Major Update to Wage Subsidy Scheme
The Government has made major modifications to the wage subsidy scheme to ensure people don’t lose their jobs during the national lockdown.
The changes will apply from 4pm today. The key points are discussed below:
- The modifications focus on keeping businesses and workers connected and paid during this unprecedented time.
- Businesses accessing the scheme must still undertake best endeavours to pay employees 80% of their pre-COVID income. Where that is not possible – in particular where a business has no activity whatsoever due to the shutdown and workers are not working any hours – they must pass on at least the whole value of the wage subsidy to each affected worker. Before that can happen employers will still need to consult in good faith and reach agreement with their employees. However, when faced with an unpalatable redundancy and no income or some form of income then that will give employees a degree of comfort and allow employers to continue until there is certainty.
- The previous sick leave scheme is being folded into the wage subsidy scheme to prevent double-dipping.
- For businesses that receive the subsidy they cannot make employees redundant for the duration of the scheme (until 9 June).
- Significantly, the changes and the Wage Subsidy scheme itself do not remove any other employment law obligations. That means for example the requirement to pay statutory holidays, consult in good faith all remain as does the requirement to comply with minimum wages. If in doubt about what those obligations are please contact our Anderson Employment Team.
The Minister’s Press release states:
These changes will soften the impact of COVID-19 on workers, families and businesses, and position them to exit the lockdown and look to recovery, Finance Minister Grant Robertson says.
The modifications focus on keeping businesses and workers connected during this unprecedented time.
They apply from 4pm today, and include:
- Businesses accessing the scheme must still undertake best endeavours to pay employees 80% of their pre-COVID income. Where that is not possible – in particular where a business has no activity whatsoever due to the shutdown and workers are not working any hours – they must pass on at least the whole value of the wage subsidy to each affected worker.
- Businesses must undertake to keep employees in employment for the period of the subsidy.
- We are folding the previous sick leave scheme into this scheme to prevent double-dipping. The original sick leave scheme was designed when few people were in self-isolation, and it is no longer fit for purpose. We are working on arrangements for those in essential work who require sick leave due to COVID-19.
The Treasury now estimates the financial cost of the scheme will be between $8 billion and $12 billion depending on uptake by businesses.
“These modifications are about keeping New Zealanders currently at home in lockdown connected to the job they were in on Wednesday before it started,” Grant Robertson said.
“This ensures businesses not able to operate do not need to lay off staff. Even if this requires businesses to operate with no activity, the subsidy allows them to keep their workers on the books, particularly during Alert Level 4.”
The wage subsidy is a Government payment to help employers pay wages. It does not change any other employment law obligations, meaning employees must be paid appropriately under their employment agreements for the hours they do if they work during the lockdown.
“We are running this scheme on a high-trust model in order to get money out the door and support the workers, families and businesses who are affected by COVID-19. We are also preparing an appropriate audit process that will act as a backstop for this high-trust model,” Grant Robertson said.
The wage subsidy is $585.80 a week for full-time workers (who worked 20 or more hours per week before COVID-19) and $350 a week for part-time workers (fewer than 20 hours). It will continue to be paid out in a lump sum covering the 12 weeks, meaning a $7,029.60 payment per full time worker.
Want to know more?
Please contact our specialist employment team for any advice on the changes and obligations employers have in applying, receiving and administering the subsidy.
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