The Government’s Wage Subsidy Scheme was introduced in response to COVID-19 to support employers and ensure income for affected employees. Applications for the Scheme are open from 10 June 2020 to 1 September 2020. Employers under the Scheme or planning to apply for the Scheme must ensure they are compliant with its legal obligations to avoid penalties.
Employment law operates alongside the Wage Subsidy Scheme, and regular employment obligations must continue to be adhered to. Employees must be paid the higher of the amount they are entitled to under employment law or the relevant wage subsidy requirements. The employment law requires employees to be paid for each hour they work at the agreed wage rate (that cannot be below the minimum wage rate). This rate can be temporarily or permanently varied if it is agreed upon by the employer and employee. Changes made require good faith consultation and written agreement.
Under the Wage Subsidy Scheme, employers must make their best efforts to pay employees at least 80 per cent of their regular wages. The full value of the subsidy rate must be passed on to employees, with the exception of employees whose normal wages are less than the subsidy amount. If the regular wages are less than the subsidy rate, the employee should be provided with their regular wages and employers can use the excess amount from the subsidy to pay for the wages of other employees.
The Scheme requires employers to retain employees for the entire period the employees are receiving the subsidy. However, if an employee becomes redundant during the subsidy period, the employer can use the subsidy to pay the employee any notice period as a result of the redundancy. As well as this, the employer must repay the remaining amount of the subsidy to Work and Income after the notice period has been paid.
Employers are given the subsidy amount as a lump sum and can pass on the subsidy to employees through their usual pay cycles or at other agreed intervals. Employers who wish to pass on the subsidy to their employees as a lump sum should ideally have a written agreement with their employee about the circumstances of the subsidy. In the event that the employee is not working for a period of time due to COVID-19, the agreement should include a statement about how the subsidy lump sum includes an advance of a portion of the back-to-work wages. When the employee returns to work, the subsidy sum that was paid in advance will be deducted from their regular wages. Employers and employees who are not able to reach an agreement about a deduction from their wages to account for the subsidy paid in advance can seek assistance from Employment Mediation Services or the Employment Relations Authority.
Employees who believe their employers may be acting unlawfully can make a complaint to Employment New Zealand.