News & Views
Mar 26

Covid-19 update – Employment Law

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 shut down.

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. 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:

Tony Shaw 027 222 5474 tony@timpanywalton.co.nz
Thomas Nation 027 463 5134 thomas@timpanywalton.co.nz
Lauren Archer 03 687 7384 lauren@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.

Government Support
This is a unique situation that continues to change very rapidly. From 3pm on 27 March 2020, the COVID-19 Leave Payment is no longer available for employers. Applications already submitted will continue to be processed and paid.

The Government has indicated that further sick leave provisions will be implemented in the coming days, with a particular focus on individuals over 70 or immune-compromised people who work in essential businesses. No further details have been provided at this point.

The primary government support is now the wage subsidy. Further information is being released regarding this package but the current situation (as at 7:30pm 28 March) is:

Wage Subsidy
The government has indicated that they want employers to keep all their staff on during the level 4 restrictions rather than implementing redundancies. The wage subsidy is more than most would receive on a benefit and it is important that simply passing on the wage subsidy is considered as an alternative to redundancy.

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.

The Government has now removed the $150,000 per business cap on wage subsidies that can be paid to employers affected by COVID-19.

The Wage Subsidy is available for employers in all regions. It is to support your business if you’re impacted by COVID-19 and face laying off staff or reducing their hours because of COVID-19.

Who qualifies?
To qualify a business must show that it is registered and operating in New Zealand and that:

  • the employees are legally working in New Zealand;
  • the business must have experienced a minimum 30% 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 can be found here:
workandincome.govt.nz/online-services/covid-19/declaration-wage-subsidy

It is important that you read this declaration and ensure that you meet all the requirements.

How much can you get?
The Wage Subsidy will be paid at a flat rate of $585.80 for a person working 20 hours or more per week, and $350.00 for a person working less than 20 hours per week.

The subsidy is paid as a lump sum and covers an employee for 12 weeks. This payment must be used to pay employees during this period.

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.

Can a business apply for the subsidy more than once?
Yes, but you can only apply for this subsidy once per employee. If you applied initially only for some staff, you can now apply for other staff.

What if I have already applied for the Wage Subsidy, but the limit was capped?
If you have already applied for and received the wage subsidy, but the Ministry of Social Development (“MSD”) capped the amount paid, then you will not need to re-apply. MSD will top up the difference between what you applied for and what you were granted.

If, however, you have already applied for the wage subsidy and your amount was for less than $150,000, you can re-apply to MSD.

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, 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).

At present, the Government has not provided any guidance on what constitutes “normal income” for the purposes of the wage subsidy. In the absence of official guidance, it is our view that “normal income” should be interpreted as the contracted minimum hours or base salary provided for under the employee’s employment agreement.

As an employer, if I have already received a COVID-19 Wage Subsidy for an employee, do the new obligations of the COVID 19 Wage Subsidy (after it was modified on March 27 2020) now apply?
No. The obligations for the COVID-19 Wage Subsidy remain the same as at the time you applied.

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. If you applied for the COVID-19 Wage Subsidy for any employees after 5pm on 27 March 2020, you must retain those employees or you will be in breach of your obligations.

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 now apply for the subsidy multiple times but you can only apply for each employee once. 

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.

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.

What happened to the leave payment
As of 3pm today, 27 March 2020, the leave payment subsidy will now be largely folded into the wage subsidy scheme. This is in an attempt by the Government to not only limit businesses from double dipping but to ensure that people don’t lose their jobs during the national lockdown.

Finance Minister Grant Robertson has announced that businesses must undertake to keep employees in employment for the period of the subsidy. The original sick leave scheme was designed when New Zealand had a very limited number of people in self-isolation, with the country now at Alert Level 4 this scheme is no longer fit for purpose.

The Government has indicated that further sick leave provisions will be implemented in the coming days, with a particular focus on individuals over 70 or immune-compromised people who work in essential businesses. No further details have been provided at this point.