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The New Zealand Government has quickly moved the country into Alert Level 4 following the detection of the Covid-19 Delta variant in the community. While this may resolve quickly, it may not, and employers need to be aware of their obligations to employees during this time, and what support may be available to allow the business to stay afloat.

Changes to employment

Somewhat helpfully, we have been through this before, and we now have some guidance from the Employment Relations Authority and Employment Court on what is best practice during this challenging time.

Nonetheless, this does not mean that employers can simply impose on employees what they may have put in place last time. Any agreement reached then, would not extend to the situation now.

Based on recent decisions, the default position is that, if an employee is ‘ready willing and able’ to work during Alert Level 4 (despite being prevented from doing so by government direction), then they should be paid as usual. However, this is subject to consulting with and/or reaching agreement with employees about any changes to that position. If you are wanting to make changes, whether that be redundancy, reducing hours of work, or reducing pay, a consultation process needs to be followed. This will be most relevant to employers who do not operate an essential service and whose employees cannot work remotely from home.

Even if an employer has a force majeure or frustration clause in their employment agreement that allows them to suspend, reduce or terminate employment, the Authority has made it clear that consultation is still required before relying on such a clause. It has also been noted by the Authority that the threshold for frustration is high.

Therefore, the key points to keep in mind are:
  • An employer is always required to consult with employees before disestablishing their role or making changes to their employment. This applies even if there is a force majeure or similar clause in their employment agreement;
  • An employer cannot unilaterally reduce an employee’s pay (even if the employer is in receipt of a wage subsidy);
  • If an employee’s pay is reduced by agreement, they must still be receiving at least the minimum wage for hours actually worked (relevant to essential workers); and
  • Annual leave should not be used or taken without employees’ agreement.

While we appreciate that this is a difficult time for employers, it is important to not cut corners. Based on recent decisions, a failure to get the process right can be costly.

Support for businesses

For employers that have been adversely affected by the change in Alert Levels, there is a range of support available.

Wage subsidy

The Government has announced that employers that expect a 40% drop in revenue in light of the change in Alert Level will be able to apply for the wage subsidy. Applications can be made from tomorrow on the Work and Income website. The wage subsidy has increased since last year, and businesses will be eligible for $600 per week per full-time equivalent employee, and $359 per week per part-time employee. As previously, amounts must be passed on to employees and employers will need to make a declaration at the time of application.

Resurgence Support Payment

An additional subsidy available to businesses is the Resurgence Support Payment (RSP). The RSP is a payment to help support viable and ongoing businesses or organisations due to an Alert Level increase to Alert Level 2 or higher. To be eligible for a RSP, the business must experience (or expect) at least a 30% drop in revenue, or a 30% decline in capital-raising ability over a seven-day period, due to the increased Alert Level. This decrease in revenue or capital-raising ability is compared with a typical seven-day revenue period in the six weeks prior to the increase from Alert Level 1.

If eligible, businesses will receive the lesser of $1500 plus $400 per full-time equivalent employee (up to a maximum of 50 full-time employees), or four times the actual revenue decline experienced.

Applications for the RSP are made through the Inland Revenue Department (IRD)’s website. The IRD has advised that receiving any other government Covid-19 support does not affect a businesses’ eligibility for the RSP, so it appears that eligible employers can apply for both the wage subsidy and the RSP.

Short-term Absence Payment

As previously, employers can apply through Work and Income for a one-off payment for an employee who cannot work from home and is following public health guidance to stay home whilst awaiting a Covid-19 test.

Importantly, an employer cannot receive the wage subsidy for an employee for the period that they are covered by a short-term absence payment.

Leave Support Scheme

Employers can also apply through Work and Income for a one-off payment for an employee who has been directed to self-isolate by a health official and are unable to work from home.

Again, an employer cannot receive the wage subsidy for an employee for the period they're covered by a leave support payment.

Privacy considerations

Where an employer is applying for a wage subsidy or other payment, best practice is to seek written agreement from employees to apply for the wage subsidy on their behalf and seek their written consent to provide their personal/private information to Work and Income and/or IRD.

We are here to help

We appreciate that this is a difficult time for employers. However, it is important not to panic or cut corners. Our team is business-as-usual working from home, so please reach out if you have any questions or need advice. Our team’s contact details are set out below.

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