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: 19 May 2020

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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 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 usual, 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.
  • Note that 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 for casual employees. 
  • 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. 

Restructuring

  • 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. 

Modifying employee agreements during COVID-19

Wage Subsidy and Leave Support Scheme

Wage Subsidy Scheme

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. For eligible employers, they must try their hardest to pay all employees named in their Wage Subsidy application, at least 80% of their usual wages.

If that isn't possible, employers need to pay a minimum of the subsidy rate that applies to them ($585 (if they usually work full time) or $350 (if part time) per week). If the employee usually earned under the subsidy amount, the employer must continue to pay the employee their usual wage. 

Wage Subsidy Scheme

COVID-19 Wage Subsidy – Work and Income (external link)

Leave Support Scheme

The Government’s 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 can't work from home. Employees and employers should work together to identify if they are eligible for the scheme. 

For eligible employers, they must try their hardest to pay eligible employees at least 80% of their usual wages. If that isn't possible, employers need to pay a minimum of the subsidy rate that applies to them ($585 (if they usually work full time) or $350 (if part time) per week). If the employee usually earned under the Leave Support amount, the employer must continue to pay the employee their usual wage. 

COVID-19 Leave Support Scheme 

COVID-19 Leave Support Scheme – 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 and 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.

The Wage Subsidy and Leave Support Scheme payment do not define or restrict whether PAYG or KiwiSaver contributions are included in, or excluded from payments made to employees through the Wage Subsidy or Leave Support Schemes. 

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 $18.90 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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