Get advice for someone who knows on the Wage Subsidy.
The main issue for most of you at the moment is clarification regarding the wage subsidy package. There is a lack of clarity and information currently.
In simple terms, there have been two (2) wage subsidy models released by the Govt – Model 1 and Model 2.
To qualify for Model 1, the employer has to demonstrate that their business had suffered an actual loss of 30% of more in revenue over any month Jan thru June 2020 against the comparable month in 2019.
To qualify for Model 2, the employer has to show that the business has experienced a minimum 30% decline in actual or predicted revenue. This is over a month (from Jan 2020 through to the end of the scheme) compared to the same month last year.
The critical difference is adding ‘predicted’ into the definition because this means most companies will qualify due to the lockdown requirements.
The amount of money under Model 1 and Model 2 remains the same ($580.80 for employers higher than 20 hours per week and $350 for employees 20 hours or less)
Under Model 1, to qualify for the subsidy, the employer needs to guarantee that they will pay the employee a minimum of 80% of their regular weekly income.
Under Model 2, to qualify for the subsidy, the employer only needs to agree that they will try (best endeavour) to retain the employees on at least 80% of their regular income.
The critical difference is that under Model 1, you only get the money if you can guarantee 80%. While under Model 2, you will still get the subsidy if you can only afford to pay less than 80% - (this can mean passing on the $585 or $350 if this is your “best endeavour”)
Under Model 1, to qualify for the subsidy, an employer has to guarantee that their employees will be paid for a period of up to 12 weeks.
Under Model 2, the 12 weeks has been removed. The subsidy is now available for the period for however long the subsidy is available from the government.
Under Model 1, there was a cap of $150,000 per business.
Under Model 2, there is no cap in place.
If a business qualifies under Model 2, there should be no reason for any employees to become redundant. As a minimum, companies should be able to pay their employees the entire subsidy amount during the period of lockdown (for however long the subsidy exists).
Finally, from discussions with WINZ, the subsidy is paid to the business as ‘funds’. The employer then uses their regular wage system to pay their employees. This means it is subject to PAYE and Kiwisaver deductions, and the employer is still required to make their Kiwisaver contributions.
WINZ has also advised that if an employee is made redundant, the usual tests will continue to apply to emergency benefit applications. This may mean that if their partner or spouse is still earning an income, they are unlikely to qualify for the emergency benefit.
The priority for every employer should be to try to retain their employees in employment, even if this is at the lowest possible costs (i.e. just the government subsidy amount.
Wage Subsidy and Leave Payment
Are those at risk, but under 70 with health conditions, covered by the leave payment?
The Wage Subsidy is designed to support employers to keep their staff employed, while the government considers changes that may be needed while the disruption continues. This is also to ensure the future viability of NZ businesses.
If someone is required to self-isolate and cannot work from home (provided they meet the other eligibility criteria), then the employer can apply for the COVID-19 Leave Payment.
Are Wage Subsidy and Leave Payment payments subject to tax?
The Covid-19 wage subsidy is not subject to GST and is not taxable. However, any payment paid through regular payroll systems is subject to all usual deductions - PAYE, Kiwisaver and student loan deductions.
The Covid-19 leave payment for self-isolation is paid to replace taxable income, so is subject to tax.
Should I receive an email confirmation when applying for the government Wage Subsidy and Leave Payment?
No, but you will receive an email about the outcome/ details of your application once it has been processed.
Can you make multiple applications for the same employee as the situation changes for the Wage Subsidy and Leave Payment?
Each business can only apply once for the Wage Subsidy. The Leave Payment can be accessed on an ‘as needed’ basis.
If an employee has sufficient annual or sick leave entitlements to cover the time off, can they also receive the subsidy on top of receiving that entitlement?
You and your employee can agree to use any form of paid leave (e.g. annual leave) to cover their period of self-isolation. However, employees aren’t required to have used any or all of their paid leave entitlements before they can receive this payment.
Do the subsidies cover staff who are at risk, but the nature of their work means they cannot work from home?
To qualify for the leave payment, employees need to be legally working in New Zealand and they need to self-isolate in line with Ministry of Health Guidelines. They must have registered (by calling) as needing to self-isolate with Healthline, cannot work from home and their self-isolation is not because they left NZ since the travel restrictions on 16 March 2020 and have since returned.
I don’t meet the criteria, what can I do?
If you clearly don’t meet the criteria, then we recommend seeking advice from business partners (the bank, financial services, mentors etc) or from the Regional Business Partner programme. To contact the EMA on this, email email@example.com. Apply anyway, as MSD wants to help.
We have been told that the subsidies incur PAYE tax, would all wage implications apply? eg: KiwiSaver, student loan repayments, child support, whether it would be included in gross earnings when employers go to calculate annual holidays.
Yes. In the hands of an employee, the subsidy is wages and attracts on all normal obligations and deductions unless these are specifically altered by the government. This is a subsidy scheme to help employers pay wages – it doesn’t change any wage implications unless another policy has been altered.
How does the Wage Subsidy work for contractors?
Same as for businesses, when actual or projected losses meet the threshold criteria. Applications to MSD same as for businesses. Contractors can apply as self-employed and are required to meet the criteria. Businesses should not be seeking the Wage Subsidy for contractors.
If I apply for the leave payment for staff in isolation, does their annual leave accrue as per their normal full-time pay rates or will they be reduced for the lower payment value?
Their leave accrues at the normal rate.
How does the 150k limit work?
Under Model 2, the cap has been removed. There is no cap for how many payments a business can receive through this scheme under model 2.
How do I apply for the Wage Subsidy and Leave payment?
Application for the government Wage Subsidy and Leave Payment is here.
We are a small high growth company, how does the revenue reduction based on last year impact our year’s growth and ability to apply now?
The package does not distinguish between low and high growth businesses. Businesses can use actual or forecast revenue to determine their 30% loss of income attributable to COVID-19 (they should retain a record of how they have determined this in the event of future auditing).
Can Non-profits/incorporated societies can claim the Wage and Leave subsidy?
Charities and not for profits can apply for the scheme if they are an employer, are registered in New Zealand (business IRD number, GST registered, NZBN, or Companies office), and have an income loss of 30% attributable to COVID-19.
When will leave payments be made?
The government endeavours to pay within 5 days of application, however, it depends on the evidence provided.
What are considered essential services?
The Wage Subsidy is available for all employers, contractors, sole traders or self-employed individuals who meet the qualification criteria on the website. There are no criteria for these subsidies related to ‘essential services’. The definition of essential services as per the government’s latest announcement.
If I have crucial staff stuck overseas who are on a work visa, so not a Permanent resident or citizen, what can I do to get them back in the country?
The current temporary border measures - The government has further strengthened border travel restrictions, closing our border to almost all travellers from 23.59 on Thursday 19 March 2020. Exceptions can be made on a case-by-case basis by Immigration New Zealand for:
- humanitarian reasons
- health and other essential workers
- citizens of Samoa and Tonga for essential travel to New Zealand
- the holder of a visitor visa who is the partner or dependent of a temporary work or student visa holder and who normally lives in New Zealand
- No other foreign traveller can enter New Zealand.
Is there any support available for those on working holiday visas?
The subsidy is available for employees’ legally working in New Zealand. This includes people who have a New Zealand work visa or a condition on their New Zealand temporary visa that allows them to work in New Zealand.