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New Zealand’s wage subsidy scheme out now

2020-04-06 17:46:18
As part of a relief package to prevent businesses from shuttering, the wage subsidy was announced to help employers retain workers instead of sacking them due to the coronavirus crisis. Expected to help struggling businesses and individuals stay afloat financially, the government is keen to keep unemployment at a minimum and businesses open. Read about this massive scheme

The prime minister, Jacinda Ardern, has announced that $5.3 billion has now been paid out to 876,000 people through the government’s wage subsidy scheme.

The companies who applied for the coronavirus wage subsidy scheme named by the Government lets employees of those companies know whether or not their employer has accessed the subsidy.

Followed by the naming of sole traders and the self-employed in a publicly available register in the next two weeks

The mammoth wage subsidy has seen $4.8b paid out in the last two weeks - slightly more than is usually paid out in unemployment and sole-parent benefits in an entire year.

According to Finance Minister Grant Robertson, the scheme had helped 800,000 Kiwis, including 120,000 sole traders or self-employed people.

"The wage subsidy is keeping employers and employees connected to one another during the lockdown, so they are in the best position to reopen and kick-start the economy on the other side," Robertson said.

Wage subsidy 

The Government’s Wage Subsidy Scheme supports employers and their staff to maintain an employment connection and ensure an income for affected employees, even if the employee is unable to actually work any hours. 

The purpose of the wage subsidy is to retain and pay employees during this time. If an employer is receiving a wage subsidy for employees (and if the business is shut down), then at the very least the employers have to pass the entire wage subsidy to the employee (unless their normal pay is lower than the subsidy). 

The entire wage subsidy must be passed onto employees. However, if the wage subsidy is higher than an employee’s normal wage, an employer does not have to pass the entire wage subsidy to that employee. Rather, any difference should be used for the wages of other affected employees. 

Businesses are asked to top up pay to 80 per cent of normal salary if they are able.

To be eligible for the wage subsidy businesses must declare that they:

  • - have had a 30% revenue drop attributable to COVID-19
  • - will retain named employees for at least the duration of the grant (12 weeks)
  • - will pay named employees, at a minimum:
  • - for any work they do at their normal rates
  • - at least 80% of income where reasonably possible (for employees working reduced hours while self-isolating)
  • - the full subsidy received for each named employee, except where a person’s income is normally less than the subsidy amount, in which case they can be paid their normal salary.

By allowing companies to keep their full workforce on 80 percent salaries until they start again, this provides a plan for companies to keep their operations viable in the future while allowing companies to scale back up quickly from zero to normal income within the four to six weeks of the lockdown

The scheme pays out for 12 weeks of pay in a one-off payment.

When introducing the scheme, Finance Minister announced that a public register is to be made available in order to make the scheme transparent to employers and employees

Robertson said on Thursday the Government had pledged roughly $22b of spending to combat Covid-19's economic impacts.

It has the ability to spend up to $52b thanks to an Imprest Supply Bill passed hurriedly before Parliament was adjourned.