Government Wage Subsidy for Businesses – Criteria, Access, Employer Obligations and Review (updated at 14 May 2020)

29 March, 2020 | Alex Dunne

(updated after Govt changes announced 11 May 2020)

Wage subsidy for businesses

The coronavirus (COVID-19) is impacting the national and global economy.  Classification of essential services, changes in consumer spending and government requirements are impacting businesses, employers and employees alike.

In an effort to keep businesses afloat, the government is offering a COVID-19 Wage Subsidy package to support businesses who may otherwise be considering redundancies in order to keep people employed.

The subsidy applies to all New Zealand employers, contractors, sole traders, self-employed people, registered charities and incorporated societies.

Criteria

If you are an employer, contractor, sole trader or self-employed you may apply for the COVID-19 wage subsidy.

If a business, you must be a registered company with employees legally entitled to work in the country.

To qualify, your business must have experienced a 30% decline in actual or predicted revenue for one month in 2020, from January 2020, when compared with the same month in 2019 (e.g. March 2020 compared with March 2019). Importantly, this decline must be COVID-19 related.

As a business, you must take active steps to mitigate the spread of COVID-19, such as seeking alternative banking arrangements, drawing on cash reserves etc.

If your business receives the wage subsidy, and the application was made after 4 pm on 27 March 2020, you:

• must use it for wages only;
• must make best endeavours to pay employees a minimum of 80% of their normal income (based on their employment agreement as at 26 March 2020) for the subsidised period;
• must use the full amount of the subsidy towards paying each of the employees you have claimed for, in fulfillment of your salary obligations to them for the subsidised period, (except where the employee’s normal pay is less than the subsidy (as might be the case for part-time workers) and then they must receive 100% of their usual pay;
• Must retain the employees you have claimed for in the application for the full subsidised period; and
• Cannot compel employees you have claimed for to take leave entitlements during the subsidised period.

If your business applied for the wage subsidy before 4 pm on 27 March 2020, the previous provisions of the scheme apply.  These are similar but there are important differences.  The changes happened quickly, and it is important that you understand which laws apply to you.  You should seek legal advice if you have any concerns or questions regarding this.

Determining subsidy amount

How much a business may receive depends on whether employees work 19 hours or more per week.

For employees who work 20 hours or more per week, employers will receive $585.80 per employee.

For employees who work less than 20 hours per week, employers will receive $350 per employee.

The subsidy is paid as a lump sum and covers 12 weeks per employee.

Previous maximum subsidy amounts

Previously, the maximum subsidy was capped at $150,000 per business. This cap has now been removed.

If you have already applied and received the subsidy, but claimed only enough to meet the cap, you can reapply after you have used the subsidy.  If you did not specify a limit an additional payment will be made to you automatically.

Previous maximum subsidy amounts

Previously, the maximum subsidy was capped at $150,000 per business. This cap has now been removed.

If you have already applied and received the subsidy, but claimed only enough to meet the cap, you can reapply after you have used the subsidy.  If you did not specify a limit an additional payment will be made to you automatically.

Criteria for Wage Subsidy Extension

From 10 June 2020 until 1 September 2020, employers will have access to a Wage Subsidy Extension scheme, which is an 8 week subsidy (at $585.80 for fulltime staff) in addition to the 12 week Wage Subsidy discussed above.

Qualifying factors and criteria are similar to the Wage Subsidy, except that instead of a qualifying 30% decline, your business must have experienced a 50% decline in actual or predicted revenue for the 30 days before you apply, compared to the closest period last year.  Again, this decline must be COVID-19 related.

Importantly, an employer cannot receive more than one Covid-19 payment for the same employee at the same time.  This means that if you have already claimed the Wage Subsidy for an employee, you cannot apply for the Wage Subsidy Extension for that employee until the 12 week Wage Subsidy period expires.  In some cases, this will be 10 June 2020, but in many cases it will be some time after that date.

The employer must:

• Pass the wage subsidy on to its employees
• Retain the employees for the duration of the 8 weeks
• Make best endeavours to pay the employees at least 80% of their normal pay
• Take active steps to mitigate the impact of Covid-19 on its business

Employer obligations

The government is taking swift steps to administer the subsidy, which means verification may not be required before the subsidy is approved. However, the Ministry of Social Development may check and verify later.

If employers provide false or misleading information, they may be investigated for fraud. Note that employers must notify of any change in circumstances that affect eligibility for the subsidy, and repay any amount to which they are not entitled.

Details of each employee must be given to the Ministry.  Privacy obligations remain in force and employers must discuss the application with their employees and obtain specific employee consent (in writing if possible) to provide their information to the Ministry and other agencies.  Employees must also consent to how the information will be used.

It is important to note that employment law continues to apply.  You and your business are still bound by the provisions of employment legislation, case law and your employment agreement with your employees.  Any changes to the terms of the employment arrangement, such as reduced hours and reduced pay, must be agreed to by both parties.  Alternatively, you should be considering a restructure process to cover the changes you propose to make. (See more information about this here)

The government releasing certain details of all businesses and individuals who claim the wage subsidy.  You must be prepared that your application (if not the details of it) will be made public.

Many employers have understandably been seeking advice from their accountants.  However, it is critical that you also seek legal advice on your legal employment rights and obligations at this time.

If your application is declined

If an employer’s application is declined, they can request to have this decision reviewed.

The application will be reconsidered to determine whether the decision to decline was an “informed” decision, including:

1. whether all relevant information obtained;
2. whether options and implications were considered;
3. whether the appropriate decision maker was involved in the decision.

The covid-19 crisis is unprecedented and confusing.  However, the government have acted swiftly to put assistance in place.

However, to avoid a personal grievance or a breach of privacy complaint it is important to follow the correct process.  If you have any concerns you should seek legal advice from an experienced employer lawyer before implementing any changes to the terms of your employee’s employment, including applying for the COVID-19 Wage Subsidy on their behalf.

Contact PA to the employment team Mikayla Sagar, to become a client and set up a time for a phone or video conference meeting – phone 09 837 6890 or email mikayla.sagar@smithpartners.co.nz