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 email@example.com
Thomas Nation 027 463 5134 firstname.lastname@example.org
Lauren Archer 03 687 7384 email@example.com
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 7 April 2020.
This is a unique situation that continues to change very rapidly. The Government has now released details around the Essential Workers Leave Support Scheme and we have outlined below the new regulations and guidelines around it.
It is important to note, you cannot receive both the wage subsidy and essential workers leave support for the same employee at the same time. What payment you apply for depends on how you have been impacted. If you have any queries regarding which scheme is more appropriate for you and your business then we are here to help.
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.
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:
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.
Essential Workers Leave Support
The Essential Workers Leave Support is available to all New Zealand essential businesses to pay their staff who:
- cannot come into work because Ministry of Health guidelines recommend they stay at home; and
- cannot work from home.
Employers can apply to cover the wages of your employees over a 4-week period. If you need to apply for your employee again after the 4 weeks is up, you can do this in the 4th week.
To qualify for the Leave Support, you must be an essential business. To find out if you are an essential business, refer to the MBIE list of essential businesses.
Additionally, you must have essential service workers who either:
- are at higher risk if they get COVID-19, and Ministry of Health guidelines recommend they stay at home while we’re in lockdown (and potentially longer);
- come into contact with someone who has COVID-19 and must self-isolate for 14 days (as required by Ministry of Health guidelines);
- have tested positive for COVID-19 and are required to remain off work until they’ve been cleared by a health professional to be released from self-isolation; or
- have household members who are at higher risk if they get COVID-19 and Ministry of Health recommend the worker also remains at home to reduce the risk to them.
As an employer, you must also have had a conversation with your employee about how you can best support them at this time. For example, they may choose to use any sick or discretionary leave they have, instead of getting the Leave Support. If you can’t pay the full amount of this leave to your employee, you can apply for the Leave Support to top it up.
You must also not be able to financially support your employee due to the COVID-19 public health restrictions. For example, the cost of paying for your employees’ leave and paying for replacement staff is significant.
You are also required to complete a declaration; this can be found here:
It is important that you read this declaration and ensure that you meet all the requirements.
How much can you get?
The COVID-19 Essential Workers Leave Support will be paid at a flat rate $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.
It will be paid as a lump sum and covers 4 weeks per employee. If you need to apply for your employee again after the 4 weeks is up, you can do this in the 4th week.
If your employee’s hours fluctuate, you can calculate the average to work out what rate to apply for.
In determining this consider the average hours worked each week:
- over the last 12 months, or
- over the period of time you (or they) have been employed (if it’s less than 12 months).
If the average hours are 20 hours or more, then apply for the full-time rate. If the average is less than 20 hours, you will need to apply for the part-time rate.
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.
Can I reapply for Essential Workers Leave Support for the same employee(s) at the end of four weeks?
Yes, You can re-apply for the same employee(s) as early as three weeks after the initial application date. To ensure that there are no gaps in payment, you should re-apply before the end of the four-week leave period.
Under the Essential Workers Leave Support when does my employee’s four-week period start?
The four-week period for the Leave Support starts from the date an application was submitted; please make sure to note this date in case you need to re-apply for someone.
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.
Under the Essential Workers Leave Support which employees should I re-apply for?
You should have a conversation with each employee when you submit the initial application, and when it’s time to re-apply. Some employees will only need the Leave Support for a short time, and you will only need to apply for those employees once. For other employees, an existing health concern will mean they need to stay at home longer.
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.