On the 17th of March 2020, the Government announced a $12.1b stimulus package. In reality, only around $7b of this is for short-term relief related to the virus. The package includes:
- $5b in wage subsidies between now and 30 June 2020.
- $126m in leave payments over the next 8 weeks.
- $2b in Taxpayer friendly tax changes (over 4 years).
- $2.4 increase in social assistance payments over 4 years.
- $400m in additional winter power subsidies to beneficiaries and superannuitants.
We are seeing the requirements for the wage subsidy and leave aspects of the stimulus package are evolving quite quickly, and that there is a fair amount of confusion about how these subsidies will apply.
Wage subsidy
The wage subsidy is the key part of the Government’s package. This subsidy is a much needed $5b injection into the economy between now and June 2020. The stated purpose of the wage subsidy is to help keep staff employed while a business considers changes that might be needed to ensure its future viability.
The key qualification criteria for the wage subsidy are:
- a business is registered and operating in New Zealand
- the business’ employees must be legally working in New Zealand
- the business must have experienced a minimum 30% decline in actual or predicted revenue over the period of a month when compared with the same month last year (or a reasonably comparable month if the business has operated for less than a month), and that decline is
related to COVID-19 - the business must have taken active steps to mitigate the impact of COVID-19
- the business must make best efforts to retain the named employees and pay them a minimum of 80% of their normal income for the subsidised period.
These requirements are modified where necessary to apply to sole traders/contractors. These payments are calculated based on the flat rate of:
- $585.80 for a person who works 20 hours or more a week.
- $350.00 for a person who works less than 20 hours per week.
The maximum amount of the subsidy is $150,000 and a business can only apply for it once. The amount will be paid out in a lump sum based on 12 weeks per employee, and the intention is that payments will be made within 5 days. The $150,000 maximum equates to about 20 full-time employees. A business with more than 20 employees can get the subsidy, but it will only get the $150,000 maximum.
Leave Payment
For the next 8 weeks, the Government will be making payments to cover the anticipated additional leave employees (or contractors/sole traders) will be taking to cover not being able to work due to:
- self-isolation in line with Ministry of Health Guidelines and have registered with Healthline
as needing to self-isolate; or - being diagnosed with COVID-19; or
- caring for dependents having to self-isolate, or who have been diagnosed with COVID-19.
In the case of those self-isolating, it is a requirement that the person cannot work from home to be eligible for the payment.
These payments are a flat rate of:
- $585.80 for a person who works 20 hours or more a week.
- $350.00 for a person who works less than 20 hours per week.
An employer applies for this amount on behalf of their employees, but they must pass the amount onto employees in full.
It is not a requirement that an employee exhausts their sick (or other leave) before accessing these amounts.
The payments are capped at 14 days, but there is no limit on how many times an employer can apply for these payments. If an employee is on leave for more than 14 days the employer can reapply for the payment for that employee.
Useful links:
Government’s information for business site: Coronavirus-information-for-businesses
Work and Income NZ’s page for employer support: Covid-19-employer support
IRD’s page for tax relief: COVID-19 tax relief
Disclaimer
We have done our best to summarise our understanding of these rules as the stood at the time this was written. Please note that this is a rapidly evolving situation and that the Government is frequently updating the requirements.