Reflecting our recent view, as of 4 pm today (27/03/20), the Wage Subsidy criteria has changed to specifically allow only the $585.80 to be passed on to employees in certain circumstances – Read the press release here
After Monday’s announcement, we had many conversations with clients about the Government support available for the lockdown period. Clients wanted to know if they could get the Leave Payment for the lockdown period, to which the answer still seems no.
We had many clients tell us that with no revenue coming in for at least 4 weeks, and the complete uncertainty beyond, that the Wage Subsidy is not going to be enough because they cannot afford to top their staff wages up to the required 80% of normal pay. This of course means that many of our clients are, sadly, exploring making some or all their staff redundant.
First thing Tuesday morning, we reached out to Finance Minister, Grant Robertson, Prime Minister, Jacinda Ardern, and Social Development Minister, Carmel Sepuloni. We wrote to them expressing our concerns about the inadequacy of the support package in light of Monday’s lockdown announcement. We suggested that either the amount of the subsidy needed to be raised, or the criteria for the leave payment extended. We stressed that tens of thousands of jobs would be lost if urgent measures were not taken. We assume that many others have given the same feedback.
We had been expecting an extension to the support package this week, but we now wonder whether the Government is holding off in case the lockdown needs to be extended and they need to keep some powder dry.
While no further Government support has been announced, the Government rhetoric about the 80% requirement for the Wage Subsidy changed yesterday afternoon. Around 3pm, Finance Minister, Grant Robertson gave a speech that seemed to be directly addressing our email to him. In that speech, he reiterated that the purpose of the Wage Subsidy is to support businesses to keep their staff in work. He then repeatedly stressed that the 80% requirement only requires best endeavours and that the Government does not want people to be laid off.
You can see the Minister’s comments here. Skip to about 26mins through the video:
What does this mean?
They have left the door open to pay employees less than 80% for the lockdown period in certain circumstances. This contrasts our previous guidance, but as we have always said, this is a fluid situation.
At the time of writing, the WINZ guidance has not dramatically changed its guidance around the best endeavours. This is what the guidance said as at 27 March, 7:30am:
“To receive the COVID-19 Wage Subsidy, the employer must agree:
the employer will make best endeavours to retain the named employees and pay them a minimum of 80% of their normal wages or salary for the duration of the subsidy”.
We must stress that this is an employment law minefield, so seek advice before taking such action, but if your finances are such that paying employees at 80% or more of their normal pay threatens the viability of your business and the jobs, of some or all of your employees, then we now suggest that it may now be possible to explore paying your employees less than 80% for the lockdown period without jeopardising the Wage Subsidy. This could mean only passing on the subsidy amount, or perhaps an amount in between the subsidy amount and 80% of the normal pay.
Again, we stress that this is not going to be a one size fits all approach, you will need to carefully consider your circumstances and tread very carefully. On that point we have seem communications from Union-aligned Labour MPs encouraging workers to dob in employees paying less than 80%, albeit these were from before yesterday’s speech.
Further, ignoring finances for a second (and we appreciate that is no easy task right now), it is worth bearing in mind the people side. This is an equally tough time for employees and if you try and do the right thing by them, they ought to reciprocate and try their best to do right by you. Therefore, we suggest that you communicate with your employees, and seek their ideas before considering dropping their pay further.
If possible, we would suggest getting employers to try and get their employees to agree to use sick leave before reducing their pay further. Of course, this does not relieve the cash flow burden, it does use up the leave liability you are carrying on your balance sheet.
Finally, if you are considering paying less than 80%, you must be prepared to defend it. At a minimum, we would suggest some form of cash flow, budget showing the plight of the business if this did not occur.