In response to the lockdown due to the COVID-19 pandemic, the Government has introduced a wage subsidy. The purpose of the subsidy is to help businesses keep their staff employed, both during and after the lockdown, minimising its economic impact.

It is important to note that the subsidy is not available to every employer. The employer must have seen, or be predicting, a downturn in their income (in comparison to the same month last year) of at least 30% and this must be due COVID-19.

Additionally, the wage subsidy may not be claimed if the employer is already receiving money for an employee under the Essential Worker Leave Scheme.

The Government has noted that it is important that employers use their best endeavours to pay their workers at least 80% of their usual wage or salary for the period of the subsidy (12 weeks).

If the employer is not able to continue paying their employees at their usual rate, the employer cannot simply start paying their employees less without first consulting with the employees, and getting their agreement. 

A change in work hours, or a change in pay, must be negotiated between employer and employee in good faith, and any agreed changes should be recorded in writing.

If an employer qualifies for the subsidy, they will receive a lump sum payment per worker covering a 12-week period. The amount of this payment will depend on whether the employee works 20 or more hours per week and will be subsidised at a rate of $585.80 per week (gross);  or who work less than 20 hours a week, and will be subsidised at $350.00 per week (gross).

Employers must continue to make the usual deductions from their employees’ wages before they pay them (for instance KiwiSaver, PAYE, child support, ACC levies and so on).  Even though employers will receive a lump sum payment, they can continue to pay their employees in accordance with their normal pay cycle. 

If the employee normally earns more than the subsidy amount, the employer must top the subsidy amount up to achieve the normal/agreed remuneration. However, if the amount received is more than the employee is normally paid, the employer only needs to pay the usual amount.  The remaining subsidy can be kept and used to subsidise other employees’ incomes.

In order to receive the subsidy, employers must also commit to retaining their employees for the 12-weeks covered by the subsidy amount. 

If an employer has not used their best efforts to pay their employees at least 80% of their regular income, and is using the pay cut and subsidy as a means of protecting profits, they run the risk of being prosecuted for fraud.  Employers who do not comply with the rules around the subsidy may also need to pay it back. 

Some employers will have unique business models and revenue streams, so if there is any uncertainty, it pays to consult an experienced professional in this area.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-priced Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.

We are set up to assist you remotely via telephone, email or video call.