COVID-19 – wage subsidy update 30 March 2020
Due to a number of uncertainties over treatment of the wage subsidy, the government have given further guidance regarding the use and treatment of wage subsidies.
We have employees earning less than the subsidy – what do we do with the excess?
If your employee’s usual wages are less than the subsidy, you must pay them their usual wages. Any difference should be used for the wages of other affected staff – the wage subsidy is designed to keep your employees connected to you.
Is the subsidy amount the gross amount paid to employee or net?
Your employee will need to pay tax on their wage subsidy payment as it’s paid to them as part of their normal wages. This means it’s subject to the usual deductions e.g. PAYE, Student Loan, Kiwisaver, ACC etc.
What happens if I cannot afford to top my employees up to 80%?
Employers are required to agree that, for the duration of the subsidy, they will make best efforts to retain the employees the subsidy was paid for.
If you are receiving the COVID-19 Wage Subsidy, you must:
- Try your hardest to pay staff at least 80% of their usual wages;
- If that isn’t possible, pay at least the rate of the subsidy that applies to that employee
A business must take active steps to mitigate the financial impact of COVID-19 on their business. This could include:
- drawing from your case reserves (as appropriate)
- activating your business continuity plan
- making an insurance claim
- proactively engaging with your bank
- speak to your accountant
- seeking advice and support from:
- the Chamber of Commerce
- a relevant industry association
- the Regional Business Partner programme (Gilmore Taylor Associates are registered to assist with COVID-19 Support whether you need cashflow assistance, HR help or Business Planning).
I already applied for the COVID-19 Wage Subsidy, but only for some of my employees. Can I make another application for my remaining employees?
Yes. You can make an additional application for any of your employees whom you haven’t already applied for.
If I am a shareholder in a business, can I apply for the wage subsidy?
If you work for the business and you are paid a wage, salary or draw an income for the work you do for the business, you can apply for the wage subsidy.
If I work for a business where there are multiple shareholders, how do I apply for the wage subsidy?
The business you work for should make one application for all of its employees and shareholders who work for the business and are paid a wage, salary or draw an income for that work they do.
Which form do I use?
You can use the ‘employer’ form and the other shareholders if they are paid a wage, salary or draw an income for the work they do for the business, need to have their details entered into the employee section of the form.
If my business operates in a partnership, can I apply for the wage subsidy?
If each partner that works for the business is paid a wage, salary or draws an income for the work they do, you can apply for the wage subsidy.
Which form do I use?
One partner must apply on behalf of the other partner(s) using the ‘employer’ form and using the other partners as named employees.
Non-essential business + Minimum waged worker
James is a barista at a Wellington café. James earn the minimum wage. The café is closed for the lockdown and has had a 30% loss in revenue. James’ employer cannot afford to pay any wage to James, but wants to keep him on. James does not want to use his annual leave entitlements.
James’ employer can access the wage subsidy and pay $585.80 per week to James, without James being required to do any work. James retains his annual leave entitlements to use at a different time.
Able to do some work from home + Full-time worker
Sam is a civil engineer. He usually works 40 hours per week at $30 per hour, with a usual gross income of $1200 per week. The business is non-essential and closed for the lockdown and has had a 30% loss of revenue. Sam can do some work from home over this period. He works 30 hours per week for the duration of the Alert Level 4 lockdown period.
Sam’s employer can access the wage subsidy and pays Sam his usual salary at the agreed reduced hours, which is $900. Sam’s employer can use the $585.80 per week to subsidise Sam’s wages, this means Sam’s employer will top up the wage subsidy with $314.20 to compensate the hours Sam worked.
Non-essential business + Can do some work from home
Phil is an HR advisor in a medium-sized business and works full time. The business is non-essential and closed for the lockdown and has experienced a 30% loss of revenue. Phil can do some work from home. He does 8 hours per week. His hourly rate is $25 per hour.
Phil’s employer can access the wage subsidy. Their revenues have dropped so much that they are worried as they will be unable to retain their staff. Under employment law, Phil must receive $200 per week for the hours worked. His employer can use the remaining money from the subsidy for other affected employees.
Non-essential business + Unable to work
Craig is a waiter at a successful restaurant chain that also needs to close during the lockdown. Craig was getting paid $1,000 per week. Craig’s employer has committed to paying full wages to their staff as they know that such workers will be in demand as the lockdown ends. The restaurant has suffered a 30% loss in revenue due to COVID-19.
Craig’s employer can access the wage subsidy scheme to pay Craig $585.80 per week, and the employer can then top that up with $414.20 per week to ensure Craig receives his full income.
Essential business + Able to work
Steve is an essential services worker, ensuring certainty of electricity supply. Steve is really busy, working his normal hours and getting paid at his normal rate, and his business has not been affected by COVID and does not require support to pay or retain its staff.
Steve’s employer does not need to apply to the wage subsidy scheme.