COVID-19 and the Wage Subsidy Scheme: FAQ
About the Author:
Paul Wilton (editor)
CA with degrees in commerce, accounting and information technology. Paul worked overseas in the “Big 4” accounting firms and served as a director at Audit New Zealand before setting up his own consultancy. Author of A-Z of New Zealand Business Law, Paul has over 20 years of experience as a business owner and consultant. He joined FBA in 2004 and is totally committed to providing excellence in quality and value to our subscribers.
We continue to receive questions about the wage subsidy scheme, which was further clarified by the Finance Minister in a press release following the 27 March announcement of the modifications. This article compiles a few of these questions and one relating to pay for the upcoming public holidays.
Question
There is a confusion about the wage subsidy. Are employers required to pass the weekly subsidy to employees? Most our clients' employees are on much higher salaries than the $585 per week. For those clients, they have to top up their employees' pays. But for the part time employees, especially, they may work 10 hours a week at $20 per hour, their weekly pay = $200 which is less than the under 20 hours subsidy of $350. Do employers need to pay the part time staff $350, although the staff's normal part time job weekly pay is only $200?
Answer
There has been an updated release from the Finance Minister, clarifying the modifications originally announced on 27 March. See examples below:
Question
The wage subsidy is not taxable, will staff wages be deductible, or have to be proportioned to remove the non deductible part? Eg, staff weekly wage = $2,000 wages subsidy =585, so deductible = $2,000 - 585 ? How does this work? Please help.
Answer
From Work and Income:- Your employee will need to pay tax on their wage subsidy payment as it’s paid to them as part of their normal wages. This means it's subject to the usual deductions, eg, PAYE, Student Loan, KiwiSaver, ACC, etc.
Question
If a company has no staff, but two directors each of whom is entitled to get the subsidy, what is the entitlement? 1 x $7029 ? or 2 x $7029?
Answer
If there are two directors who earn a salary from the company and the company is entitled to the wage subsidy, then the amount received will be 2 x $7029. Our understanding is that WINZ requires each director to be named in the application.
Question
We are an essential service but due to covid19 we are working reduced hours and most staff are working approximately 50% of their working day. We are paying those employees 80% of their pay by topping up with annual leave. We also have a few workers who are working their normal hours. Can you please clarify the following:
Do we have to top up to 80% without using their annual leave, or can it be topped up with annual leave
Are the employees who are working 100% of their hours entitled to 100% of their pay, or do we reduce this to 80% regardless of the fact that they are working 100%
Answer
A 1: An employer cannot require an employee to take annual leave unless 14 days' notice is given. Decisions about annual leave need to be made in consultation with employees, by negotiating in good faith. We'd suggest that this includes advising your staff of their rights in this regard, before asking them to use their annual leave for a top-up.
If you are able to top up the wages of your staff who are receiving the subsidy to 80% of their normal wage, then you are required to do so. If doing so will bring the business down, then the minimum you need to pass on is the subsidy itself. Finance Minister, Grant Robertson, clarified in his updated press release that you can pay your staff their normal wage if that is less than the subsidy.
A 2: Also in the above release, the Minister clarified this point as follows:
The wage subsidy is a Government payment to help employers pay wages. It does not change any other employment law obligations, meaning employees must be paid appropriately under their employment agreements for the hours they do if they work during the lockdown.
Employees who are working during the lockdown should therefore be paid their normal wage.
FBA Editor
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