Ask The Expert – Managing Layoffs and Government Subsidies

Managing Layoffs and Government Subsidies

By Deanna Lanoyway, People First HR Services

Employers that have encountered a slow-down or closure due to Covid-19 may already have been forced to implement layoffs. As the restrictions begin to lift and you are thinking of bringing your employees back, you may be trying to navigate the supports available.

If your reduction in business is somewhere between 10% and 29%, you have two options available. The first is the recently expanded workshare program. It is a federal program designed to help avoid layoffs when you have a temporary reduction in business that is beyond your control. If your employees are eligible for EI and agree to work a temporarily reduced work week while the business recovers, it may be an option.  Seasonal businesses and those less than 2 years old are not eligible. But the organization can be a private or publicly held company or a not-for-profit organization.

You can find more information on the Workshare program here

Your second option is the 10% Temporary Wage Subsidy (TWS), which provides the benefit by allowing you to reduce your remittances, so it assists a bit with cash flow while you get your employees and your business back up to speed. 

You can find more information on the Temporary Wage Subsidy here

For employers with more significant business reductions – over 30%, you may be eligible for the Canada Emergency Wage Subsidy (CEWS). For March 2020, employers need to be able to demonstrate a reduction of 15% in gross revenue, and for April on they need to be able to demonstrate a 30% reduction. The subsidy will be available for three months, retroactive until March 15.

Companies deemed eligible will need to reapply for the subsidy each month.  Employers will need to attest that they are doing “everything they can” to pay the remaining 25% of employee wages. The government wants employers that are financially able to provide the additional 25% to do so, but they recognize that many may not be able to. 

Your finance expert will want to spend some time with the application to make sure that you’re looking at your own specific circumstances. Charities and not-for-profits can either include or exclude revenue from government funding in their computation, but once they make that choice they have to continue the same approach for the 3 months. For people who own more than one business and they are related in the value chain – for example if you have one company selling raw materials to another, then you will need to take special steps in your calculations and applications. 

So deciding if you will bring your employees back on payroll, even if you have no work for them to do, is a decision that may require you to think about what’s best for your employees, how well you are positioned for cash flow, and how it can benefit your business.

Let’s Consider an Example…

A restaurant, with an 85% reduction in business due to offering only take-out and delivery.  Perhaps all servers and over half of the kitchen staff are not working, leaving you with just 4 employees. If all of your employees earn $15 an hour, and for simplicity we’ll say they are all full time, your employees’ typical month’s income from wages was, and is, $2600.00. If you apply for the subsidy and pay them their full wages, you may be reimbursed, if eligible, $1950 per full time employee. So your costs would be $650 per month, per employee to top up their wages, if you are financially able to pay them. Don’t forget to factor in the mandatory employer contributions to EI, CPP, Workers Compensation, etc. And of course, since this is a reimbursement program, you need to consider any costs of financing – should cash flow be a challenge right now. 

Since you are already open in a reduced capacity with 4 employees, you can apply for the 4 that are already keeping your business going – so that would be up to $7800 per month to help you support the employees that are still serving up your take-out and keeping you in your customer’s minds.

What about your employees? What is best for them in this scenario? If they’ve applied for and are receiving the Canadian Emergency Response Benefit (CERB), they get $2000 per month. Your subsidy, if that’s all you can afford to pay them, provides $1950. So in this case, what is best for your employees is likely whatever is best for you – because the very best scenario for them is that they have a job to return to, whether it’s now with a subsidy or later on without.

The Impact of Your Approach

One aspect of your decision making should be your culture, and the cost of hiring and training new staff. As HR professionals we know how hard it is to recruit, train, and keep employees with the right skill sets, and who fit your organization’s culture. The longer your employees are off, the harder it may be to keep them engaged and ready to come back at full efficiency. If you are not ready to bring back employees, or if you are looking at further layoffs, consider whether you can provide some support. Employees who have been furloughed during Covid-19 face all the normal challenges and emotions of job loss, even if it’s designed to be temporary, in addition to experiencing unprecedented uncertainty and stress. 

Employers who want to retain the investment they’ve made in their employees are looking for ways to keep them engaged and supported. Our online service, JobPause, is designed for individuals experiencing job and life changes. Built into the offering is emotional support, guidance on resiliency, and a mechanism for employers to encourage ongoing engagement with their staff … all from the safety of their own home.

Find out more about JobPause here

Our Expert

Deanna Lanoway

Vice President, Strategic HR Consulting