Using Wage Subsidy Funds for Redundancy Payments

Question

If we received the Wage Subsidy for an employee with the intention of retaining him, but now realise we will have to let him go, can I use the balance of the subsidy as a redundancy payment to him?  We have no redundancy clause in our Contract so are not obliged to pay anything additional to his annual leave entitlement.  He has been on full pay since the lockdown, at home not working.

Answer

The following is from the Work and Income website: 

If you have to make an employee redundant during the subsidy period:

• you can use the Wage Subsidy to pay the employee any notice period arising from the redundancy;

• you must repay any balance of the Wage Subsidy that’s left after the notice period has been paid;

• you cannot use the Wage Subsidy to make any contractual redundancy payments to an employee; and

• you must notify the Ministry of Social Development within 5 working days if any of the employees named in your application end their employment relationship with you.

THE GOVERNMENT CONTINUES TO MONITOR THE MEASURES THAT THEY ARE TAKING IN RESPONSE TO COVID-19 AND THESE MAY BE CHANGED AT NO NOTICE, AS THEY SEE FIT. IT IS FAIR TO POINT OUT THAT WE ARE BUSINESS ADVISORS AND NOT LAWYERS.  OUR ANSWERS ARE BASED ON OUR UNDERSTANDING OF THE SOMEWHAT LIMITED INFORMATION THAT HAS BEEN MADE AVAILABLE PUBLICLY AT THIS POINT.