COVID-19 Wage Subsidy
On 17 March 2020, Finance Minister, Grant Robertson, announced a $12.1b package to provide relief against the economic losses forecast to affect both individuals (employees) and businesses as a result of the COVID-19 pandemic. This was increased when the “Level 4” status was announced and then further amended since. Below is a summary of the wage package introduced and current as at 30 March 2020.
FINANCIAL RELIEF
These payments are provided as financial relief for employers that are significantly affected by COVID- 19 and struggling, or will struggle. This applies to sole traders and self- employed persons, as well as companies, registered charities, non-governmental organisations, incorporated societies and post-settlement government entities.
ELIGIBILITY
- Employers need to prove they have, or are projected to suffer, a loss of revenue of at least 30% for any month January – June 2020 when compared to the prior year.
- New businesses and high growth firms are also eligible as well. They need to demonstrate the revenue loss assessment against a similar time period, for example a 30% loss of income, attributable to COVID- 19, in March 2020 compared to January 2020.
- Self- employed people with variable monthly incomes are eligible if they can demonstrate the revenue loss assessment against the previous year’s monthly average (e.g. 30% loss of income attributable to COVID-19 comparing March 2020 to the average monthly in come in the period March 2019 to March 2020).
- The scheme will also cover registered charities, non- governmental organisations, incorporated societies and post-settlement governance entities.
DECLARATION
Employers must make a declaration that:
- On their best endeavours, they will continue to employ the affected employees at a minimum of 80% of their income for the period of the subsidy (e.g. 4 days per week).
- They have taken active steps to mitigate the impact of COVID – 19. Examples provided included engaging with the bank/financial advisors.
- They will not make changes to their obligations under any employment agreement, including pay rates and hours of work and leave entitlements without the employees written consent.
- They will not unlawfully require employees to which the application applies, to use their leave entitlements for the period that the subsidy covers.
- The full subsidy will be paid to the named employee, unless they usually earn less than the subsidy amount, in which case, you must pay them their full normal wages.
PAYMENTS
Full time employees working 20 hours or more per week will receive $585.80 per week for up to 12 weeks, total $7,029.60.
Employees working less than 20 hours per week will receive $350 per week for up to 12 weeks, total $4,200.
The payment is received as a lump sum for a maximum of 12 weeks.
ACCESS TO PAYMENTS
Employers can apply at any time from now for the next twelve weeks via the WINZ website.
The payments can be backdated to 17 March 2020, and are aimed to be paid within five days. The employer will receive a lump sum payment.
As part of the application process the employer must provide the MSD with the following details relating to the employee:
- First and last name
- IRD number
- Date of birth
- Number of hours they work per week/fortnight The employee must to consent to their
- employer providing this information.
TAX TREATMENT
Employer: The wage subsidy is excluded from taxable income, however, no deduction is allowed for the corresponding payment to employees. The wage subsidy is exempt from GST.
Employee: This is a wage payment and is subject to the normal payroll deductions for that employee, such as PAYE, Student Loans, Child Support, etc.
This is an ever-changing response package in terms of its benefits, eligibility and application. For anyone needing assistance with this process, or if you have questions, please get in touch, our people are here to assist you in your time of need.
See our update here on the leave scheme for essential workers.
Saunders & Co Lawyers are available by phone and email to provide legal advice and guidance on a range of matters. For more information and specific legal advice on your employment relations and health and safety obligations please contact the employment team.