The proposed NZ Income Insurance Scheme – and how to have your say

5 Apr 22

The Government, Business New Zealand and the New Zealand Council of Trade Unions have together proposed a New Zealand Income Insurance Scheme. Here we outline what the scheme is proposing to look like, and how you can have your say.

The scheme would operate to provide financial assistance to New Zealand citizens and residents who lose their job through no fault of their own. The designers of the scheme believe loss of employment in these circumstances can result in a significant income shock that can affect wellbeing, even when a person finds new work, because many people accept lower-paid jobs that don’t match their skillset due to the financial pressure to get back to work quickly. Others may not find work because their skills are no longer needed. The scheme proposes to assist people in the transition period of being ‘laid-off’ and finding a new job.

How the scheme would operate

The scheme would provide income for people who lose their job due to displacement (the loss of work due to the disestablishment of a role), or due to health conditions or disabilities. It would operate in a similar way to ACC, through a compulsory levy paid in equal proportions by employers and employees. The Government would also contribute some additional capital.

The scheme would be paid for by an initial levy of 2.77% of an employees salary and wages. This would be split between the employer and the employee, with each paying 1.39%.

In the event an employee lost their job through one of the qualifying reasons, the scheme would offer a period of up to 7 months income support at a rate of 80% of prior income (up to a cap of $130,911 adjusted annually), plus an initial period paid by the employer for the first 4 weeks of unemployment.

Where a person loses a part-time job and continues to earn income from another part-time job, income insurance would ‘top up’ the workers income to 80% of the total pre-loss level. The payments would be calculated on an individual basis (with no asset testing or partner income assessment).

Employers would be required to give at least 4 weeks’ notice to the insurer and to the employee, and meet the cost of the worker’s initial period of unemployment for up to 4 weeks.

The scheme would cover any health condition or disability that resulted in a reduction of capacity to work of at least 50% and that is expected to last for at least 4 working weeks. A work capacity assessment would need to be certified by a health professional. Employers would need to take reasonable steps to support an employee to continue working, and make reasonable efforts to protect the job where a reasonable prognosis is made of return to work within 6 months.

Obligations on claimants

To be eligible, claimants would be expected to be based in New Zealand and to show effort to search for suitable employment, or to prepare for employment (such as undertaking approved training). Claimants would not be required to accept non-suitable offers of employment, but would be expected to accept suitable offers.

Health condition and disability claimants would be obligated to participate in work capacity assessments, and return to work services where appropriate.


Some businesses are expressing concerns as to how this feels like simply another tax on them in already trying times. Some feel this may in reality keep people out of work for longer.

The proposal will also change notice periods requirements for employers which in some cases will come at additional cost at times where the business is having to take steps to reduce costs (i.e. a redundancy situation necessitated by financial reasons).

Business New Zealand encourage businesses to contribute to the feedback that will be taken into consideration in the next steps of the proposal.

Have your say

Consultation is open to have your say on the proposal.

For more information on the scheme, a discussion document can be viewed here. You can answer a short survey or download a submission form and send in your submissions on the proposal to Submissions are due by 5pm on 26 April 2022.


Want to know more?

If you have any questions about the income insurance scheme proposal, please contact our specialist Employment Team.

PDF version: here.

This article was included in Edition 14 of our employment newsletter – Employment News which you can read here.

For more information contact:

AJ Lodge