The New Zealand Government updated its terms of the COVID-19 Wage Subsidy scheme on the 27th of March 2020 this blog details our findings on these changes.
Again, we would like to reiterate that this is a fluid scenario and that the guidance from officials is sporadic, evolving and sometimes conflicting. Therefore, we are using our best endeavours to give you practical guidance that is consistent with the spirit of these rules.
Wage Subsidy FAQs
27 March changes to the scheme
The Government’s messaging on the 27th of March was a bit muddled and this has created some major confusion. What remains the same is that the scheme is designed to help keep staff employed and that employers are supposed to use best endeavours to retain staff at 80% or more pay.
Like many others, we have struggled to make sense of what the changes mean practically. For most businesses, there is no significant change. The differences are at the margins where a business is really struggling due to the lockdown. This is how we have reconciled the difference:
- From 27 March a business can apply for the scheme knowing that it can only pay out the $585.80 subsidy amount ($350 for part time) while their business in interrupted;
- Before 4pm on 27 March a business an employer was applying on the basis that they would use their best endeavours to retain the named staff on 80% or more pay, if it transpires that this cannot be reasonably achieved, they can go below that.
Practically, we see the difference is that a business that knew it could not pay its staff 80% could not in good faith apply before 27 March, but now they can. This of course, will save jobs and that is the purpose of the scheme.
While the requirements of the scheme were relaxed somewhat, the obligations on employers were strengthened and a far more prescriptive. Below are links to both sets of terms.
Read the new terms and conditions that apply to applications made from 4pm on 27 March 2020 here >
Read the old terms and conditions that apply to applications made before 4pm on 27 March 2020 here >
Here is our comment on some of the additions to the 27 March terms:
| Change to the terms |
Our comment |
| “You acknowledge that the granting of your application and your receipt of the subsidy does not override your existing obligations under the Employment Relations Act 2000” |
Employment law has always continued to apply, it is now just an express condition of receiving the subsidy. To a certain extent this is a clarification, although a breach in employment law would have been solely an employment issue and would not affect an application lodged before 4pm 27 March. |
| “You will not make any changes to your obligations under any employment agreement, including to rates of pay, hours of work and leave entitlement, without the written agreement of the relevant employee” |
Employment law has always continued to apply, it is now just an express condition of receiving the subsidy. To a certain extent this is a clarification, although a breach in employment law would have been solely an employment issue and would not affect an application lodged before 4pm 27 March. |
| “You will retain the employees named in your application as your employees for the period you receive the subsidy in respect of those employees” |
This is a change. Previously an employer only needed to use best endeavours. This can be explained by the fact that an employer can now apply for the amount with the knowledge that they are only going to pay them the subsidy amount. |
| “You will not unlawfully compel or require any of the employees named in your application [4] to use their leave entitlements for the period you receive the subsidy in respect of those employees” (emphasis added) |
Employment law has always continued to apply, it is now just an express condition of receiving the subsidy. To a certain extent this is a clarification, although a breach in employment law would have been solely an employment issue and would not affect an application lodged before 4pm 27 March. |
| “You will only use the subsidy for the purposes of meeting your named employee’s ordinary wages and salary and your obligations in relation to this subsidy.” |
This is a change, there was no requirement to set aside the funds for the purpose of paying employees before 27 March. We suggest that this reflects the drastic change in trading conditions due to the lockdown and the fact that tens of thousands of jobs are now at risk. |
| “You will notify the Ministry of Social Development within 5 working days if anything changes that may affect your eligibility or entitlement to the subsidy, including if any of the employees named in your application end their employment relationship with you.” |
This is a change that can be explained by the fact that subsidy amounts are now specifically to be used for the named employees. Therefore, it follows that is a duty to notify
WINZ if the situation changes. We are not sure how someone would notify WINZ at present, given it is near impossible to reach them.
|
For clarity – the above applies only to applications made from 4pm on the 27th of March
Same employee multiple business (Incl. self-employed)
We have seen a couple of situations where a person is an employee of several businesses or is an employee for one business and has a side business (self-employed or contractor). A claim can be made for each business in this scenario. The question is how many hours the person works in each business.
The FAQs on the WINZ website supports this.
Other income sources
We have had several questions around a situation where an employee has another part-time job. Several clients are concerned that the person has other sources of income. This is not relevant; the subsidy is looking at how many hours the employee works in the affected business. Remember this scheme is about the continuity of businesses and keeping people in employment.
Employee takes another job during lockdown
For the reasons applying to the options above, a person taking another job during the close-down does not impact the main employer’s ability to make a claim for them (assuming all criteria are met). Unless the employment agreement says otherwise, then the starting point here is probably that the original employer has an obligation to pay the employee, although the employee might agree to take leave without pay in these circumstances.
The employee may be in breach of their employment agreement here if they did not receive their employer’s permission, as most employment agreements do not allow employees to work other jobs.
Casual employees
WINZ has updated its guidance on casual employees, and it matches our prior view that if you intend to keep a casual employee on for the subsidy period then they are eligible.
WINZ guidance suggests, that the hours should be averaged over the last year (for employees who have worked for more than a year) to determine if they should be treated as ordinarily working more or less than 20 hours.
We do not think a year is reasonable or practical. Businesses and employees change a lot in the course of a year. We suggest that a four to eight-week period before COVID-19 caused massive disruption would represent a fairer view, however, the WINZ view is what it is so care needs to be taken if applying a contrary view.
Normal hours and the lock down
The rules talk about normal or ordinary hours/pay. Obviously, the lock down ruins everything when considering what is normal hours. For claims lodged before 4pm on the 27th of March a commonsense approach should be taken.
In respect of claims made on or after 4pm 27 March, this is spelled out in the terms and conditions as follows:
The ordinary wages or salary of an employee 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.
Payment and processing times
The Government/WINZ have thrown more resource at processing the applications. Therefore, we are seeing that applications processed since about 25 March have been processed very fast.
Some older applications have not been paid out yet. We understand this is because there were issues verifying data with Inland Revenue or bank accounts. We understand that improvements were made to the data verification processes that stopped the more recent claims being held-up.
Last Friday we were getting calls from WINZ to clear claims that were held-up and we are starting to see the payments for older claims coming through.
We note that the WINZ website now has the following comment:
“We cannot give you information about the status of your application over the phone. We’ll be in touch as soon as we can.”
This means there is no feasible way to follow-up a claim. We are trying to establish a direct communication channel. Sorry, this is very frustrating, and it may cost jobs if the claims are not paid out soon.
Non-resident employee of NZ business
A NZ employer cannot claim in respect of an employee who is working overseas. Likewise, a self-employed person who is NZ tax resident, but derives their income working overseas cannot make a claim.
Please note that Australia has set-up a similar type of Scheme for New Zealanders in Australia.
NZ employee trapped overseas.
A NZ employee is trapped overseas is a very different scenario to the one described above. A claim should be available in this situation (if all other criteria are met).
Passive entities
Someone needs to work for the business for a Wage Subsidy to be made. While it could be argued that someone who works zero hours, is less than 20 hours, this is clearly not within the spirit of the rules.
Missed employees
In our previous FAQs, we suggested that if an employee is missed for any reason, you should just make a separate claim for that employee. WINZ website now confirms that this is the correct approach.
Subsidy period
We are seeing some confusion around the subsidy period. The period runs for the 12 weeks from 17 March 2020 until 9 June 2020, not 12 weeks from the date of application.
Payroll FAQ’s
Receipt of a subsidy amount
As we have previously mentioned, the receipt of a Wage Subsidy or Leave Payment has no direct implications to the payroll. The payroll will only include the payments made to the employee.
Accruing leave
We are getting numerous questions about where an employee continues to accrue leave while they are being paid during the lockdown but not able to work. Unless, the employee has agreed to take leave, then it seems that yes, they will be accruing further leave.
Reduction to 80%
We are seeing that many employees are agreeing to have their pay reduced to 80% of normal or down to the subsidy amount. We have then been asked how this would be achieved in payroll.
Normally, we would expect that the reduction would be done by way of reducing the employee’s ordinary hours, not their hourly rate. That being the case, it would simply be a matter of changing the hours in the payroll to reach the desired level of pay.
In the rare circumstances and employer and an employee might agree to a pay rate reduction. In that case, the pay rate would be amended in the payroll giving the required outcome.