Coronavirus / COVID-19 and the Workplace - Wage Subsidy Extension

Many businesses will now be at the point of considering whether to apply for the Wage Subsidy Extension.  The Wage Subsidy Extension was introduced to support employers who are still significantly impacted by COVID-19 (this also includes self-employed and sole traders).   

Wage Subsidy Extension amount

The Wage Subsidy Extension provides for 8 weeks per named employee from the date a business makes an application and is paid in a lump sum at the weekly rates of:

• $585 for people working 20 hours or more per week (full-time rate)
• $350 for people working less than 20 hours per week (part-time rate).

As with the Wage Subsidy, if an employee’s ordinary wages are less than the Wage Subsidy Extension rate, a business must pay the employee’s ordinary wages and any difference should be used for the wages of other affected staff. If there are no other employees to use the Wage Subsidy Extension for, the remaining amount must be paid back to the Ministry of Social Development. Ordinary wages for a sole trader or self-employed person is the weekly amount regularly paid as at the date that the Wage Extension Subsidy is applied for.

Revenue loss

There is a different revenue loss threshold to the earlier Wage Subsidy scheme. To be eligible to apply for the Wage Subsidy Extension, a business must have experienced a minimum 40% decline in revenue over a continuous 30-day period in the 40 days immediately before the date of the application when compared to the same period last year. That revenue loss must be attributable to COVID-19.

New businesses that have been operating for less than a year or high growth businesses can compare their revenue to a reasonably equivalent period.

Before making the application, a business must have taken active steps to mitigate the financial impact of COVID-19 on the business activities (including but not limited to engaging with their bank, drawing on cash reserves as appropriate, and making an insurance claim).

Applying for the Wage Subsidy Extension

Applications opened for the Wage Subsidy Extension on 10 June 2020.  However, a business cannot apply for the Wage Subsidy Extension for an employee while it is receiving another COVID-19 payment for that employee. This includes the Wage Subsidy, the Leave Subsidy, Essential Workers Leave Support and the Leave Support Scheme. Therefore, if a business is receiving the Wage Subsidy for an employee, it will need to wait until that 12 week Wage Subsidy has finished before applying for the Wage Subsidy Extension.

A business does not need to have received the previous Wage Subsidy to apply for the Wage Subsidy Extension.

A business applying for the Wage Subsidy Extension will need to make a declaration. It is important that a business carefully reviews the particular declaration it is making when applying for the Wage Subsidy Extension to be aware of all of its obligations.  As part of the declaration a business will need to declare (among other things) that it will:

• Retain the employees named in the application for the period it receives the Wage Subsidy Extension in respect of those employees;
• Use best endeavours to pay at least 80 per cent of each named employee’s ordinary wages or salary;
• Pay at least the full amount of the Wage Subsidy Extension to the employee; but where the ordinary wages or salary of an employee named in the application (or themselves if a sole trader or self-employed) is lawfully below the Wage Subsidy Extension amount before the impact of COVID-19, pay that amount.

Employment obligations still apply

Employment obligations remain regardless of whether an employer receives the Wage Subsidy Extension. This includes, but is not limited to, obligations under the Employment Relations Act 2000, Minimum Wage Act 1983, Holidays Act 2003, and Health and Safety at Work Act 2015. An employer still has obligations such as to pay minimum entitlements and to act in good faith.

Information sharing and privacy obligations

Obligations under the Privacy Act 1993 also still apply. It is important that businesses discuss the application with employees and get their consent to sharing information about them.

The specialist employment law team at DTI Lawyers are able to provide specific advice around considerations for your particular business in respect of the Wage Subsidy Extension. You can contact the team on 07 282 0174.