Federal payroll test expansion offers relief to small business, though gaps still remain

Small businesses in St. Albert welcomed news of the Canadian government's expansion of the payroll test for the Canada Emergency Business Account (CEBA) on Thursday, though there is still more work to be done. 

Prime Minister Justin Trudeau announced changes to requirements for the $40,000 loan on April 16 after hearing outcry from small businesses across the country that weren't able to meet the original payroll test threshold. 

Originally, the payroll test required businesses to prove they paid between $50,000 and $1 million in payroll in 2019 in order to be eligible for the loan. On Thursday, Trudeau said the government has modified that test to require proof of payroll between $20,000 and $1.5 million.

"No one should feel as if they are alone in this fight. Our government is here to help you through these challenging times. So when we hear the program is not reaching as many people as it should, we make changes," Trudeau said. 

In addition, Trudeau said the federal government is planning to introduce a commercial rent assistance program, though details have yet to be announced. 

David Niebach, owner of Herc's Nutrition, said while he was glad to hear the news, the lower $20,000 limit still prevents the small new business from being eligible. The store's application was denied on April 16. The vitamins and supplement store opened last November.  

"It's hopeful news – unfortunately it won't solve our problem," he said. "I did the calculation and we would have had to have five full-time employees, or 10 part-time employees in November and December to get to that $20,000 limit.

"For a little store, we wouldn't have had five full-time employees. We'd be tripping over each other." 

• RELATED: Federal payroll test shuts out small businesses from COVID-19 loan

Niebach said having a payroll test in the first place still doesn't make sense. As a small business owner and an accountant, he estimated the test was put in place so the federal government could estimate how much it was going to spend on the loan program. 

"In my calculation, $20,000 worth of payroll is at least 1,000 hours at minimum wage. Any business that is small, open only for the later part of 2019 or even opened in 2020 is still not eligible.

"I don't know why we're now establishing all these arbitrary thresholds in a time of crisis when we've always gone on the honour system. There will be audits later, and we will reconcile when we get there."

Niebach suggested if the payroll test was put in place to prevent single contractors working from home from accessing the loan, why not use the same process and mechanisms contemplated for the commercial rent assistance program and apply it to the CEBA instead? 

"If they're contemplating a mechanism where you can prove that you're paying rent, well then just use the same mechanism. Don't reinvent the wheel by making arbitrary thresholds," he said. 

Jessica Robertson, owner of Viva Tan Beauty Boutique, said her small salon should now qualify underneath the new payroll targets. If she did not qualify for the loan, the salon would have faced bankruptcy in a matter of months. 

"My stress level today is so much lower," Robertson said.

She said the $40,000 loan will allow her to pay for rent and amalgamate her credit cards to lower her interest payments. 

 "At least with that $40,000 loan, it'll be a lower payment than if I was paying for those credit cards. This will actually save my butt."

Being able to afford monthly rent still remains a top priority, and Robertson said she will be waiting to hear more details on the federal government's upcoming commercial rent assistance program, but small businesses like hers should not feel punished because of the pandemic. 

"Am I in debt because of things I did? Absolutely. I built my business and it needed to be done. I took on that debt," she said. 

"But this? This is not my fault. I don't have an income because of COVID-19, and the government shutting everything down. I shouldn't be penalized for it, and I feel like I am being penalized. But at least that money saves my business – well, for like four months."

Local advocacy paying off

Ken Kobly, Alberta Chambers of Commerce president and CEO, said the expansion on the payroll threshold is a sign their advocacy efforts are working.

Red flags surrounding the payroll test were initially brought up by Niebach to the St. Albert Chamber of Commerce, he said, where discussions were brought through to the provincial and national Chambers, and finally to the federal government.  

"We had real effect today on the Government of Canada, and we'd like to see more changes to that program," Kobly said.

He said the Alberta Chambers are still advocating for the elimination of the payroll test entirely. Small business owners who pay their own wages in dividends rather than taking a salary are also left out of eligibility criteria.

"When you set a limit, either upper or lower, there's always going to be people who fall just outside of that parameter," he said. 

On Tuesday, the Alberta Chambers of Commerce launched an online survey to gather feedback to help policymakers understand the most pressing impacts, and what measures they can enact to provide the greatest relief.