This is a difficult time for employers and employees. It is important to remember that employment law and your obligations have not stopped because of the current Level 4 lockdown.
When considering restructuring, redundancies or changing an employees pay (such as reducing it to 80%), it is important to remember you have a duty of consultation and a duty of good faith.
While consultation will look different in the current lockdown environment, that doesn’t mean it doesn’t need to happen at all.
If you have queries about your obligations, or where to from here please contact one of our employment team:
Thomas Nation 027 463 5134 | thomas@timpanywalton.co.nz
We have been updating this page as changes come in to play, we’ll try our best to stay up to date with developments. This information is current as at 20 August 2021.
Government Support
This is a unique situation that continues to change very rapidly. The Government has previously released details around both the Wage Subsidy Scheme and the Resurgence Support Payment and we have outlined below the current regulations and guidelines around both schemes from information the Government has made available to date.
If you have any queries regarding which scheme is more appropriate for you and your business then we are here to help.
Wage Subsidy Scheme
The Wage Subsidy Scheme is available nationally to eligible employers who have had or who expect a loss of 40% of revenue over the period 17 August to 30 August 2021 as a result of the Alert Level increase announced on 17 August 2021 and helps eligible businesses keep paying staff with a view of protecting those jobs.
The Wage Subsidy Scheme requires you to prepare and retain evidence to support your declaration, such as records that demonstrate how the decline in your revenue was attributable to the move to Alert Level 4 on 17 August. Prior to making the declaration, you must have taken active steps to mitigate the impact of the move to Alert Level 4 on 17 August on your business activities.
Applications for the scheme opened on 9am Friday 20 August 2021 with the first payments usually available after three days.
The Wage Subsidy applies to all New Zealand employers, contractors, sole traders, self-employed people, incorporated societies, NGOS, post-settlement governance entities and registered charities. Businesses can now apply for a wage subsidy for all your staff.
Full information on the Wage Subsidy can be found here: https://www.workandincome.govt.nz/covid-19/wage-subsidy/index.html
Who qualifies?
In previous applications to qualify a business had to show that it is registered and operating in New Zealand and that:
- the employees are legally working in New Zealand;
- the employees have not been given notice of redundancy, at the date of your application;
- the business must have experienced a minimum 40% decline in actual or predicted revenue over the period of a month when compared with the same month last year, and that decline is related to COVID-19;
- the business has taken active steps to mitigate the impact of COVID-19; and
- the best efforts are being made to retain employees and pay them a minimum of 80% of their normal income for the subsidised period.
As an employer you are required to complete a declaration, this will be available on the work and income website – https://www.workandincome.govt.nz/online-services/covid-19/declaration-wage-subsidy.html
It is important that you read this declaration at the time you apply for the scheme and ensure that you meet all the current requirements. The 17 August declaration varies in content from the March 2020 declaration.
The declaration for the 17 August 2021 lockdown outlines that applicants acknowledge that the granting of the Wage Subsidy application and receipt of the subsidy does not override your existing obligations under employment law, including (but not limited to) the Employment Relations Act 2000, Minimum Wage Act 1983, Holidays Act 2003 and Health and Safety at Work Act 2015.
Specifically the declaration states “[8] It is unlawful for you to unilaterally vary an employment agreement to reduce an employee’s wages or salary in order to receive the subsidy, without the agreement from the employee. You must continue to comply with your obligations as an employer including under the Employment Relations Act 2000.”
As an applicant for the Wage Subsidy you declare you will not make any changes to your obligations under any employment agreement, including rates of pay, hours of work and leave entitlements, without the written agreement of the relevant employee.
You further declare you will not unlawfully compel or require any of the named employees to use their leave entitlements for the period you receive the subsidy in respect of those employees. You remain responsible for paying the ordinary wages of and salary of the named employees.
Employees can agree to reduce their wages, or top up their pay with their holiday pay but this must be done in consultation with employees, rather than simply being told that it will happen. If you’re unsure of how to go about this, please get in touch.
How much can you get?
The Wage Subsidy Scheme has increased to reflect the increase in wage costs since the scheme was first used in March 2020. The Wage Subsidy will be paid at a flat rate of $600.00 for a person working 20 hours or more per week, and $359.00 for a person working less than 20 hours per week.
The subsidy is paid as a lump sum and covers an employee for 2 weeks. This payment must be used to pay employees during this period.
How much do I need to pay employees?
Employers need to use their best endeavors to pay at least 80% of an employee’s ordinary wages or salary. At the least, employees need to be paid the full amount of the subsidy, unless their ordinary pay is less than the subsidy amount.
Ordinary wages or salary are specified in the employee’s employment agreement.
Resurgence Support Payment
The Resurgence Support Payment is a payment to help support businesses or organisations with one-off costs due to an Alert Level increase to level 2 or higher. This is available to eligible firms at the same time as the Wage Subsidy Scheme.
Who qualifies?
- Applicants must have experienced a decrease of revenue or capital-raising ability of at least 30% due to the increase in alert level. (If the applicant is part of a commonly owned group this 30% decrease also needs to be satisfied across the group as a whole.)
- Businesses and organisations (including sole traders) must have been in business for at least 6 months.
- The business or organisation must be considered viable and ongoing.
- Charities and not-for-profit organisations may be entitled to the Resurgence Support Payment, provided they meet the other eligibility requirements.
- State sector organisations are excluded from the Resurgence Support Payment, but can apply to the Minister of Finance for an exemption to apply for the scheme.
- Income that is received passively – such as interest and dividends, and all forms of residential and commercial rent – is excluded from the measurement of revenue.
- Your business must be physically present in New Zealand.
- Applicants must be 18 years or older.
- Businesses and organisations (including sole traders) must have a New Zealand Business Number.
How much can you get?
The Resurgence Support Payment is available if firms incur a loss of 30% of revenue as a result of the Alert Level increase. The Resurgence Support Payment is worth up to $1,500.00 plus $400.00 per full-time equivalent employee, up to a maximum of 50 full-time employees (so up to a total of $21,500.00).
It is possible that the Government may decide to activate the Resurgence Support Payment multiple times if there are multiple alert level increases from level 1. Businesses and organisations can apply for the Resurgence Support Payment each time that it is activated, as long as they meet the eligibility criteria.
Other existing support for individuals include the Leave Support Scheme and the Short Term Absence Payment.
Leave Support Scheme
The Leave Support Scheme provides a two-week lump sum payment of either $585.50 per week for full-time workers, or $350.00 per week for part-time workers, who must self-isolate and cannot work from home.
Short Term Absence Payment
The Short Term Absence Payment provides a one-off (once per 30 days) $350.00 payment for workers who must miss work due to a COVID-19 test and cannot work from home.
Common questions
What about tax?
The employer doesn’t have to pay GST or tax on the wage subsidy. It is exempt from GST, and classified as “excluded income” for tax purposes. Your employee will need to pay tax on their wage subsidy payment as it’s paid to them as part of their normal wages. This means it’s subject to the usual deductions, eg, PAYE, Student Loan, KiwiSaver, ACC, etc.
Some of my employees hours fluctuate week to week; therefore, their income is not consistent. How do I determine their “normal income” for the purpose of fulfilling my obligations as an employer under the wage subsidy?
If you have been granted a wage subsidy, employees are obliged to use their “best endeavours” to retain your employees (to which the subsidy applies) on at least 80% of their “ordinary wages or salary” for 2 weeks (the period of the subsidy).
Ordinary wages or salary means:
- in relation to a named employee, the ordinary wages or salary as specified in the employee’s employment agreement or in accordance with relevant statutory obligations as at the date you apply for this subsidy; or
- in relation to you if you are a sole trader or self-employed person, the weekly amount that you regularly pay yourself as at the date you apply for this subsidy
As an employer, what happens if I make my employee redundant during this time?
You need to try your best to retain your employees you are currently receiving the COVID-19 Wage Subsidy for. It will be extremely difficult to justify a redundancy during the subsidy period. You should contact us for advice before doing so.
What do I do if the subsidy is higher than what I usually pay my employee?
If your employee’s usual wages are less than the subsidy, you must pay them their usual wages. Any difference should be used for the wages of other affected staff – the wage subsidy is designed to keep your employees connected to you.
Some of my employees are essential services and will work limited hours during the close down, can I still claim the subsidy?
Yes, the threshold for claiming the subsidy is the reduction in actual/projected business. You should therefore claim the subsidy for all your staff (provided you make best endeavours to retain them and top them up to 80%).
You can apply for the subsidy multiple times but you can only apply for each employee once.
Can I reduce my employee’s wages/salary down to 80% if I am receiving the Wage Subsidy?
You can only make alterations to an employee’s wage or salary with their agreement or by going through a consultation process with staff. You should not unilaterally reduce the wages/salary of an employee.
It is important to note that while a requirement of the Wage Subsidy Scheme’s declaration is to use your best endeavours to pay at least 80 per cent of each named employee’s ordinary wages or salary, it does not mean that you can negate your obligations under employment law and point to the wage subsidy as a reason for reducing the employee’s wages/salary without their agreement.
What obligations do I have to my staff during Alert Level 4 who are working from home?
If your employees are working from home, they should remain on full pay. If there is a business need to reduce hours of work/wages during the lockdown period, this must be done by way of consultation.
If you have been granted a wage subsidy for these employees, there is an obligation on you as an employer to use your “best endeavours” to retain your employees (to which the subsidy applies) on at least 80% of their “normal income” for 12 weeks (the period of the subsidy).
You are entitled, as an employer, to utilize the employee’s annual leave entitlements to top-up the wage subsidy payment, on agreement (or otherwise directed in 14 days’ notice). Should an employee’s annual entitlements become exhausted, then you have the option of paying out the employee’s sick leave in an act of good faith to continue to top-up the wage subsidy, however, this is not mandatory.
If I make my employee redundant during the 4-week period, do I need to pay the money back to MSD?
Yes. You will have to pay the money back to MSD where you make an employee redundant.
What happens if my employee exhausts all of their leave entitlements?
Once an employee’s leave entitlements have been exhausted, the employer may need to consider to what extent further top-ups can be made. If it is no longer commercially viable to top-up then at the very least, the employer must continue to pass on the wage subsidy to the employee for the remainder of the subsidy period, with no additional payments made.
There must be active consultation made with employees around how to deal with top-ups before any decision is made.
Please contact us if you have any questions or queries in relation to any of the schemes or payments mentioned in this article.
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