is no business-consider the entire tourism sector including hotels, airlines, restaurants, cruise lines, etc.

As every organization looks to reinvent itself trying to forecast best case/worst case scenarios into 2021, there is a very clear reality.  There will most likely be fewer employees on payroll.  Postponed decisions for permanent layoffs are already now coming home to roost. 

Here are some good reasons to consider making these decisions now.

  1. Severance costs will be booked against a year with already demonstrable poor results thereby starting the new fiscal year with a better chance of profitability in 2021;
  2. There is probably a renewed business plan with the remaining team “rightsized” and reinvigorated for success.  There has been expanded scope of work for some positions, as others have been eliminated;
  3. It is an act of kindness to permanently lay off someone who has no chance of returning to the position until later in 2021 (if at all) – in order for the employee to begin the search for alternate employment.

Where the continuation of the CEWS appears in theory to be a great idea to weather this pandemic storm, it is simply delaying the inevitable for so many employees until 2021 for the few companies that choose to take advantage of the programme.

Under any circumstances, organizations should be applauded where they have:

  • Produced a viable business plan for 2020/2021
  • Critically reviewed all positions in the company to right size to support the plan
  • Considered all recall preparations; home based work; temporary layoffs and permanent layoffs
  • Assessed the appropriate timing and venue to share the global vision for the coming year in an honest and forthright fashion
  • In the wake of the “state of the union” / Throne Speech address, have all the appropriate individual conversations with all employees.