What you need to know about the Wage Subsidy Extension
As you may be aware the Government announced that a Wage Subsidy Extension will be available for a further 8 weeks for the businesses most affected by COVID-19.
Below are some of the key facts about the Wage Subsidy Extension that you should know about before applying.
The criterion for the Wage Subsidy Extension is very similar to that of the original Wage Subsidy. However, there are some distinct changes:
- Businesses must have had a minimum 40% revenue drop over a 30-day consecutive period in the 40 days immediately prior to application, attributable to the COVID-19 outbreak.
- The employees in the application have not been given notice of redundancy (this means that if a business wants to apply for employees that have previously been made redundant, they must be rehired and the redundancy notice revoked).
- Businesses cannot apply for employees that are on ACC earnings related compensation at the time of application. However, if an employee returns to work from ACC earnings related compensation during the Wage Subsidy Extension period, businesses can apply for the Wage Subsidy Extension for that employee.
- When a business receives the Wage Subsidy Extension they are obligated to notify the employees of the conditions that apply to the receipt of the Wage Subsidy Extension.
- When submitting an application for the Wage Subsidy Extension, employers are required to confirm they will retain the employees named in the application for the period of the subsidy. This does not differ from the most recent declaration, but it will be new to employers that applied for the original subsidy prior to 27 March 2020.
Applying for the Wage Subsidy Extension
The Ministry of Social Development (Work and Income) has also specified that when applying for the Wage Subsidy Extension for employees that work variable hours an averaging approach can be used to determine which rate to apply for.
If the averaging approach is used, businesses must apply it as follows:
- Use the average hours worked each week over the last 12 months; or
- If the employees have been employed for less than 12 months, then the business must take an averaging approach over an 8 week period, or another period (if this is more appropriate).
Paying Employees with the Wage Subsidy Extension
In short, paying employees that are normally paid below the amount of the Wage Subsidy Extension, can get fairly confusing.
When paying employees the Wage Subsidy Extension, businesses are still required to use best endeavours to pay at least 80 per cent of each named employee’s normal wages or salary and pay at least the full amount of the subsidy to the employee.
However, where the ordinary wages or salary of an employee named in the application was lawfully below the amount of the subsidy before the impact of COVID-19, an employer is to pay the employee that amount.
Ordinary wages or salary has been defined (in relation to an employee) as:
- The ordinary wages or salary as specified in the employee’s employment agreement as at the date you applied for this subsidy; or
- If the business ended the employment relationship with any employee named in the application as a result of the business being adversely affected by the COVID-19 outbreak and has re-employed that employee before the date of application of the Wage Subsidy Extension, then ‘ordinary wages or salary’ means the ordinary wages or salary as specified in the employee’s employment agreement as at the date that employment relationship ended.
It appears to be permissible for businesses to:
- Use an averaging approach when working out whether to apply for an employee as part-time or full-time, for the purposes of an application for the Wage Subsidy Extension; but then
- Apply an “ordinary wages” approach based on the salary or wages specified in the employee’s employment agreement, when calculating the correct amount to pay an employee.
This is unusual as an employee’s wage rate in their employment agreement multiplied by the ‘ordinary hours’ in their employee’s employment, may in some cases be considerably less than their average weekly pay. The Ministry of Social Development may not have intended this anomaly and we recommend employers contact us if they encounter this issue.
If you need comprehensive advice on your obligations or rights under the Wage Subsidy Extension, please don’t hesitate to contact a member of Lane Neave’s Employment Law Team.