Wage subsidy scheme broadened again to the tune of a few billion dollars to capture more businesses

Government tweaks wage subsidy rules to provide more support for businesses that have had to close or reduce hours during the lock-down

27th Mar 20, 4:46pm by Jenée Tibshraeny

Grant Robertson

The Government is for the second time broadening its wage subsidy scheme in an attempt to keep more people employed.

This comes as it had paid $2.7 billion in wage subsidies for 428,768 workers, as at Friday morning.

Under the scheme, employers, contractors, sole traders, self-employed people, registered charities and incorporated societies can receive a subsidy to help pay wages if they can show a 30% decline (or expected decline) in revenue for any month between January and June 2020 compared to the same month in 2019.

Up until now, they had been required to keep paying staff at least 80% of their incomes to be eligible for the subsidy.

But as at 4pm Friday, this rule has been scrapped and replaced with a new rule that employers must pass on at least the entire subsidy.

This will mean the subsidy can be accessed by businesses that have had to close during the lock-down or significantly reduce their staff’s hours.

Finance Minister Grant Robertson explained: “Businesses accessing the scheme must still undertake best endeavours to pay employees 80% of their pre-COVID income.

“Where that is not possible – in particular where a business has no activity whatsoever due to the shutdown and workers are not working any hours – they must pass on at least the whole value of the wage subsidy to each affected worker.”

Businesses are still required to keep their employees in employment for the 12-week period of the subsidy to be eligible.

The subsidy is $585.80 a week for full-time workers (who worked 20 or more hours per week before COVID-19) and $350 a week for part-time workers (fewer than 20 hours).

It will continue to be paid in a lump sum covering 12 weeks.

Leave Payment canned

Robertson also announced the Leave Payment he created on March 17 will be folded into the wage subsidy scheme.

Under the Leave Payment, employers of staff in self-isolation, with COVID-19 or caring for the sick or self-isolated, could get a $585.80 or $350 a week payment for eight weeks.

Yet because most people are now in self-isolation, the scheme is no longer fit for purpose.

Robertson said: “We are working on arrangements for those in essential work who require sick leave due to COVID-19.”

Treasury estimates the wage subsidy scheme will now cost around $12 billion depending on uptake by businesses - an increase from the $8 billion previously expected.

“These modifications are about keeping New Zealanders currently at home in lockdown connected to the job they were in on Wednesday before it started,” Robertson said.

“This ensures businesses not able to operate do not need to lay off staff. Even if this requires businesses to operate with no activity, the subsidy allows them to keep their workers on the books, particularly during Alert Level 4.

“We are running this [wage subsidy] scheme on a high-trust model in order to get money out the door and support the workers, families and businesses who are affected by COVID-19. We are also preparing an appropriate audit process that will act as a backstop for this high-trust model.”

The wage subsidy scheme was introduced on March 17 and then broadened on March 23 when the $150,000 per business cap was removed.

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46 Comments

by waymad | 27th Mar 20, 5:35pm 1585283738

Some math: $2.7b over the quoted 428,768 woikers, over 12 weeks = $524.76 per woiker per week. Indicates mostly full-timers are being serviced at this point. That's equivalent to an annual salary of $27,362.

by cjmain | 27th Mar 20, 5:42pm 1585284142

So if a part time worker earns less than $350 subsidy they should now receive the full subsidy from their employer? That doesn't sound right.

by Yvil | 27th Mar 20, 5:50pm 1585284641

Yep that's exactly my issue, I employ cleaners at the Motel, most weeks they earn less than $350, some weeks they earn more (not many) depending on number of hours worked. Today I get an sms from one of them asking to be paid in full immediately, my main issue is that we are still open but she refuses to come to work, she thinks it's like a paid holiday while the business that employs her (us) struggles to stay afloat.

by Kate | 27th Mar 20, 5:58pm 1585285110

Are you classified as an essential service provider?

by Yvil | 27th Mar 20, 6:33pm 1585287226

Yes, we provide long-term accommodation to people who cannot be relocated

by Kate | 27th Mar 20, 6:51pm 1585288261

I'd speak to MBIE via email with your question regarding whether termination is appropriate. I heard of a case where the essential worker had a pre-existing condition that made them high risk, and so they did not have to work. You can contact MBIE here;

essential@mbie.govt.nz

https://covid19.govt.nz/government-actions/covid-19-alert-level/essenti…

by Yvil | 27th Mar 20, 7:32pm 1585290769

Thanks Kate but I do not want to get into a lenghy argument with my employees, we're a team and we generally get along really well. I will look after her (and all of them) until the very end. We since had a talk, she explained her kids have asthma that's why she doesn't want to come to work, I told he I understand and I will always look after her, she then apologised for her message that was very demanding and a bit rude

by Kate | 27th Mar 20, 7:50pm 1585291825

Sounds ideal.

by Mrs The Point | 28th Mar 20, 11:59am 1585349960

From Business.govt.nz
"To be eligible for the wage subsidy businesses must declare that they:
will pay named employees, at a minimum:
the full subsidy received for each named employee, where their pay is below the subsidy rate."

Pretty clear I think. The wage subsidy is for the employee not for you Yvil.

by Living | 28th Mar 20, 1:57pm 1585357043

So I work for a company that is Essential and still working but due to my vulnerable respiratory health condition I'm high risk an have self isolated myself, am I eligible for the Govt. Wage subsidy?

by rastus1 | 29th Mar 20, 1:12pm 1585440744

Sound like you are one of those mob getting the $1500 to $2000 per week to house the homeless. If so, quit whinging. If not, I withdraw.

by CourtJester | 27th Mar 20, 6:08pm 1585285738

There's a lockdown in case you didn't notice. Why would she go to work? Is cleaning your motel an essential service?

by Yvil | 27th Mar 20, 6:34pm 1585287277

Yes, we provide long-term accommodation to people who cannot be relocated

by zayneboi | 27th Mar 20, 6:57pm 1585288664

The subsidy is to the employee and you must pass the value to them less any tax.

But the payments covers 12 weeks of work only. Now if the lockdown only last for 4 weeks and business resume back to normal from week 5-12. Then the employer will essential benefiting the most from the subsidy. But it may take 2 months or longer to recover and redundancy is imminent.

by Beanie | 27th Mar 20, 7:14pm 1585289647

The subsidy is not to the employee, it is to the employer. In return, the employer agreed to use their "best endeavors" to keep paying their employees at least 80% of their normal pay for at least 12 weeks. Anyone paying under that had better be able to show they used their best endeavors. That should include liquidating non essential assets owned by the business...

by frazz | 28th Mar 20, 7:48am 1585334887

Wrong...the subsidy is for employee wages only. You apply by listing who is employed and it is paid out on that basis. Too many business owners think it is for them. I would keep carefully records as how this money is being spent.....they will audit at some point.

by Beanie | 28th Mar 20, 11:24am 1585347879

Have another read of my comment. The point is, in return for taxpayer assistance,the employer agreed to try and pay at least 80% of normal wages for 12 weeks. (This will almost always be more than the amount of the subsidy received.)
Any less than that, and they will need to justify that they used their "best endeavors" to try and do so. What constitutes best endeavors will be a matter of interpretation. Should it include for example selling a pleasure boat owned by the business?....if you are holding your hand out to the taxpayer I would argue it should.
And after using those best endeavors, at the very minimum they must pay all of the subsidy amount to the employee.

by frazz | 28th Mar 20, 7:49am 1585334952

She probably doesn't feel safe. What level of protective equipment are you providing. Are you enforcing the 2 metre rule. Would you personally clean toilets and showers of strangers at this point in time? Are you paying her over $20 an hour? Pay her the $350 or it needs to be paid back to the Government.

by frazz | 28th Mar 20, 8:17am 1585336660

It's no cost to the employer...whats your issue...$350 less tax is not much money. My clients are passing it on. If we can bail out Air NZ we can pay $350 a week to part timers.

by Pacman_46 | 27th Mar 20, 5:43pm 1585284180

I suspect many will be made redundant now, in anticipation of a downturn in business post the lockdown, rather than take the subsidy for the full 12 weeks.

by GV 27 | 27th Mar 20, 6:21pm 1585286487

Many businesses will have already incurred legal costs getting clarity around these issues before they submitted an application.

by frazz | 28th Mar 20, 8:34am 1585337682

The fact sheet was pretty straight forward...no legal help to apply for grant?

by murray86 | 27th Mar 20, 6:46pm 1585287984

A lot of what I heard I like. As always the devil is in the details.

by Kate | 27th Mar 20, 6:59pm 1585288779

It's definitely a much better strategy than all those employment contracts being terminated (which has its own set of costs) and employers having to go out on mass re-employing people when we open up again. The amount paid I believe is better than the unemployment (jobseeker) benefit as well.

by Beanie | 27th Mar 20, 7:17pm 1585289834

Yes Kate, I checked today how much the dole is and was shocked at how little it is.
Only $215 pw in the hand for a single person.

by chris_t | 27th Mar 20, 7:23pm 1585290183

As a small employer of 8 (manufacturing), I have been amazed at the speed and painless process this has been the last 3 days. I applied for all staff on Tuesday mid morning, when I expect a lot of business owners rushed in like me, and money showed up on Thursday evening at 7:08pm.

If I get a significant contract progress payment claim approved for payment in late April without issues by a large main contractor, I can afford to subsidise all staff for at least 3-4 weeks, and bring them up to 70% of a typical 40 hour week. If our landlord agrees to help during the next 2-3 weeks, I could perhaps even extend my extra support up to 6-7 weeks. I know for a fact that this will make all the difference for at least 5 of the guys that work for me that have a family, and rent or mortgage payments of 700+ going out every week! SO, anyone knocking the government and the departments involved in processing, stop and think first! Without this scheme as it is now, and with the speed and simplicity it has, it would not work. Too many people would be in deep trouble within a week or two and stressing beyond reasonable limits.

I am really impressed with the way they have made this work! And, there is no way they can make it work by making it all complex and cumbersome to administer. For that reason alone I will be putting in some of my personal capital to make sure I can restart as if nothing happened when/if the restrictions are lifted in 4-6 weeks. Any longer than this though, it may start to become a bit of a challenge to put in additional wage support on top of what is offered by the government. And if that would happen, those staff with that level of accomodation costs will have no choice but to quickly re-evaluate how long they can handle that financially.

A lot of food for thought...

by RickStrauss | 27th Mar 20, 7:29pm 1585290573

Encouraging story. Good stuff, Chris. Good to hear of the landlord also chipping in as everyone else is having to during the tough time.

by Kate | 27th Mar 20, 7:56pm 1585292187

Wonderful. Grant Robertson gave a shout out to the MSD management and staff for the work they have done to administer this swiftly - so it's great to hear it is working for employers and staff.

by Houseworks | 27th Mar 20, 8:23pm 1585293812

Glad to hear it's working out and Govt is expediting payment

by Chris-M | 27th Mar 20, 10:44pm 1585302286

Some figures
-The death rate in the USA doubles about every 3 days. At that rate there will be about 30,000 dead in two weeks and their medical services may be swamped, so that figure could be a significant underestimate. A significant proportion of those people will already be infected whether they know it or not.
- the authorities said today that NZ can produce 200,000 face masks per day. There are about 70,000 doctors and nurses not to mention the midwives, paramedics, carers, police and vital services. That is less than 3 masks per day each. I have not seen any statement describing our manufacture of any other PPE, so what we have now and can scrape up from a market that will rapidly be exceeded, is all we have. If we fail to snuff this out now, all health care workers will catch it become a significant spread vector and a significant number of them and us will die.
It is imperative that we all isolate from each other as much as possible and hope that we can keep on top of it.

by Malarkey | 27th Mar 20, 9:12pm 1585296744

NZ has nothing to fear from the coronavirus. You have to be alive to die.

by Foreign buyer | 27th Mar 20, 11:43pm 1585305782

They need to let this system totally reset. Let struggling companies fail and give new people a chance to shine through and start up businesses in their places. The current bosses are happy spending on flash sports cars and boats while doing well but cry poverty on a downturn. Cake and eat it springs to mind. Come the revolution!!!

by Houseworks | 28th Mar 20, 7:04am 1585332261

The govt must act or there will be economic damage. New territory for NZ with QE aka money printing or free money whoppee

by ham n eggs | 28th Mar 20, 9:30am 1585341054

There are no longer ANY viable consumers (without manipulation and free money...)

Capitalism is dead.
Not just K Oed
It's no longer even in the ring

The future is small, local, basic and tough

by rohan198 | 28th Mar 20, 1:52pm 1585356762

is there any subsidy for casual employees? the government is a little unclear on this!

by joanne7 | 28th Mar 20, 3:44pm 1585363467

If I normally work part time 12 hrs a week and now my place of work is closed and we are now on lock down how much money am i entitled to from the govt package for workers a week?

by Nzdan | 28th Mar 20, 5:05pm 1585368343

$4.20.

by Beanie | 28th Mar 20, 7:45pm 1585377903

It depends on how much your normal gross pay was. And we are assuming your employer has taken up the government wage subsidy.

If it was under $350, then you just get your normal pay.

If it was between $350 and $437.50 then you should get at the very least $350. (Your kind employer still might want to pay you your normal pay though.)

If you normally earn over $437.50 then your employer must make their "best endeavors" to pay you at least 80% of your normal pay. But if they are financially doing it tough, then they are allowed to just pay the $350.

by Mattyy6788 | 28th Mar 20, 9:04pm 1585382693

Hi. Does anybody know if a sole trader can apply for the wage subsidy if they have already claimed the 2 week leave subsidy last week? Thanks

by Beanie | 28th Mar 20, 9:35pm 1585384503

I believe you can.

by Mattyy6788 | 28th Mar 20, 10:24pm 1585387452

Thanks!

by Sam_S | 28th Mar 20, 9:32pm 1585384348

Like Chris, I applied for the Employer Wage Subsidy, but have yet to hear anything after eleven days. We applied on the18th March. There are two of us (employees) in the business.

After reading of the time frame on their website of five working days, I decided to try and contact someone after seven. As MSD and Work and Income's only contact point is a phone number there’s no way to get through as they are overwhelmed.

I think the scheme is extremely positive for smallish businesses such as ours, and I know MSD, and Work and Income are under immense strain, but as the application process doesn’t acknowledge the submission with an e-mail response I’m starting to worry ours didn’t make it through. I've been reading many reports of businesses being paid out within five days. As our company will start to feel the pinch in the coming weeks maybe the scheme could acknowledge with an e-mail when the application is being processed. At the moment all we can do is wait and hope.

by Beanie | 28th Mar 20, 9:38pm 1585384732

Everyone I know has been paid within a week. Give them a ring, or just resubmit a claim. Check you haven't made any errors with ird or bank account numbers as this would cause a delay.

by Sam_S | 28th Mar 20, 10:28pm 1585387732

Thanks Beanie, I was on the phone for two days last week and couldn't get through. Their phone system just resets to an automated overloaded phone message. I'm pretty sure I double checked everything when I submitted the form so I'm not sure what's going on. If I re-submit, do you think it would confuse their system, or it would recognize a double submission? I would much prefer to either e-mail or talk to someone, but obviously that's not going to happen at the moment.

by Beanie | 28th Mar 20, 11:21pm 1585390879

I assume the system would pick up a second claim, and so not pay out twice.
But worst case if they do you can contact them and pay it back later.

by Sam_S | 29th Mar 20, 9:08am 1585426134

Thanks Beanie, I'll wait a couple more days before following your advice and re-applying. I know their workload is extreme at the moment so are reluctant to overload it even more with a double application. As I haven't received an e-mail / text confirmation regarding the application, it is either still being considered, or didn't make it through the system. If only there was a way to double check if they have the application; it would save me time, and also MSD / Work and Income at their end. Some kind of database to show that applications had been lodged and are being processed. It one thing to talk up the scheme, but there will always be those that will fall between the cracks. Stressful situation at the moment for our business.