Coronavirus: Financial benefits for employers and employees

On Tuesday 17 March 2020, the New Zealand Government announced its NZ$12.1 billion support package, primarily aimed at assisting businesses suffering the widespread effects of COVID-19. Significantly, two of the benefits announced in the financial package may prove quite helpful for employers during this time. These are the “wage subsidy”, and the “leave payment".

COVID-19 Wage subsidy

Eligibility requirements

A major component of the financial support announced by the Government on Tuesday is the “wage subsidy”. The purpose of this subsidy is to support businesses detrimentally affected by COVID-19, and where restructuring, redundancies, and reducing employees’ hours are being considered by employers as an undesired, but necessary result of the economic down-fall the virus has brought with it.

Employers, contractors, sole traders and self-employed individuals may qualify for the COVID-19 wage subsidy. Applications can be made for 12 weeks, from 17 March 2020. In order to qualify for the wage subsidy, the following requirements must be met:

1. The business must be registered and operating in New Zealand;
2. Employees must be legally working in New Zealand;
3. The business must demonstrate that it has encountered at least a 30% reduction in actual or predicted revenue (amount earned by the business before expenses are deducted) over the period of a month, when compared with the same month last year;
4. In relation to the above, the reduction in revenue must be shown to be related to COVID-19. Further, the decline (actual or predicted) must have been experienced between January 2020 and 9 June 2020;
5. The business must demonstrate it has undertaken active steps to mitigate the financial impact of COVID-19 on their business. This could include steps such as seeking advice and assistance from their bank, or the Chamber of Commerce.
6. Further, a business must endeavour to use their best efforts to retain employees and pay them at least 80% of their normal income for the subsidised period.

Potential financial support available

Employers who are eligible to receive the COVID-19 wage subsidy will receive a flat rate for employees, depending on the number of hours worked by the employee each week:

• For full-time employees (working 20 hours or more per week), the rate is $585.80 (gross).
• For part-time employees (working less than 20 hours per week), the rate is $350.00 (gross).

The subsidy covers a period of 12 weeks per employee. This means that, if eligible, employers will receive a subsidy of $7,029.60 (gross) for a full-time employee, and $4,200 (gross) for a part-time employee. The total subsidy will be paid in one lump sum.

It is to be noted that the subsidy applies to payment of wages only, and the maximum subsidy any single employer is eligible to receive is $150,000. Further, businesses are only able to receive the wage subsidy once.

Verification will not be required before approval of the subsidy. However, the Ministry of Social Development will have the ability to check the accuracy of the information provided in an application, at a later date. Employers ought to take care that the information they have provided is accurate, and not misleading. Any false or misleading information provided may lead to an investigation of the business for fraud, and an employer will be required to repay any amount which it is not entitled to. Employers should notify Work and Income if circumstances arise, which affect their eligibility.

Employers should also discuss the application with the employees named in the application, to ensure they consent to the information being provided, as well as used by the Ministry to make decisions and/or review and audit any subsidy granted.

COVID-19 Leave Payment

Eligibility requirements

Applications for the COVID-19 leave payment can be made for 8 weeks, from 17 March 2020. The leave payment is aimed at providing financial support to people who are unable to work due to self-isolation, are sick with COVID-19, or looking after a dependent who is required to self-isolate or is sick with COVID-19. Employers (except for those in the State Sector) can apply for the leave payment for employees who are:

1. Self-isolating in accordance with the Ministry of Health Guidelines, have registered as needing to self-isolate with the Healthline, and cannot work from home. This does not include employees who have left for overseas since the travel restrictions implemented on 16 March 2020, and have since returned; or
2. Unable to work because they have been diagnosed with COVID-19; or
3. Are unable to work because they are caring for dependents who are required to self-isolate or who are sick with COVID-19.

Employers ought to consider whether, during the period of self-isolation the employee is legally working for them, and whether the employee is expected to work during this period.

Leave payments for eligible employees will be paid to employers directly, who ought to pass this on to the relevant employees in full.

Employers receiving this leave payment can potentially receive it for 14 days. The amount given may cover the entire period of 14 days while an eligible employee is away, but an employer is only permitted to apply for the leave payment every 14 days.

Unlike the wage subsidy, employers may apply for the leave payment multiple times, when the need arises, to account for the fact that people may be required to self-isolate more than once.

The leave payment will be paid at a flat rate equivalent to the amounts mentioned above for the wage subsidy.

Applying for the wage subsidy and leave payment

Impacted employers may apply for the COVID-19 wage subsidy and leave payment online here.

When applying, employers will need to provide:

• Your IRD number;
• Your business name and New Zealand Business Number (NZBN);
• Your business address;
• Names of employees and their IRD numbers; and
• Contact details for your business and employees.

Work and Income aims to provide payments no later than 5 workings days after the application has been submitted, with all relevant information. This may, however, vary depending on the number of applications received.

We are pleased with the economic response announced by the Government, and its commitment to assisting businesses impacted by COVID-19. We anticipate this will provide at least some relief for employers and employees alike, and may assist in avoiding undesirable alternatives, such as redundancies.   

At Jennifer Mills & Associates, we are able to advise employers on employment and legal issues arising from the Coronavirus.

Please contact us for further advice and assistance at [email protected]

Disclaimer: Jennifer Mills & Associates has taken all reasonable care to ensure that the information materials contained in this article are true and correct at the time of publication. The information provided is general information only, and is not intended to constitute legal or other professional advice to be relied upon. Therefore, Jennifer Mills & Associates accepts no responsibility for any loss, errors or omissions which may arise pertaining to such reliance.