On 17 March 2020, the government unveiled a $12.1 billion support package for the New Zealand economy in response to the economic downturn which is expected to be caused by the Covid-19 outbreak.
The support package originally included two types of subsidies for businesses: a wage subsidy and a sick leave subsidy. The sick leave subsidy was intended to subsidise the cost of providing sick leave to employees who were required to self-isolate under the Ministry of Health guidelines. This subsidy was revoked on 27 March 2020 after the government considered it was no longer appropriate after the country went into lockdown on 25 March 2020.
The following is an up to date explanation of the wage subsidy scheme after changes were introduced on 27 March 2020.
To support businesses who are impacted by Covid-19 and face having to make staff redundant or reduce their hours, the Government has announced a Covid-19 Wage Subsidy package. The Wage Subsidy is available to all employers, contractors, sole traders or self-employed workers who meet the required qualification. To qualify:
- The business must have suffered, or is projected to suffer, a 30% decline in revenue compared to any months between January and June the year prior and this must be due to Covid-19;
- the business must have taken active steps to mitigate the impact of Covid-19, for example, engaging with their banks or financial advisor.
- You must make best efforts to pay staff 80% of their normal income for the subsidised period. If this is not possible, it is acceptable for you to simply pass on the subsidy.
- If you have applied for the Wage Subsidy after 4pm on 27 March 2020 you must retain any staff member that you have requested the subsidy for. This means you cannot make an employee redundant for the duration of the wage subsidy scheme but must at a minimum continue to pass on the subsidy.
For eligible businesses, the Wage Subsidy will be paid at a flat rate of $585.80 per week available for all full-time workers (20 hours per week or more) or $350 per week for part-time workers for a 12 week period and is paid in one lump sum to the employer.
If an employee's usual wages are less than the wage subsidy, you are still allowed to apply for the subsidy for this employee but you are only required to pass on enough of the subsidy to meet the employee's usual wages. The rest of the subsidy can for utilised for wages of other affected employees.
The government has also clarified that the wage subsidy scheme does not change legal obligations for employers. Therefore, all employers are still required to consult with employees and endeavour to reach agreement with them before making any changes to an employees hours of work or wages. Similarly, employers cannot unilaterally require employees to take annual leave, employees must first agree to take annual leave.
Applying for Wage Subsidy
To apply for the wage subsidy scheme, employers will be required to complete a declaration form on the Work & Income New Zealand website declaring that they have met the criteria. Any false declaration will be treated as fraud.
For more information about the wage subsidy, including to access the declaration form, please follow the link below:
If you have any questions about the information contained in this article, please get in touch with us and our employment law specialists will be happy to assist.