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The Wage Subsidy explained – By Karen Tobeck

Dealing with the Wage Subsidy and what you can and can’t do with it.

We have to remember that the initial announcement of the wage subsidy was when the country went to Alert Level 2 and it was assumed most businesses would remain operating but at a lower level.

When the country went to Alert Level 4 the landscape changed and businesses were then looking at a minimum of four weeks without any income.

Late Friday the Government announced some changes to the subsidy which took effect if you applied for the subsidy on or after 4pm on Friday 27 March 2020.

Pre 27 March 4pm The initial requirements for the subsidy were that a business needed to agree to:

“you agree you will, using best endeavours, retain the employees named in your application in employment on at least 80 percent of their regular income for the period of the subsidy.”

Post 27 March 4 pm The new requirements under the amended subsidy state:

Summarised (in my words)

  • You will retain employees for the 12 weeks you received the subsidy for.
  • You will not make staff use their leave entitlements.
  • You will only use the subsidy to pay wages.
  • You will for the period you receive the subsidy make best endeavours to pay 80% of your employees salary or at least the amount of the subsidy.
  • If the employee is normally paid less than the subsidy then you pay them their usual pay and use the balance towards other wages.

For the full detail on this go to https://workandincome.govt.nz/online-services/covid-19/declaration-wage-subsidy.html

As you can see there is a much tighter restriction to ensure that employers retain staff and keep paying them for the 12 weeks.  I believe that this is what the government intended all along but their initial quick release of information didn’t cover the detail and many businesses were left not knowing where they stand.

Holiday Pay and Cash Flow

Paying staff holiday pay does not help your cashflow because you are still paying out money that you don’t need to.  If cash flow is tight then this does not seem a logical thing to do.

If your cash flow is ok and your staff member wants to top up the wages by using holiday pay then this is an option you may mutually agree on.

I strongly suggest you keep the wage subsidy separate from day to day business cash flow and transfer the portion that relates to each payday as you go.  This way you will always have the funds available to pay the $585 per week.

Let’s be optimistic and hope that the lockdown is only four to six weeks at the most and then we can all get back to running our businesses in the usual way.

An article I found which I think summarises things quite well can be read here. https://www.hrtoolkit.co.nz/2020/03/the-wages-subsidy-and-how-to-apply-it/