NZ Government makes changes to Wage Subsidy scheme to keep workers in jobs

Effective 27 March, modifications to the Wage Subsidy Scheme will apply to ensure people don’t lose their jobs during the national lockdown. The Wage Subsidy is a Government payment to help employers pay wages.

The changes focus on helping businesses who are not able to operate during the lockdown to keep their workers and position them to exit the lockdown and look to recovery.

The modifications include:

  • Employers accessing wage subsidies must make every effort to pay employees at least 80% of the income they received prior to their wage being affected by COVID-19, and if they cannot do this, they must pass on the full wage subsidy to employees.
  • Employers cannot terminate an employee while receiving the wage subsidy.
  • The COVID-19 Leave Payment Scheme will be disestablished and will become part of the Wage Subsidy Scheme. The original Leave Payment Scheme was set up when few people were in self-isolation. The Government is working on arrangements for those in essential work who require sick leave due to COVID-19.

Employees must be paid appropriately under their employment agreements for the hours they work during the lockdown. All employment legal obligations still apply, including paying staff for hours worked if over and above 80% of their wages/salary.

The names of businesses who have been paid the wage subsidy will be made public. Any employer who does not pass on the full Wage Subsidy to employees could soon face consequences.

The financial cost of the scheme has now been estimated to be around $8-12 billion.

The Government is preparing an appropriate audit process that will act as a backstop for this high-trust model.

Our article NZ announces further assistance with wage subsidies, mortgages and business finance outlines other financial support measures announced last week to assist businesses and workers during this challenging period, including:

  • a six-month mortgage holiday scheme for mortgage holders and SME customers whose incomes have been affected by the COVID-19 pandemic.
  • the $6.25 billion Business Finance Guarantee to provide short-term credit for SME customers, and business tax measures to support cashflow and help businesses continue to operate.

Should you wish to discuss the above matters with one of our William Buck business or tax advisors, please get in touch with our Auckland team on 09 366 5000 or our Tauranga team on 07 927 1234.