Firstly, to the many clients that have called or emailed our team in the last 24 hours and are still awaiting a response, please accept our apologies. The email and call demand has been unprecedented and our team is working as fast as possible to provide the information that you are looking for.
We now have our full team safe and working from home. The first priority is to contact all clients and ensure Government support has been applied for and to answer questions. One of our team will be in contact soon. We are thinking of you and are doing our best to assist in these difficult times.
Key updates from the last 24 hours are:
- There is still lots of confusion around what is an essential service. Some further information was released on this last night, but it is still vague in some respects. However, we are delighted for Marlborough the harvest can continue. We wish our winery clients all the best for what will be a challenging couple of weeks.
- Instead of the planned 0800 number, the Government has put in place an email address for queries about essential services essential@mbie.govt.nz
- The WINZ website for making applications was surprisingly robust yesterday, but the 0800 number failed entirely
- The Government announced a financing package to help mortgage holders and SMEs. We will analyse and advise you accordingly when full details are released.
- We are still seeking clarity on whether a Leave Subsidy is available to all staff now required to self-isolate. It would appear though, that this may not be the case.
FAQs – Wage Subsidies
Tax implications for wage subsidy
GST – It has been confirmed that there will be no GST on the receipt of the subsidies. This required a law change.
Income tax – The Wage and Leave subsidies are not taxable to an employer. Payments to a sole trader are taxed.
Paye, Student Loan etc – any amounts passed on to an employee are taxed as per normal.
Deadline for applying for Wage Subsidy
We are seeing a lot of clients are thinking there is a deadline for applying. There is no deadline. When a client makes a claim, they will get the subsidy claim for the full 12 weeks.
Employees leaving
If an employee leaves during the subsidy period, there is no specific obligation to repay if the application was made in good faith (ie the employer intended to keep them on). This would even be the case if they were made redundant.
Employees starting
Nothing in the rules covers employees beginning during the 12-week period. Where this happens, it seems the employer will get the full 12-week subsidy. In this case, they would need to have had at least one pay go through payroll so that IR can verify them.
Want to make an employee redundant
We are getting clients asking whether they get the subsidy for an employee they are planning on making redundant. They clearly cannot. It is a condition for getting the subsidy for a named employee, that they intend to keep that employee on at 80%+ pay for the subsidy period.
Casual employees
The scheme does not provide any meaningful assistance to casual employees. Talk to us if you have casual employees.
Financial circumstances
If your business has not yet been impacted financially, this does not stop making a claim on the basis there is an expectation turnover will drop by 30%. We expect virtually all non-essential businesses should be able to make this claim after Monday’s announcement.
Business recovers
A few clients have asked whether they need to repay any of the amount if their business picks up again. The answer is that they do not. If they make a bona fide claim on the basis of an actual, or expected 30% turnover drop, they are entitled to that money. Remember this scheme is about financial stimulus. The Government wants/needs money in the economy to prevent a deep recession. A business recovering is a win for the scheme.
Any requirement to repay a wage subsidy
The subsidy is not a loan. If a claim is made in good faith, there should be no circumstance where an amount of wage subsidy needs to be repaid.
What if I applied before the $150k Cap was removed?
If you only applied for 21 staff to get the maximum, it is possible to reapply for additional funding now the cap has gone. If you included all employees, a top-up will automatically be made.
FAQs – Paying your staff
Can I pay staff just the $585.80 weekly subsidy I have received?
Firstly, if you have applied for the Wage Subsidy, you have agreed to “make best efforts to retain employees and pay them a minimum of 80% of their normal income for the period January 2020 – June 2020”. This means paying just the $585.80 weekly subsidy is unlikely to be acceptable (unless $585.80 is 80% or more of their ordinary pay).
What if 80% of normal pay is higher than the $585.80 subsidy I have received?
You will need to make key decision as to whether you will pay the difference for these staff or look to make staff redundant. If you pay the difference, this is essentially reducing any profits in that financial year. If you intend to make staff redundant, you cannot include that staff member in your Wage Subsidy application.
Can staff use annual leave to top up their pay?
You would need to consult with your staff and get their agreement. We are seeing a number of staff allowing employers to use annual leave and sick leave to top up their pay to 80% or 100%. This seems like a sensible compromise in that employers and employees are able to share the financial cost of Covid19.
Can I require staff to take annual leave?
You will need to check the terms of the Employment Agreements with your team. Often employers can require staff to take annual leave by giving notice. Some of our clients have advised team members that they are required to take annual leave during the Lockdown period.
What if staff are not prepared to take annual or sick leave?
You are then faced with the decision on whether you are prepared to subsidise your employee through this period.
Anything else I need to consider?
If you are considering making staff redundant, you should consult your lawyer. In general, terms, remember good faith (talking honestly to staff), and fair process (what is reasonable in all the circumstances) is essential. Under Covid19, normal consultant periods are unlikely to be considered practical.
Disclaimer
The above is general in nature. We have used our best endeavours to come up with practical answers in the circumstances. However, you will appreciate that this is a fluid situation and limited information is available from official sources.