If a business has already received the original wage subsidy lump sum, they are required to continue to use that funding to pay employees for the full 12-week duration as agreed to in the initial application.

Pending applications made prior to 3pm Friday 27 March 2020 will be assessed against the original criteria of the wage subsidy scheme. Only applications received from 4pm on 27 March 2020 will have new criteria and obligations applied.

The original scheme was capped at $150,000 per business, which meant that some larger businesses couldn’t claim for all their workers, but this cap has been removed. There have been no further modifications to this criteria which means the modified scheme is also uncapped.;

Businesses can make new claims for any employees that they did not apply for under the original scheme.

Once you receive the subsidy:

• You must retain the employees for the full period (12 weeks) you apply for.
• You must use your best endeavours to pay at least 80% of each named employee’s ordinary wage or salary that you apply for;
• Where paying the employee 80% is not possible, for example where all business activity has ceased, then you must pass on at least the whole value of the wage subsidy to each affected worker. Note: if the worker’s income is normally less than the subsidy, they can be paid their normal salary

If employees that you receive the wage subsidy leave or other changes occur in your business that affect your eligibility for the wage subsidy, the link to repaying the subsidy is below. We recommend you talk to us before filling in this form.

 

https://www.workandincome.govt.nz/products/a-z-benefits/covid-19-support.html#null

 

Wage Subsidy Record Keeping

Please keep notes of any conversations and calculations you have done prior to applying for the wage subsidy that could support you have done the following:

• Decline in of 30% in actual/predicted revenue compared to the same month for the prior year (this one will probably be easier to show in hind sight).
• The decline in revenue is due to COVID-19
• Details of active steps taken to mitigate the impact of COVID-19 (contacting bank, advisor, industry association)
• Correspondence with staff that you applied for the wage subsidy and updating them of pay during lockdown etc.

 

In the following months we will need to gather this information and have it saved on file should work and income do an audit on your eligibility for the wage subsidy

 

Contact Us for more info.

Following the government’s announcement on Monday, you may be wondering what you need to do with your staff. All non-essential businesses are required to close from 11:59 pm on Wednesday 25 March 2020.  We are doing our best to keep you informed, however some of the terms around paying employees during the lock-down period are not very specific.
Below is a course of action which should fall in-line with the guidance provided.

Working from home

Where employees can work from home, they should do so and can be paid accordingly.

Example: Brett normally works a 40 hour week. Brett is able to work from home however his hours have reduced to 32 hours a week. He is paid for the hours he works (32 hours) as he is still doing 80% of his normal weekly wage.

Where employees cannot work from home

Where employees can’t work from home, you can pass on the wage subsidy ($585.8

0 or $350.00 per week). You could negotiate with your employees to use some of their annual leave to top them up to 80% of their normal pay (the guidance on what to do specifically in this case is was not very clear). The IRD have now clarified (in the link below) that it is up to the employer whether they top it up.

Example: Mary normally works a 40 hour week ($1,000 gross wage per week) but is unable to work from home. Her employer has applied and received the wage subsidy for her from Work and Income due to being affected by COVID-19 (i.e. Mary is still employed but due to the lockdown is unable to work).

When Mary’s pay gets processed for her first week of the lock down, her employer pays her the wage subsidy of $585.80 (less tax). This is 59% of her usual wage. Mary and her employer may negotiate to use $214.50 of her annual leave or by an employer contribution to bring her up to $800.00 (which would be 80% of her normal wage).

Payroll systems:

Crystal Payroll: Crystal has automatically set up a COVID-19 Leave type and a COVID-19 Wage Subsidy income type which you can use when paying employees.

Xero Payroll: You need to create the new COVID-19 unpaid leave type and COVID-19 earnings type. (Let us know if you are on Xero payroll and we will provide assistance on doing this).

Let us know if you want us to review the first pay you process for your employees.

Wage Subsidy

Wage subsidies are available for affected employers to subsidise an employee’s pay by $585.80 per week for an employee who works 20 or more hours per week, or $350.00 per week for employees who work less than 20 hours per week. A condition of receiving the wage subsidy requires that you have a downturn in profit of 30% from the same month the year before, and that you make best efforts to top up an employee’s pay to 80% of their normal pay from the subsidy amount where possible. Presumably the government would prefer that employees receive at least the subsidy amount and remain employed, as opposed to receiving nothing (or moving on to a benefit). The purpose of the subsidy is to keep employees employed. Any business that has had to close due to the lockdown will likely qualify for the wage subsidy.

You will need to apply for the subsidy via the Work and Income website and complete and application form.  If the wage subsidy is approved, the subsidy will be paid directly into your business bank account 5 days from it being accepted (the whole 12 weeks is paid in a lumpsum), and you should then pass this on (per pay period) to your individual employees. The link to the application form is below:

Work & Income – A-Z Benefits

Some useful facts regarding COVID-19 tax related issues from IRD are in the link below:

IRD – Your Questions Answered

We understand these are uncertain times however, all our staff at Hunter McLeod will be contactable and working from home during the 4 week lock-down period.
Please contact us if you have any queries, we are here to help.