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What you’re entitled to under the Covid-19 wage subsidy scheme

Already over $2.7bn has been paid out to New Zealand businesses and their employees under the government’s wage subsidy scheme. We take a look at how it works and how to know if you’re eligible.

This article has been updated to reflect changes to the wage subsidy scheme announced on March 27 and March 28.

The Covid-19 wage subsidy is designed to support employers and help them continue to pay their workers over the four-week shutdown period and beyond.

However, because wages and working times vary markedly across businesses, some employees may be confused about how the wage subsidy works and how much of it they are entitled to.

How does it work?

It works how it sounds – it’s government money that subsidises your wage so your employer can keep their business operating through the hard times.

An affected business (or self employed contractor) that can show or project a 30% decline in revenue compared with the same month last year can apply for the wage subsidy, which the government pays out at $585.80 per week per full time employee (working 20 hours or more a week) and $350 per week per part time employee (working less than 20 hours a week).

Among other criteria, Work and Income stated that the business “must make best efforts to retain employees and pay them a minimum of 80% of their normal income for the subsidised period” in order to qualify.

What if I usually make more than $585.80 per week?

If you are a full time employee and usually earn more than $585.80 per week, then your employer should pay the additional amount to meet 80% of your regular weekly wage.

For example, if you work for an affected business and you normally earn $1000 per week before tax, then your employer should be at least paying you 80% of $1000, after deducting Kiwisaver and taxes. The $585.80 wage subsidy is to help your employer pay that amount.

This requirement is stated on the Work and Income wage subsidy website:

“You will use your best endeavours to pay at least 80 per cent of each named employee’s wages or salary for the period you receive the subsidy. The wages or salary obligations are:

  • as specified in the employee’s employment agreement as at 26 March 2020; or
  • if you ended your employment relationship with any employee named in your application as a result of your business being adversely affected by the COVID-19 outbreak and have re-employed that employee on or after 17 March 2020, as specified in the employee’s employment agreement as at the date that employment relationship ended.”

Note that an employee must be notified and provide written consent in order for an employer to start paying 80% of their wage.

Some employers that are struggling to make up the 80% minimum payment even with the wage subsidy applied are using an employee’s accrued annual leave to pay the difference. More on the rules around that here.

However, in any case an employer cannot pay employees 80% of their normal pay without their written consent. This is explained in greater detail here.

Employers can elect to pay more than the 80% amount if they choose. The owner of an Auckland mechanics for example has elected to pay his employees their full wage for the four-week shut-down period, but may have to reduce that to 80% if the shut-down period continues for longer.

What if I earn less than the $585 wage subsidy?

If you are an actively-working full time employee and you earn less than $585.80 gross per week, the 80% minimum payment does not apply, and according to the official advice provided by Work and Income you should be paid the amount you were earning before the impact of Covid-19.

“Where the ordinary wages or salary of an employee named in your application was lawfully below the amount of the subsidy before the impact of COVID-19, pay the employee that amount,” Work and Income states.

There has been a lack of clarity around this issue with the government and Work and Income providing contradicting information. However, as of March 28, Finance Minister Grant Robertson clarified this in a press release.

“We still want employers to use their best endeavours to pay employees 80% of their normal salaries.  Where this is not possible, we want the value of the subsidy to be passed on.

“But to be absolutely clear if a person’s income is normally less than the subsidy they can be paid their normal salary.

“This is particularly an issue for part time employees some of whom normally earn less than the $350 per week.  We urge employers to use normal hours in the period before COVID-19 to assess the amount to be paid,” Grant Robertson said.

What about for part-time employees?

According to Work and Income the exact same rationale applies for part time employees working less than 20 hours a week, except that a $350 wage subsidy per week is applied, and you will be paid the value of your pre-Covid hours if is is less than the wage subsidy.

What if I have multiple jobs?

According to Work and Income, if you are an employee who is employed by two or more different businesses, you can receive the wage subsidy from multiple employers.

Likewise, if one or more of your jobs is classified as self-employed, then you can apply for one or more wage subsidies as long as you meet the usual criteria. Read this if you need more information about how to apply as a freelancer or self-employed contractor.

How is it paid?

For a full time worker, the wage subsidy will be a 12-week lump sum of $7029.60 paid to your employer. Your employer will then pay that to you on a weekly or agreed upon basis calculated on the above.

If you are self-employed it should be paid directly to you.

While many employers and self employed contractors are reporting the wage subsidy being paid out very quickly – some within two days of applying – it’s worth remembering that these are extraordinary circumstances and this massive scheme has been deployed in an incredibly short amount of time. Many businesses will be scrambling in different ways to take care of their employees while also balancing other responsibilities to keep their businesses from collapsing.

It won’t always go smoothly, and there may be issues. Make sure you stay in contact with employers to find ways forward and reach out to Work and Income if you need more support.

 


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