Utilising the COVID-19 wage subsidy extension
Utilising the COVID-19 wage subsidy extension
Wednesday 17 June, 2020
Despite New Zealand’s triumph over COVID-19, victory is bittersweet for New Zealand’s hardest-hit businesses.
Although applications for the original wage subsidy scheme closed on 9 June 2020, from 10 June 2020 further support is available to the worst-hit businesses in the form of the wage subsidy extension (the “extension”), which will remain open for applications until 1 September 2020.
The extension will be paid as a lump sum for the period of eight weeks at the same rate as the original wage subsidy. The extension will be administered by the Ministry of Social Development.
Eligibility
For a business to be eligible for the extension, they must have had a decline in revenue of at least 40% resulting from COVID-19, in a continuous 30-day period when compared to the same period in 2019. This continuous period must be within the 40 days before the application but cannot be any earlier than 10 May 2020.
For businesses that have been operating for less than a year, or where the same period in the previous year is not an accurate representation of the business due to significant growth, a different period may be used as the benchmark to calculate a 40% decline. In doing so, the business must use a previous month (or 30-day period) that gives the best estimation of their revenue decline caused by COVID-19.
Businesses cannot receive the extension for employees that they have already received the original wage subsidy for until the 12 weeks of the original subsidy period has ended. A business also cannot apply for the subsidy in relation to any employee who has received notice of redundancy, unless that notice is withdrawn.
Conditions
To receive the extension, businesses must adhere to the following conditions:
- Businesses must pay the extension to their employees. Employees whose usual pay is less than the extension amount may be paid their usual pay, but the difference must be used to contribute towards payments to other staff. If there are no other staff members to use the balance for, it should be paid back to the Ministry of Social Development.
- Businesses must retain the employees for the duration of the extension and must endeavour to pay them at least 80% of their normal pay.
- Businesses must take active steps to mitigate the impact of COVID-19. Some potential measures have been suggested by the Ministry of Social Development. These include businesses drawing on cash reserves and proactively engaging with organisations for support such as their bank, insurance provider, and/or other support as appropriate. Support may be available from the business’ relevant industry association, the Chamber of Commerce or Regional Business Partner programme.
If you have any questions around the wage subsidy extension, please get in touch with our Employment team.
