Last updated: 24 September 2020
On this page:
- About the wage subsidy schemes
- Wage subsidies and employment law
- Wage subsidies and pay
- Payment frequency
- Tax treatment
- Labour on-hire and temping agencies
- Wage subsidies and redundancies
- Complaints about employers
- More information
Regular employment law applies to all employment relationships – regardless of the circumstances that we find ourselves in. This includes:
- having a written employment agreement for every employee, and doing what that agreement requires
- keeping each written employment agreement up to date, including documenting any changes that affect rate of pay or hours worked
- meeting legislative and any relevant contractual requirements for changing employment arrangements
- complying with all minimum standards legislation and with the Employment Relations Act 2000.
The wage subsidy schemes:
- support employers adversely affected by COVID-19, so that they can continue to pay their employees, and
- support workers to ensure they continue to receive an income, and stay connected to their employer, even if they are unable to work their normal hours.
An 8-week Wage Subsidy Extension payment was available nationally for employers, including self-employed people, who were significantly affected by COVID-19 after the original wage subsidy scheme closed in June 2020. Applications for the Wage Subsidy Extension closed on 1 September 2020.
A 2-week Resurgence Wage Subsidy payment was available nationally for employers, including self-employed people, who were financially impacted by the resurgence of COVID-19 and changes to the COVID alert levels. Applications for the Resurgence Wage Subsidy closed on 3 September 2020.
There are currently no wage subsidies to apply for.
The COVID-19 Leave Support Scheme is available for some workers who have COVID-19 like symptoms, need to self-isolate and cannot work from home.
Employment law has not changed. The wage subsidies operate alongside existing employment law. Employment obligations have not been removed or changed by employers accessing the wage subsidies.
Employers and employees must discuss in good faith the implications of COVID-19 on their working arrangements.
Employers and employees may be considering changes that involve impacts on the continuity of employee’s work, such as changes to job descriptions, reducing hours of work or, where no alternative arrangements can be found, redundancy may be considered. These changes must be discussed in good faith and use agreed consultation processes.
Employers must ensure that they are meeting their pay obligations under both employment law and the requirements they agreed to when applying for a wage subsidy.
Employees must be paid the higher of the amount that they are entitled to under employment law or the relevant wage subsidy requirements:
- Under employment law, employees must be paid for each and every hour that they work at their agreed wage rate. Employers and employees can temporarily or permanently agree to vary the agreed wage rate in writing and signed by both parties. This rate can never be below the minimum wage rate. Any change requires good faith consultation and written agreement signed by both parties.
- Under the wage subsidies, the employer must make their best endeavours to pay employees at least 80% of their normal salary or wages, but never less than the minimum wage. They must pass on at least the full value of the relevant subsidy rate 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 pay the wages of other affected employees.
- Any remaining subsidy should be paid back to Work and Income.
The wage subsidy rates are:
- $585.80 (gross) per week for full-time employees, where full-time is 20 hours or more per week
- $350.00 (gross) per week for part-time employees, where part-time is less than 20 hours per week.
Employers should pass on the subsidy and additional wages through their usual pay cycles, or at other intervals agreed with the employee. If employers decide to pass the full subsidy to their employees as a lump sum, ideally they should have a signed agreement in writing between the employer and the employee. This agreement should state that the lump sum includes an advance of a portion of the back-to-work wages, and once the employee returns to work, the subsidy amount already paid in advance will be deducted from the employee’s normal wages.
Before an employer makes a deduction from an employee’s wages or salary, the employer must have a specific authorisation from the employee to make the deduction. Without the specific written authorisation from the employee, the employer will not be able to make the deduction and must pay the employee’s wages or salary in full when it becomes due.
If the employer is not able to reach an agreement with their employee for a deduction from their wages to account for the subsidy paid in advance for the period since they have returned to work, employers can seek help from Employment Mediation Services or the Employment Relations Authority to resolve them.
The wage subsidy is considered excluded income to businesses and are also GST exempt. When passed on as wages, businesses don’t get a deduction for income tax purposes.
Payments to employees using the a wage subsidy are wages. Therefore, they are subject to standard deductions like PAYE, ACC levies, KiwiSaver contributions, Child Support and student loan repayments.
Providing they met the eligibility criteria, labour on-hire and temping agencies could apply for a wage subsidy for all on-hire workers who are employed by the agency whether or not they are working for a client at the time of application.
The wage subsidy can be accessed by labour on-hire and temping agencies for any employees (eg casual, fixed-term, and permanent). Independent contractors can apply directly, if they meet the eligibility criteria.
Wage subsidies and casual employees
Employers can apply for a wage subsidy for casual employees if they are employed at the time of the application and would have been expected to work during the time the employer receives a wage subsidy. To determine casual employees’ subsidy rate, employers should use the average hours worked each week over the last year, or over the period of time they have worked for the employer.
Employers are required to retain the employees named in their subsidy application for the entire period they are receiving the subsidy, which commences on the day the employer applied for the subsidy.
If an employer has to make an employee redundant during the subsidy period:
- they can use the subsidy to pay the employee any notice period arising from the redundancy, and
- they must repay any balance of the subsidy to Work and Income that’s left after the notice period has been paid.
An employer cannot use the subsidy to make any contractual redundancy payments to an employee. Redundancy payments should be made in accordance with the provisions in the relevant employment agreement.
The relevant obligations are in the declaration that employers agreed to when they applied through Work and Income.
If employees have been notified that they will be made redundant
Employers are not eligible for a wage subsidy for employees who have received notice of redundancy. If an employer and employee agree to cancel the redundancy before the employer makes an application, the employer is able to include that employee on their application form.
Where a redundancy is cancelled, the worker continues to be an employee and employment law continues to apply. If redundancies still need to be considered at the end of the wage subsidy period, employers will need to start a new redundancy process.
If you have already made your staff redundant
If you have made staff redundant because of the impact of COVID-19, you could think about re-hiring your employees if you are eligible for a wage subsidy. You will need to re-hire the employees before you apply for a wage subsidy.
If an employer dismisses an employee and reinstates or re-employs them within 1 month, the employee’s employment must be treated as continuous for the purposes of entitlements under the Holidays Act.
It is expected that employers and employees would operate in good faith and employers would look to reinstate or re-employ the worker on the same terms and conditions.
If employees have questions about how the subsidies are being applied to them, such as whether the employer has applied for a subsidy or when and how much they will receive, employees should contact their employer in the first instance.
If talking to employers doesn’t resolve the problem, or employees think their employer has acted unlawfully, employees can make a complaint with us.
Find out more about the schemes available to businesses, including how to apply, and other support for businesses at:
- Leave Support Scheme
- COVID-19 Wage Subsidy – Inland Revenue (external link)
- COVID-19 Wage subsidy schemes – Work and Income (external link)
- Privacy information for employees – Ministry of Social Development [PDF 475KB] (external link)
- COVID-19 information for businesses – Business.govt.nz (external link)