COVID-19 - Wage Subsidies (19 March 2020)
The government has announced two major wage subsidies as part of their COVID-19 support package.
1. Twelve-week wage subsidy scheme
Introduction
For the next 12 weeks, wage subsidies will be available for all employers that are significantly impacted by COVID-19 and are struggling to retain employees as a result. The scheme will be open to sole traders and the self-employed as well as firms. The subsidy is:
NZ$585.80 per week for a full-time employee (20 hours or more), or
NZ$350.00 per week for a part-time employee (less than 20 hours).
The payment is made as a lump sum for a period covering 12 weeks. The maximum amount any one employer can receive is NZ$150,000.
Eligibility
Employers must have suffered, or be projected to suffer, at least a 30% decline in revenue compared to last year for any month between January 2020 and June 2020. Applications can also be made on the basis of forecast revenue loss within the period of the scheme.
Key undertakings required from the employer are:
On their best endeavours, they will continue to employ the affected employees at a minimum of 80% of their income (e.g. 4 out of 5 days of the week) for the duration of the subsidy period.
Employers must also have taken active steps to mitigate the impact of COVID-19 (e.g. engaged with their bank/financial advisor) and signed a declaration form to that effect.
Applications for the subsidy can be made through the Work and Income website www.workandincome.govt.nz. The Ministry of Social Development (MSD) will aim to make first payments no later than five working days from when applications are received.
More information can be found here.
What does a 30% decline in revenue mean?
This means a business has experienced a 30% decline in:
actual revenue, or
predicted revenue (e.g. for businesses who have seen a reduction in bookings such as accommodation providers), and
that decline is related to COVID-19.
The business must experience this decline between January 2020 and 9 June 2020.
Definition of revenue
Revenue means the total amount of money a business has earned from its normal business activities, before expenses are deducted.
Determining a decline in revenue
To determine a decline in revenue, the business must compare one month’s revenue against the same month the previous year (e.g. February 2020 compared with February 2019). The revenue of the month in the affected period must be at least 30% less than it was in the month it was compared against.
Businesses operating for less than a year
Where a business has been operating for less than a year, they must compare their revenue against a previous month that gives the best estimation of the revenue decline related to COVID-19.
What’s the employer obligations?
The subsidy is being administered under a high trust model and employers will not be asked for verification before the subsidy is approved. However, MSD will have the ability to check applications and verify information at a later date. Where false or misleading information has been provided, employers can be subject to fraud investigation.
To receive the COVID-19 Wage Subsidy, the employer must agree:
That they meet the following subsidy eligibility criteria:
the business is registered and operating in New Zealand
their business has experienced a minimum 30% decline in actual or predicted revenue over the period of a month when compared to the same month last year (or a reasonably equivalent month for a business operating less than a year) and that revenue loss is attributable to the COVID-19 outbreak
they have taken active steps to mitigate the financial impact of COVID-19 on their business activities
the employer will make best endeavours to retain the named employees and pay them a minimum of 80% of their normal wages or salary for the duration of the subsidy
The employer has discussed the application with the named employees, who consent to the information in the application:
being provided to MSD; and
being used by MSD, and shared with other agencies, to make decisions about the application, and to review and audit any subsidy granted
The employer consents to the information in the application being verified with other agencies
The employer is aware that they may be audited, and if they provide false or misleading information, they may be investigated for fraud
The employer will notify if circumstances change that affect their eligibility
The employer will repay any amount to which they are not entitled
2. Eight-week scheme for workers, contractors and self-employed taking COVID-19 leave
The COVID-19 leave payment scheme runs for the next eight weeks, providing financial support to businesses that have workers unable to work because they are in self-isolation, are sick with COVID-19, or caring for others with COVID-19. The scheme applies to employees, contractors and the self-employed.
The payments are:
NZ$585.80 per week for full-time workers (more than 20 hours per week), and
NZ$350.00 per week for part-time workers (20 hours a week or less).
The payment does not affect any paid leave entitlements that are owed and is available even if an employee is on paid leave for part of the period. It is not available to those who can work from home during the period of self-isolation and who can be paid normally by their employer.
Employers apply for the leave on behalf of any employee who is self-isolating or sick. Payments can be backdated to 17 March 2020. The government pays employers, who will then be required to pass it on to affected employees. The government will pay on a fortnightly basis once it receives an application.
Other key parameters of the scheme are:
Eligibility is open to all employees legally working in New Zealand (through their employers), the self-employed and contractors.
Eligibility will only be for workers who are not able to work from home.
The entitlement is for:
those who self-isolate in accordance with public health guidance and who register with Healthline
those who are ill with COVID-19, and
those who cannot work because they are caring for a dependent in either of these circumstances.
Those who leave New Zealand to travel overseas from 16 March 2020 will not be eligible for this payment for self-isolation on their return.
Workers taking sick leave before 17 March 2020 can only access the scheme for time spent on sick leave from 17 March 2020. It will not be accessible for those who have travelled overseas since 16 March 2020.
Our comments
The subsidies provide a very positive lifeline for some struggling businesses. However, the eligibility criteria is vague in some areas and may require interpretations. We recommend clients seek advice and clearly document their self-assessment of eligibility so that they have a record of how they determined eligibility.
We have talked to the government helpline in an attempt to get more information. Essentially they are doing their best but don’t have a lot of additional information at this stage. They suggest patience.