Budget 2020 enhancements

From June 10, businesses will be able to apply for the extended wage subsidy scheme (EWSS).

The EWSS will provide payments of $585.80 for a full-time worker and $350 for a part-time worker for a period of 8 weeks. This equates to $4,686.40 and $2,800 for a full time and part-time worker respectively.

To be eligible for the EWSS a business must have experienced a 40 per cent reduction in revenue in the 30-day period prior to the application date versus the nearest comparable period in 2019 (this was originally proposed to be a 50 per cent reduction in revenue but was changed on June 5).

High growth and new businesses will be able to compare revenue to a comparable period within 2020.

Businesses which are pre-revenue research and development start-ups will now also be eligible for the current WSS as well as the EWSS if they are recognised by Callaghan Innovation and can demonstrate a reduction in actual or projected income from capital raises. Callaghan Innovation is assessing eligibility for this extension through an online application process.

Common questions about the wage subsidy scheme

Below are some common questions we have received about the current WSS. Unless indicated otherwise, it is expected that the EWSS will apply in the same manner (further details of the EWSS are not expected until closer to the June 10 start date for applications).

Can I apply for the wage subsidy simply because I expect to have a reduction in revenue?

No. The WSS has several other eligibility criteria that must be met before an application is made under the scheme. Broadly speaking the other criteria are that:

* Your business is registered in and operating in New Zealand;

* You have taken active steps to mitigate the financial impact of COVID-19 (the extent of the active steps varies depending on the date you made the application, see below)

And that you will use the subsidy to:

* retain the employees named in your application for the entire 12-week period you receive the subsidy;

* use your best endeavours to pay the employees named in your application 80 per cent of their normal salary/wages (if this is not possible you must at a minimum pass on the full value of the subsidy or the amount the employee ordinarily earns if this is less);

You also must agree to a number of other information sharing consents and agree that you will repay the subsidy amount where you are no longer eligible.

The eligibility criteria and other requirements are listed in the relevant declarations made when an application is submitted. As the WSS was amended on Friday, March 27, 2020 applications made before 4pm Friday, March 27, 2020 are subject to the first declaration and applications made on or after 4pm Friday, March 27, 2020 are subject to the second declaration.

How do I measure a 30 per cent reduction in revenue?

Under the WSS a business must experience a minimum 30 per cent decrease in actual or predicted revenue over a 30 day period during 2020 when compared to the same 30-day period during 2019 and that decrease in revenue must be attributable to the impacts of Covid-19. Separate rules exist for new, high growth, and R&D start-ups.

A “new business” is one that has been operating for less than one year at the date the application is made. A “high growth” business has not been defined by any part of the government for the purposes of the WSS and therefore is open to interpretation. In the instance you think your business is “high growth” we recommend the justification for this is clearly recorded and documented in the event your application is reviewed/audited (covered below).

Under the WSS a “high growth” or “new business” must also experience a minimum 30 per cent decrease in actual or predicted revenue but may compare a 30-day period during 2020 to an earlier 30 period during 2020 when calculating the decrease in revenue. Similar to the regular business requirement the decrease in revenue must be attributable to the impacts of Covid-19.

As noted above, Budget 2020 included an announcement that pre-revenue research and development “start-up” businesses will be eligible to treat a 30 per cent fall in in projected capital income as a result of Covid-19, as a fall in revenue for the eligibility of the WSS. To be eligible these employers must:

* be research and development intensive ‘start-up’ businesses

* be ‘seed’ or ‘venture’ backed;

* be Callaghan Innovation affiliated as of 17 March 2020;

* have no other revenue other than government support and seed or venture capital.

The EWSS requires a 40 per cent decrease in revenue across a slightly different comparison period, which is covered in further detail below.

What time period should I look at?

The comparative 30-day period does not need to be a calendar month. For example the period March 26, 2020 to April 24, 2020 could be used as this is the immediate 30 days following the first day of the alert level 4 lockdown. This would then be compared to March 26 to April 24, 2019.

For the EWSS, the 40 per cent revenue loss should be measured for the 30 days prior to the application and compared to the ‘nearest comparable period’ in 2019.

I am self-employed, how should I measure a decline in revenue?

Where your self-employed revenue varies between months this can cause uncertainty. The revenue comparison could take a 30-day period in 2020 and be compared against the previous years’ monthly average to determine whether a 30 per cent decrease has occurred. Where an approach like this is taken it should be clearly recorded and documented.

If I applied on the basis of an expected revenue drop and this has not eventuated, do I need to repay the wage subsidy?

If you have made a wage subsidy claim on the basis of anticipated revenue decrease (that would meet the requirements set out above) and the decrease in your businesses revenue over the projected period turned out to be less than the required 30 per cent threshold, then the official guidance is that you are required to repay the full wage subsidy received (there are varying reports as to what the Ministry of Social Development (MSD) has told individual businesses about this requirement).

If you think this might apply to you, information on repaying the subsidy can be found here and the link to complete the form to make the repayment can be found here.

How do I determine whether my employee is part time or full time?

A full-time employee for the purposes of the WSS is a person that works 20 hours or more per week.

A part-time employee for the purposes of the WSS is a person that works less than 20 hours per week.

Where an employee’s hours vary from week to week to determine whether they are full-time or part-time for the purposes of the WSS their weekly hours for the last 12 months should be averaged and considered against the two statements made above.

What do I need to pay my employees?

For the employees named in your application you must make your best endeavours to pay those employees at least 80 per cent of their usual salary or wages for the entire 12-week period you receive the wage subsidy.

Similar to the question immediately above, where an employee’s salary/wages varies from week to week their weekly gross (before tax) pay for the last 12 months should be averaged and used as the basis of their “usual” salary/wages.

Where it is not possible to pay the named employees at least 80 per cent of their usual salary or wages at minimum the wage subsidy amount received must be passed onto the named employees (this is $585.50 per week for full-time employees and $350 per week for part-time employees), unless the employee ordinarily earns less than these amounts.

My employee has been on ACC or Parental Leave, what do I do with the wage subsidy payment in relation to them?

Paid Parental Leave

Employees that are receiving paid parental leave entitlements are not eligible to be named on an application under the WSS. If you have made an application under the WSS for an employee receiving paid parental leave you will have to repay to MSD the amount that relates to this employee. If you made an application under the WSS and did not include an employee who was receiving paid parental leave but that employee has since returned to work, you are eligible to make a second application in respect of this employee.

ACC payments

Similar to the analysis above, if an employee is receiving weekly compensation payments from ACC they are ineligible to be named on an application under the WSS. If an employee receiving weekly compensation payments from ACC returns to work you are eligible to make a second application in respect of this employee.

If an employee is injured and starts receiving ACC compensation payments after you have made an application under the WSS, you must declare the Wage Subsidy to ACC as income and their weekly compensation may be altered accordingly.

I have seasonal workers and/or fixed-term contract workers, what happens when their season or fixed term contract comes to an end during the Wage Subsidy period?

If you have made an application for employees whose employment relations will cease and you proceed to stop paying them during the 12-week period you have received the subsidy, you will be in breach of your declaration made to pay all named employees for the duration you have received the subsidy.

Where the employee’s fixed-term contract or seasonal work has ended and you will not continue to pay the named employee you should notify MSD of this change in circumstance and repay the remaining amount of the subsidy to MSD.

In the instance of a fixed-term employee, the employer and employee may renegotiate terms to extend the fixed term period to the end of the 12-week wage subsidy period for that employee to receive the full benefit if the subsidy.

I’ve had to make an employee redundant, what do I need to do?

If you have made an employee redundant and they were named on your application under the WSS you will be in breach of your declaration made to retain your employees named in your application.

You are able to use the wage subsidy amount to pay the employee any “notice period” obligations arising from the redundancy and the remaining balance must be repaid to MSD (i.e. total amount received less amounts paid to the employee for weeks employed less notice period obligations).

You cannot use the wage subsidy to make any contractual redundancy payments to an employee.

My employee has voluntarily left, what do I need to do?

If an employee resigns during the wage subsidy period you must inform MSD of the updated circumstances, however the remaining wage subsidy amount does not need to be repaid to MSD. The additional amount should be used to subsidise the wages of other employees.

What happens if my business is placed into receivership of liquidation?

If your business is liquidated or a receiver / liquidator sells your business during the subsidy period, and the new owners do not take on the employees named in the subsidy application, then the business will not have met their obligation to retain staff and they must repay any amount of the Wage Subsidy remaining for these employees.

Where employees are made redundant, the wage subsidy can be used to pay the notice period but cannot be used to meet any redundancy payments owed under contract and cannot be used to support other remaining affected employees.

I am not entitled to the wage subsidy scheme, is there anything available to help pay employees who are unable to work due to Covid-19?

If your business is not eligible for the WSS but your ability to support your employees have been negatively impacted due to the Covid-19 public health restrictions you could be eligible for the Covid-19 Leave Support Scheme (LSS).

You are able to make an application under the LSS if your employee is not able to work because of the Covid-19 public health restrictions. This mean they are:

* At high risk if they contract Covid-19 per the Ministry of Health guidelines;

* Have household members that are at high risk if they contract Covid-19 and the Ministry of Health recommends that employee remains at home to protect that person.

* Have been in contact with a Covid-19 positive person and must self-isolate;

* Have tested positive for Covid-19 and cannot return to work until cleared by a health professional.

The LSS is paid at the same weekly rate as the WSS ($585.80 per week for full-time workers and $350 per week for part-time workers) but is paid in a lump sum for 4 weeks only. If an employee is impacted by any of the listed bullet points above for a period of more than 4 weeks you may re apply for the same employee in the fourth week of receiving the first LSS payment.

You cannot make a claim for any employee under two different schemes at the same time. If you have made a claim in respect of any employee under the WSS and that employee cannot work due to the factors listed above, you are not able to make a claim under the LSS.

Will anyone be auditing my application?

As seen in the media in recent weeks, MSD have requested that numerous applicants of the WSS repay the subsidy amount in full. This is a result of the Government auditing applications using information available to MSD (from the application itself) and information from Inland Revenue (for example, monthly payroll data). We suggest that businesses be ‘audit ready’ in the event MSD or Inland Revenue review your application.

When can I apply for the EWSS?

Full details of the EWSS have not yet been made available, however our expectation is that you cannot make a claim under the EWSS until 12 weeks have passed from the date of your original WSS application.

The earliest date the EWSS can be applied for is June 10, 2020, being 12 weeks from the first day the WSS was introduced and available.

If you did not make a claim under the WSS until, say, April 30, 2020 our expectation is that you must wait until July, 23 2020 (after 12 weeks have passed) until you can make a claim under the EWSS.

How do I measure the 40 per cent reduction in revenue required for the EWSS?

To make an application under the EWSS your business must experience a minimum 40 per cent decrease in revenue for the 30 days immediately before you apply for the EWSS compared to the closest 30-day period during 2019.

Similar to the concessions available in the WSS, new and high growth businesses may compare the 30 days immediately before application to a period of 30 days earlier in 2020.

The EWSS is for a period of eight weeks and our expectation is that all other eligibility criteria and declaration requirements of the WSS will largely remain the same.

Here’s a summary:

Do I have to take my annual leave if asked?

Yes, but only if done right. You accrue leave at the end of the 12 months, so anything on your payslip before then you can’t be forced to take. An employer must consult you first. There must be a “good faith” attempt to agree a solution. If this isn’t successful the employer has to give you at least 14 days notice that they require you to take leave.

Can I take unpaid leave instead?

Yes, by agreement.

Can my planned leave be cancelled if I’m working in an essential business?

No, your leave can’t be cancelled without agreement. You could also agree to defer it. Pragmatically speaking, this is a crisis and you may want to consider delaying as you can’t really go anywhere.

Do I have to take my annual leave if the business is receiving the wage subsidy?

You do not have to take annual leave if the employer is receiving the wage subsidy. The Government has been clear in its most recent clarification an employee cannot be forced to take leave in order to receive the subsidy. It is intended to help pay an employee’s salary and cannot be conditional on taking annual leave.

Does my subsidy go to me or the business?

It goes to the business to help meet wage needs.

Can I be made to take some of my leave in order to help the subsidy top up my wage?

It wouldn’t be fair for an employer to do this but it could be done by agreement.

Are workplaces able to get the subsidy for casual workers?

An employer can apply for the subsidy for casual employees.

What happens in the situation where some staff are being asked to take annual leave but others are receiving 80 per cent of their wage?

It depends on the circumstances. It may be some employees receiving 80 per cent can work from home and they have reached agreement with the employer. Whereas those asked to take annual leave (subject to what we said before) may not be able to, so an agreement to do this may help. You may work in the non-essential part of the business while others are deemed essential.

My workplace has received the wage subsidy. However, rather than paying me the 80 percent minimum of my normal income they have reduced my working hours so I will effectively be paid by the subsidy with no top-up. Isn’t this against their obligations?

Any reduction in hours below your normal level has to be done by agreement. But in the circumstances this is something a lot of employers are doing to help manage their revenue loss. If the employee has agreed then this would be legal, but only if the employer passes on every cent of the wage subsidy. The issue is that the 80 per cent minimum is not an absolute requirement. Employers have to use best efforts to pay it. If no agreement is possible, then a fair and proper process, like a restructure of hours and tasks, is also possible but it must be done in consultation with staff. Redundancies, ultimately, could be on the table too.

We have been told the money “simply isn’t there” to top us up to the 80 percent, therefore we get nothing, is this right?

The government has asked employers receiving the subsidy to make their best efforts to achieve the 80 percent and if not possible they need to be paying the subsidy at a minimum. But businesses beware, not possible is a high threshold. Employers should be talking to their employees and spelling out what they are facing. Employers need to be able to show they acted reasonably.

Can my workplace use a force majeure (an act of god clause) not to pay us?

No. There are, however, agreements which contain suspensions-without-pay clauses for exceptional circumstances. One of those is usually a pandemic. It’s currently untested law as to whether a suspension without pay now would be legal when challenged. It is something some employers are turning to. The key, again, is to consult prior to using it.

I am an essential worker but I have high-risk health issues which mean I can’t work. What are my options in relation to pay? Sick pay or leave?

The default is sick leave is for employees who are ill or have to care for someone who is, so in this instance it won’t necessarily apply. You can agree to take a period of annual leave. Another option may be to discuss with your employer what you would need to work from home or steps both parties could take to ensure your safety. The Government has signalled it is considering additional support for essential workers with high-risk conditions. At the moment we are unsure what that looks like.

Pre-Covid-19 I had a contract which guaranteed eight hours of work a week but I was normally doing between 24 and 50. Since the lockdown I am only being paid for the eight. What am I entitled to?

The company should be attempting to find an average hours figure and pay on that basis. A helpful period for the average income could be eight weeks. This has been accepted in the past by labour inspectors as a fair snapshot.

My company is reducing its employee’s wages. They’re using a percentage system that matches three different salary bands. I will get 10 percent less effective as of 1 April. Is this legal?

It is if the reduction has been agreed. There should have been an open discussion with employees which allowed them to signal their agreement. If that wasn’t the case, then the next option for an employer may be to consult with staff around why the reduction is required and provide them with an opportunity to comment.

If an essential business is staying open during the four-week lockdown period but only requires a skeleton staff can they instruct staff to stay home and not pay them for it?

Let’s forget about Covid-19. Any other day if they send you home and they can’t meet your agreed hours then they must pay for it. However, you can agree to such a change. This is an area where you will likely need more legal advice.

I was on a fixed term contract which ended appropriately. However, the business is going into a shutdown and I’m worried I’m not going get my notice period paid.

You have the right to be paid your notice period. The shutdown does not impact it.

I am an essential worker but will need to help look after my children? What are my rights?

It is a really tough situation and one that is falling through the cracks. You can take annual leave if the employer agrees but there is, currently, no government support in this area. It needs to be addressed.

I have a flatmate who is high risk and I am an essential worker. He wants to go and stay elsewhere. Can my employer help meet the cost of that?

You should talk to your employer about the options available to significantly reduce the risk of catching and giving Covid-19 to your flatmate. That could require changes to the way you work or where. If that is not possible the employer may have to look at other ways to reduce the risk of transmission, including helping house the person somewhere else.

I was due to start a new job next week and had signed the contract. Yesterday they rang to say my start date was postponed indefinitely while they sorted out the burden of the alert level 4. Can they do this?

The start date can be moved by agreement but effectively you are covered by the law having signed the contract. Given you are a signed up employee, they should either be providing you with work or applying for the subsidy.

My employer has offered us being made redundant now or employed at less than 50 percent of salary for the next 12 weeks to take advantage of the subsidy, then be made redundant. Is this legal?

No. The employer has given a clear indication you are to be made redundant. There are also duress issues here too. It doesn’t mean there can’t be full and frank discussions but already signalling you’re going to take the wage subsidy but everyone will be made redundant still is very high risk.

What if the company I work for says it has no money to pay wages at the moment?

They should be trying to get the subsidy. But, ultimately, if the business goes bankrupt you are going to lose most of what you are due.

If I take my annual leave by agreement now will it be worth more than in three months?

That’s likely, given employers are reducing hours and pay.