‘Half of restaurants still at risk’: Small businesses warn Ottawa despite new hiring subsidy

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Feds expand Canada Workers Benefit to include nearly 1 million more workers
WATCH: Finance Minister Chrystia Freeland announced on Wednesday the expansion of the Canada Workers Benefit to include nearly one million more low-income workers who didn’t previously qualify for the program. – Jun 30, 2021

Ottawa announced the rollout of a new hiring subsidy for businesses on Wednesday after the budget bill received royal assent late Tuesday evening.

The new Canada Recovery Hiring Program (CRHP) is meant to gradually take the baton from the Canada Emergency Wage Subsidy (CEWS) program as the economic recovery from COVID-19 takes hold in Canada amid soaring vaccination rates. While the CEWS is meant to help businesses avoid layoffs or re-hire staff by covering a portion of employees’ wages, the CRHP will cover part of employers’ added expenses as they boost their payroll to take on new hires or increase pay for employees.

The hiring subsidy is expected to make it easier for pandemic-battered businesses to quickly ramp up operations and staffing as COVID-19 restrictions lift despite months of reduced revenues.

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But small business groups warn the federal government’s current timeline for phasing out other pandemic-era supports for businesses like the CEWS and the rent subsidy is too optimistic. Like the wage subsidy, the Canada Emergency Rent Subsidy (CERS), which helps businesses affected by COVID-19 pay their rent or mortgage, is currently set to end on Sept. 25.

That’s far too soon says Olivier Bourbeau of Restaurants Canada.

“It will take an average restaurant around 12 months just to go back to profitability,” he says.

So far, one in 10 restaurants across Canada has closed permanently during the pandemic. As things stand, “half of … restaurants are still at risk,” he says.

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Corinne Pohlmann, senior vice president of national affairs at the Canadian Federation of Independent Business has similar feedback.

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“With economies like Ontario still far from being fully reopened and the borders still essentially being closed, starting to scale back on these subsidies in July and eliminating them by September is too soon,” Pohlmann told Global News via email.

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The CFIB is calling for subsidies to remain at current levels for a few more months and for them to be extended beyond September.

Bourbeau says Restaurants Canada would like to see current supports stay in place for the food service industry until April 2022.

Restaurants across Canada are generally operating at 50 per cent capacity, he notes. Even with increased consumer spending, they likely won’t be able to make more than 50-60 per cent of their normal revenue, he adds.

And that’s not to mention the debt load many small businesses have accumulated during the pandemic as they tried to keep the lights on while operating under COVID-19 restrictions, both business groups say.

Small businesses now have taken on an average of more than $160,000 in debt because of the pandemic, according to CFIB figures.

“We believe that this will be one of the biggest hurdles for small businesses as we go through the economic recovery from the pandemic,” Pohlmann said. “It is a significant weight for many of them to overcome and is another reason why we would like the government to extend the subsidies.”

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The budget legislation allows Ottawa to extend the wage and rent subsidies until Nov. 30, 2021, an option Finance Minister Chrystia Freeland said the federal government will consider if necessary.

“In the U.S., we have seen that reopening. It’s not like turning the lights back on at home. It might take a while,” the minister said speaking in French on Wednesday. “So the government still has all options still open to it.”

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But growing speculation about a possible summer or fall federal election has raised questions about the potential renewal of the subsidy programs and whether their fate will play a role in any campaign messaging by the governing Liberals.

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Still, Freeland added she is “optimistic” that Canada’s recovery through July, August and September “will be a strong one.”

Both Restaurants Canada and the Canadian Federation of Independent Business supported the creation of a hiring benefit. CFIB president Dan Kelly has called the program “a powerful tool to help small firms bring back their staff” as the economy transitions to the recovery phase of the pandemic.

Businesses will be able to choose between the two subsidies for a period time, with CEWS support gradually declining and eventually ending in September. The CHRP subsidy also decreases over time until the program’s expiry in November.

The hiring subsidy may help employers in food service attract new hires after many workers in the industry moved to other sectors as restrictions and lockdowns kept restaurants closed or open at reduced capacity for months at a time during the pandemic, Bourbeau says.

Jobs postings in the food service sector on Indeed Canada were 37 per cent above their pre-pandemic level in mid-July as restaurants reopened across Canada with demand for workers especially high in Western Canada and Quebec, the job search site noted in a report this week.

And restaurants, which have been hardest hit by the pandemic along with the tourism and accommodation sector, are seeking to rebuild their staff at a time when the demand for workers from employers in other corners of the economy is already strong, notes Indeed Canada senior economist Brendon Bernard.

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But Bernard says it remains to be seen how the eventual end of the wage subsidy program will affect restaurants’ ability to keep hiring or even stay in business.

“Some restaurants that have stayed open but are struggling might start to exit the industry and close permanently as government support is pulled back,” he says.

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