Vast majority of tech CEOs say firms don’t qualify for wage subsidy: survey

Tech industry group urges federal government to rethink eligibility of 75 per cent COVID-19 wage-subsidy program

Business in Vancouver
April 7, 2020

bardel entertainment
Workers at Bardel Entertainment, Inc. Photo: Submitted

When Ottawa revised its COVID-19 wage-subsidy program in late March, expanding eligibility from small businesses only to large corporations and non-profits alike, throngs of organizations were suddenly poised to get 75 per cent of employees’ salaries covered.

But not so for the tech sector, according to the Canadian Council of Innovators (CCI).

Survey results released April 6 reveal 94 per cent of the 651 tech CEOs canvassed say their companies are not eligible for the wage-subsidy program, based on current criteria.

That leaves as many as 39,000 information and communications technology in the lurch, according to the CCI’s estimates.

The Canada Emergency Wage Subsidy (CEWS) is currently available to businesses, non-profits and charitable organizations that have demonstrated a 30 per cent decline in revenue compared with the same month a year earlier.

But the CCI said most tech CEOs don’t measure a decrease in business activity by such revenue loss.

“This measurement is only appropriate for a small number of static, traditional businesses, and is not appropriate for high-growth firms in Canada’s technology sector or SMEs that experience monthly recurring revenue,” the CCI stated in its report.

Alternative measures recommended

Instead, the council is recommending government consider tech companies’ declines in billable hours, units shipped, gross bookings and subscription revenue.

“It is not always reasonable to expect SMEs to have monthly income statements that report sales, as sales in most cases is not the right metric to determine a business’s growth or business activity,” the CCI stated.

The council is also urging Ottawa to accelerate the deployment of funds and hand off decision-making on who qualifies from the Canada Revenue Agency to financial institutions.

The survey, which was conducted April 1-4, found that 40 per cent of respondents have already had to lay off employees since the beginning of the pandemic, while 82 per cent of total respondents plan cut jobs in the coming weeks.

“Gaps in current approach”

The B.C. Tech Association is also calling for the CEWS to be retooled, noting there are a “few gaps in the current approach.”

The West Coast industry group recommends changing the wage subsidy criteria so that it applies to a company that can demonstrate 30 per cent revenue declines or else apply to a “qualifying” small company.

As for fast-growth companies, the association is recommending the government allows month-to-month comparisons rather than annual comparisons in revenue.

Many software-as-a-service (SaaS) companies that sell on an annual subscription basis spread revenue to comply with accounting rules.

“Which in normal circumstances gives a true picture, but not in the environment we’re in today,” BC Tech said in a statement.

BC Tech CEO Jill Tipping said the government is aware of those gaps and her organization is hopeful future announcements will address those concerns.

Copyright © Western Investor

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