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COVID-19: Guidance for payroll professionals

This page provides a set of key messages for payroll professionals around what employment law looks like in the COVID-19 environment to help answer any questions that are presenting.

Last updated: 1 April 2021

The response to COVID-19 is an unprecedented situation that requires employers and employees to deal with new and rapidly evolving situations, legal obligations, and legal permissions, while remembering that employment law obligations, including the need to act in good faith, have not changed.

Primary messages

  • Employment law obligations have not changed during the COVID-19 pandemic.
  • Employees must be paid in accordance with their employment agreement and general employment law obligations.
  • Leave entitlements including calculation of pay must be in accordance with employment agreements and the Holidays Act. General requirements for leave and holidays continue to apply during the COVID-19 pandemic.
  • In terms of both leave and pay arrangements, employers and employees should seek first to reach agreement in good faith on what approach will be taken.

Leave and pay entitlements during COVID-19

Leave and holidays – general requirements

'Normal income' or 'normal wage or salary'

  • The terms 'normal pay', 'normal income', 'normal wage or salary' are not defined for the purposes of the wage subsidy schemes or Leave Support Scheme.
  • If the worker is working, they should be paid for their work in the usual way and according to the obligations that always apply.
  • To work out what someone would have been paid, who is not working or working less than normal, an employer should be clear how they are calculating what the employee would normally have received in an equivalent period.
  • An employer could choose to use the Ordinary Weekly Pay calculation from the Holidays Act 2003 (s8), based on 'ordinary' weekly gross earnings before the lockdown.
  • Those not working at all or working reduced hours should agree with their employer how that time will be treated. For example, if any leave is being used for their time off work, as this will influence what pay is due to them, as well as any impact on their leave entitlements.
  • For casual employees, Work and Income has recommended that average hours over the past year should be calculated to determine whether to apply for the full-time or part-time wage subsidy rate.
  • Whatever approach the employer uses should be principle-based and applied consistently to all employees. We also can’t stress enough the need for and value of worker engagement and ensuring that good faith underpins these calculations.
  • Under the Wage Subsidy Extension and Resurgence Wage Subsidy, ordinary wages and salary are tied to the relevant employment agreement on the date the employer applies for that subsidy.


  • Where changes to current working arrangements are proposed by an employer, there are specific good faith requirements that must be followed under general employment law.
  • Employers must still follow good faith and other employment law obligations in making proposals on how they will manage reductions in work or hours, including where they are only proposing to pass on the wage subsidy.
  • Consultation on changes can occur on an expedited basis if the employer needs to make rapid adjustments to cope with their circumstances under COVID-19 alert restrictions.
  • An employer cannot use a subsidy to pay for any contractual redundancy payments.

Modifying employment agreements during COVID-19

Wage subsidies and Leave Support Scheme

The wage subsidy schemes are designed to support employers and their staff who are financially impacted by COVID-19 to maintain an employment connection and ensure an income for affected employees.

The Leave Support Scheme is designed to support public health goals and financially help workers who can't come into work because Ministry of Health guidelines recommend they stay at home and they can't work from home.

Under the wage subsidy schemes and the Leave Support Scheme, an employer must make their best endeavours to pay employees at least 80% of their normal wages or salary, but never less than the minimum wage. Under employment law, employees must be paid for each and every hour that they work at their agreed wage rate. Any change to their normal hours or pay rate requires good faith consultation and signed written agreement.

Employers are required to pass on at least the full value of the relevant subsidy rate ($585.80 a week for full-time employees and $350 a week for part-time employees) except where the employee’s normal wages are less than the relevant subsidy rate. In this case, the employee should be paid their normal wages and employers can use any excess subsidy to help pay the wages of other affected employees.

More information about the wage subsidy schemes and the Leave Support Scheme is available on the Work and Income website.

COVID-19 – Work and Income (external link)

Subsidy payment application to PAYG or KiwiSaver payments

The wage subsidy and Leave Support Scheme payments are paid to employers to support the payment of workers. A number of terms that have meaning for employment law contexts (eg ordinary pay or wages) are not defined for the purposes of those schemes.

Normal employment law obligations apply to determine what employees will be paid (depending on whether they are working, contractual obligations and what has been agreed about pay, if the employee is not working as normal), including where an employer is receiving a wage subsidy or Leave Support Scheme payment to support the payment of an employee’s wages or salaries. This applies to all elements of wages and salaries, including PAYG (pay-as-you-go) holiday pay and KiwiSaver contributions. Where an employee is working, then they must be paid at their contracted rate, including PAYG holiday pay and KiwiSaver contributions. Minimum wage obligations must also be complied with.

KiwiSaver employer contributions and PAYG payments are required by law to be additional to any payment for wages when assessing the payment for minimum wage purposes. So if the subsidy is being used to support an employee at or near the minimum wage, and the employee has been working, then all work must be paid $20.00 per hour at least, and the employee will also need to be paid 8% additional to that if they receive PAYG, and any employer contribution to KiwiSaver will need to be paid on top of the hourly or salaried amount.

Help is available

If you have further queries, please contact Employment New Zealand.

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Page last revised: 01 April 2021

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