Well… here we go again. The inevitable has finally happened and Covid has reared its ugly head. As you will surely be aware, at this stage the Auckland and Coromandel regions have shifted into a 7-day lockdown, with the rest of the country in a 3-day lockdown. This afternoon’s situation updates suggest that this could easily become a major outbreak. Therefore, those short lockdowns seem incredibly optimistic. Barring some exceptional good luck, we expect that the lockdown will be extended for at least another 7 days, probably more.
The lockdown has triggered the reintroduction of our old friends, the Wage Subsidy (administered by WINZ/MSD) and the Resurgence Support Payment (administered by IRD). Below is a brief summary of what we know about these so far.
Wage Subsidy
The Wage Subsidy was the cornerstone of the economic response to the March 2020 Covid outbreak and the Government has announced that it will be reintroduced. As of 3pm today (18th of August), full details have not been released, but below is what we know (or assume) so far.
Applications open 9:00am on Friday, the 20th of August and, at this stage, will be open for 2 weeks. The subsidy will initially cover a 2-week period. However, we are expecting an extension of the lockdown and therefore the length of the subsidy should increase too.
There have been a few important changes to the Wage Subsidy Scheme since the original Wage Subsidy Scheme:
- The turnover threshold has increased from 30% to 40% (although this change occurred in previous iterations). Best we can tell this is measured over a 2-week period, but this is to be confirmed; and
- The amount has increased to $600 per full-time employee and $359 per part time employee; and
- Certain weaknesses in the terms and conditions, particularly around repayment requirements were addressed since the very first wage subsidy scheme and we expect these to carry-over.
While the wage subsidy can be applied for based on an expected drop of income, we suggest additional caution this time. In the original Covid outbreak in 2020, many businesses claimed the wage subsidy on the reasonable expectation that their turnover would drop, however the actual drops were less than expected. Many of these businesses were later investigated and asked to repay the subsidy.
Of course, some businesses, particularly in Tourism and hospitality will have had sufficient forward bookings cancelled to ensure that the 40% drop is a certainty, so these businesses will feel more comfortable applying as soon as possible.
Here is a link to the Work and Income Covid landing page which should be updated with further detail very soon.
Resurgence Support Payment
The Resurgence Support Payment (RSP) is the lesser of:
- $1,500 plus $400 per full time equivalent employee FTE), up to a maximum of 50 FTEs; or
- Four times the turnover decline in the period.
The key qualification requirement is that the business has suffered a 30% decline in revenue over a 7-day period due to the Covid alert levels compared against a typical 7-day period in the preceding 6 weeks. There are certain eligibility requirements that must be met too.
Applications are made by a business or their accountant through IRD’s MyIR online platform. As the 30% turnover decline here is actual (not expected), applications will open 8am on Tuesday the 24th of August.
The RSP can be received in conjunction with the Wage Subsidy.
The RSP is based on 7 day increases in Covid Alert Levels. Therefore, if this lockdown drags on, it is possible that multiple RSP payments will be allowed. Cabinet decides when to activate the RSP regime. Here is a link to the IRD’s main page on the RSP.
Leave Support and Short-Term Absence subsidies
Like with prior outbreaks, there is also assistance for employers who have staff who must isolate due to medical conditions (Leave Support Scheme) or because they are waiting on result of a Covid test (Short-Term Absence payment).
There is no turnover threshold for these subsidies, but an employer can only get one type of subsidy for any given employee and normally the Wage Subsidy is the best option (if the turnover requirements are met).
Applications for these are made through Work and Income and we expect that the applications for these subsidies will also open 9am Friday the 20th of August.