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Understanding Covid-19 Wage Subsidy

Wednesday 8 April 2020

Understanding Covid-19 Wage Subsidy

The COVID-19 wage subsidy scheme published on 17 March 2020 is to help businesses during the period affected by Covid-19.

If your business is affected by Covid-19, the wage subsidy will support you and your staff to maintain an employment connection and the income of  affected employees. If you are an employer, contractor, sole trader or are self-employed you may qualify also. The criteria for the subsidy are as follows:

If you apply for the wage subsidy, you must agree to use your best endeavours to pay at least 80% of the employee’s normal wage/salary.

The wage subsidy for a full time employee is $585.80 (gross), and for a part time employee is $350 (gross).

There has been confusion and misunderstanding about employer’s obligations regarding the wage subsidy. We have reviewed the relevant information and government official explanations, and we would like to share our understanding.

First, the purpose of the wage subsidy is to help business to retain its employees, to make sure the employees still have income during the Covid-19 period. The wage subsidy is for supporting employees’ income, even though the subsidy is paid to employers.

Second, there has been confusion surrounding the employer’s obligation to pay “at least 80% of normal salary”., and when the employer is required to pay that.

The Government has clarified the employer’s obligations as follows:

The above only sets out the employer’s obligations regarding the wage subsidy.

It is important to remember that under employment law, employers are required to pay an employee’s normal wage if an employee is willing to work. That is legally the case even if no work is available. Accordingly, if you wish to pay your employees less than their normal pay e.g. 80% of their normal pay, you must obtain their written agreement. Most employees will agree in these difficult times, as they are aware that the alternative may well be redundancies. You are required to pay an employee only if they are willing and able to work. If they are unwilling to work for any reason, there is no obligation for you to pay them.

For example, if your business is an essential service and stays open during the lockdown period, so long as you have taken appropriate health and safety measures, you are entitled to require your employees to work their normal hours. There may be employees who are unwilling to work due the risk of infection. They may be healthy with no underlying health conditions, and also no family members presenting higher risk to the effects of Covid 19. In these cases, there is no obligation to pay the employee. To assist the employee, you may wish to allow the employee to take annual leave. If there is no annual leave available, the employee can take unpaid leave.

Essential Workers Leave Scheme

If you are an Essential service and have employees who are unable to work due to requirements to self-isolate or if they or someone in their household have a serious health condition which will put them at higher risk of becoming severely ill from Covid-19, you may apply for the Essential Workers Leave Scheme. That will provide you with the equivalent of a wage subsidy for those workers and allow you to pay them for the 4 weeks of the lockdown. Details are set out below:

https://www.employment.govt.nz/leave-and-holidays/other-types-of-leave/coronavirus-workplace/essential-workers-leave-scheme/

The Essential Workers Leave Scheme was set up on 6 April 2020 so that no Essential worker who is vulnerable, sick or otherwise unable to work will feel pressurised that they need to work.

 

The following are resources for businesses relating to Covid 19:

 

 

Teresa Chan & Agnes Sun

6 April 2020
 

This article is for general use only. Advice should be sought for specific circumstances. Please consult Teresa Chan at Teresa Chan Law Limited, Level 3, Westpac Building, 106 George Street, Dunedin 9016, ph. 477 1069, or email teresa@tchanlaw.co.nz or agnes@tchanlaw.co.nz

KEYWORDS: Wage Subsidy, Employer’s obligations, Essential Workers Leave Scheme.
Dunedin Shanghai Association property law section ADLS