The Wage Subsidy...
We understand that this is an extremely stressful time for many New Zealanders and that many of you are facing changes and challenges to your business.
We want to support you every step of the way which is why we have put together this blog post to provide some clarity about the wage subsidy and answered many of the questions we are currently getting. Have a read through and as always, if you have any questions then give us a call. We would love to help.
Applying for the Subsidy
If your looking to apply for the subsidy, then here’s some simple steps to ensure you have covered all of your responsibilities under the Employment Relations Act 2000 and the COVID Isolation Period.
1. Consult with your employees (using the template provided below and fill in the blanks first), to read to all staff. This will help you to explain what the impact is to your business and what it means for them. Ask for their permission to apply for the subsidy by replying via email with their response to the consultation document.
2. Apply for the subsidy once you have permission from your staff to apply on their behalf. You can apply here (if you haven’t already) https://www.workandincome.govt.nz/products/a-z-benefits/covid-19-support.html#null Click on apply for wage subsidy.
3, Make sure you read and understand the declaration. It outlines your responsibilities during this time. Here is the link >> https://workandincome.govt.nz/online-services/covid-19/declaration-wage-subsidy.html . We will explain this in more details to come.
4. Wait patiently to hear back about your application. It may take a couple of weeks.
5. Check to make sure you are doing the calculations correctly, for ordinary pay and annual leave deductions.
If you have already applied for the subsidy without following the above steps then don’t panic!
These were extenuating circumstances, so now is a good time to go back and complete those procedures not done properly.
Make sure you:
- Consult with staff, letting them know that you had applied for the subsidy and are waiting to hear back or receive the additional funding to support you during this difficult time. Read the letter, explaining the process you’ve taken and the information you’ve provided to Ministry of Social Development. You can still use the consultation document provided to get all the information down and make it available to staff.
- Make sure you understand the declaration when you applied for the subsidy.
- Check to make sure you are doing the calculations correctly, for ordinary pay and annual leave deductions.
Understanding the Declaration
There have been a number of updates with this declaration and as such you should be following the one which you applied under by checking the date on your application. Much of the confusion that was surrounding the first declaration has been clarified in the subsequent ones. Here is a copy of the declaration:
“Your obligations to use the subsidy to retain and pay your employees:
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;
You must ensure that you follow all requirements under the ERA 2000, if unsure please contact us to gain support 0800 47 54 83.
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;
This means that during this time (12 weeks), you will not change their employment agreement i.e reduce their hours, or wages.
You will retain the employees named in your application as your employees for the period you receive the subsidy in respect of those employees;
The employees who you’ve applied for must remain as employees for the length of the 12 weeks that the subsidy covers
You will not unlawfully compel or require any of the employees named in your application to use their leave entitlements for the period you receive the subsidy in respect of those employees;
Unless you have a business interruption clause which states that you can direct staff to take leave unpaid or paid leave during specific events, at no time can you make staff take or use their annual leave. You can ask if they would like to use annual leave to make up any difference in income from 80% to 100%. However, if their answer is no, then you must not force them to use annual leave to reduce your liability. You also cannot use the subsidy to reduce your annual leave liability.
Since 2017 we have always included a clause for business interruption in our employment agreements due to the Rena incident in the Bay of Plenty, which impacted may businesses on the waterfront. Check that yours has this included
You will only use the subsidy for the purposes of meeting your named employees’ ordinary wages and salary and your obligations in relation to this subsidy.
This means that the subsidy is only to be used for wages. No, you cannot use it to purchase a new car or tv. You can however use any remaining wage subsidy to cover other staff wages that the subsidy does not fully cover.
You remain responsible for paying your employees ordinary wages and salary for the employees named in your application.
You are the one responsible for meeting the requirements of the wage subsidy.”
This means that you must for the period you receive the subsidy:
- Use your best endeavours to pay at least 80 per cent of each named employee’s ordinary wages or salary; and
- Pay at least the full amount of the subsidy to the employee; but
- Where the ordinary wages or salary of an employee named in your application was lawfully below the amount of the subsidy before the impact of COVID-19, pay the employee that amount.
Key words to note here are:
At least – If you can pay more than the 80% of pay then you should be doing so, however, you must try to hit the target of 80% or you may be required to explain why you have not.
80% - if you are reducing their wages, you must consult with them and explain why and work in agreement with them as to how to proceed.
The period - is defined as 12 weeks. You need to be able to pay them throughout the whole 12-week period.
Each named Employee – this is everyone whom you applied for and they must not be made redundant during this time.
This goes without saying – if your staff are working more than 80% you need to be paying them what they are working.
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.
In the second declaration, they have updated what ordinary wages means, and have based this on what is set out on the employee’s employment agreement. But they have said “best endeavours” which suggests that you also need to ensure that you are being fair with this. So, check your employee’s employment agreement and make note of this. Remember too, that while their guaranteed hours may state a lower wage, the employee may actually have been completing more hours, and you may need to calculate this. The Holiday’s act may be your best starting point for this. The link to this is here. http://www.legislation.govt.nz/act/public/2003/0129/latest/DLM236852.html
Some have asked what the calculation of wages for staff who do more hours that in their agreement, as per the Holiday’s Act, I would use 4 weeks as a starting point.
The biggest take away here is to discuss your application with your employees and gain their consent to information sharing. The following provides a little more detail.
"You have discussed this application with the employees named in it.
The employees named in your application have consented (in writing, if practicable) to the following matters:
People have the right to request access to all information held about them under the Privacy Act, they can contact email@example.com to make a request.
The employees consent to:
- the information about them in your application being provided to the Ministry of Social Development; and
- you providing the Ministry of Social Development with any further information about them required in order for the Ministry of Social Development to make decisions about your application, and to audit and review any subsidy that is granted (to you or to another applicant) and how any subsidy granted is paid to employees; and
- you advising the Ministry of Social Development if they end their employment relationship with your business at a time when you are receiving a subsidy with respect to them.
The employees consent to the information about them provided to the Ministry of Social Development with respect to this application (both at the time of application, and any information provided at a later time):
- being used by the Ministry of Social Development to make decisions about your application, and to audit and review any subsidy that is granted (to you or to another applicant) and how any subsidy granted is paid to employees; and
- being shared by the Ministry of Social Development with other agencies (including non-government agencies) to the extent necessary in order for the Ministry of Social Development and its auditors to make decisions about your application, and to audit and review any subsidy that is granted (to you or to another applicant) and how any subsidy granted is paid to employees; and
- being used by the Ministry of Social Development to make decisions about other assistance and entitlements to the extent your application and any subsidy granted is relevant to them (for instance, where your application is relevant to an employee’s application for other assistance).
The employees consent to other agencies (including non-government agencies) providing information about them to the Ministry of Social Development and its auditors, to the extent necessary in order for the Ministry of Social Development to make decisions about your application, and to audit and review any subsidy that is granted (to you or to another applicant) and how any subsidy granted is paid to employees.
Advise your employees they can request access to information you have provided in your application under the Privacy Act.
The responsibility is on the employer to ensure that employees are aware that their personal information has been used in order to access the subsidy. "
Made a mistake? Take a deep breath!
You may not have been correct in your calculations initially, but the law won’t penalise you so long as you can either justify your calculations, or explain why you did it the way you did. Also you can correct your mistakes at a later time if required.
Have some questions?
Then give us a call on 0800 HR LIVE. We want you to have all the support you need in this stressful time and if we can help in any way, let us know!
If your feeling stressed and overwhelmed then make sure you take time to breathe and look after yourself first, then work towards giving some answers to your team. If your struggling with stress then checkout this link for more information on Red Brain versus Green Brain to help mange your extremely important mental health.
The advice included here is aimed to give as much clarity as possible based on the information available at the time of publishing. Whilst we endeavour to keep up with the information, it is likely that this information may change and as such, please we cannot be sure that it is current when you read it. Please ensure that you read your employment responsibilities relating to this and keep updating your knowledge base in regards to this pandemic.