COVID-19: Government announces modifications to wage subsidy scheme

On Friday, 27 March 2020, Finance Minister Grant Robertson announced that modifications had been made to the wage subsidy scheme introduced by the Government to ensure people didn’t lose their jobs during the national lockdown. The modifications took effect at 4pm that day. They include:

• The obligation for an employer to use best endeavours to pay employees 80% of their previous income still stands, but where that is not possible, for example where all business activity has ceased, they must pass on at least the whole value of the wage subsidy to each affected worker. (The next day, the Minister made it clear that if the worker’s income is normally less than the subsidy, they can be paid their normal salary. Employers should make the assessment of what is to be paid by looking at the employee’s normal hours in the period before COVID-19.)
• Businesses must undertake to keep employees in employment for the period of the subsidy.
• The previous sick leave scheme has been merged into the wage subsidy scheme to prevent double-dipping. Originally designed when few people were in self-isolation, it is no longer fit for purpose. The Government is working on arrangements for those in essential work requiring sick leave due to COVID-19.

These measures are to ensure that businesses not able to operate do not need to lay off staff. Businesses whose workers can still work during the lockdown are still required to pay them in accordance with their employment agreements for the hours they do.

The wage subsidy is $585.80 a week for full-time workers (ie those who worked 20 or more hours per week before COVID-19) and $350 a week for part-timers (working fewer than 20 hours). It will be paid out in a lump sum covering the 12 weeks.

Updated guidance on the scheme is available on the Ministry of Social Development website: www.msd.govt.nz. The website states that the sick leave payment scheme became no longer available from 3pm on 27 March 2020 but that applications received before that time would be processed as normal. It also advises how to determine hours of work when they are variable: use the average hours worked each week over the last 12 months, or over the time the worker has been employed if that’s less than 12 months. Employers, contractors, sole traders and the self-employed may qualify for the wage subsidy.

Source documents:

Beehive (27 March announcement)

Beehive (28 March clarification)

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