COVID-19 - Update to the employer wage subsidy
Updated: Apr 3, 2020
The government has amended and clarified parts of the COVID-19 employer wage subsidy. This has immediate effect. Here’s what you need to know:
Employers must undertake to keep employees who they receive a wage subsidy for employed for the period of the subsidy. This is a new requirement of the wage subsidy and will mean an employer cannot make those employees redundant during the period of the subsidy.
·Employers who apply for the subsidy after 4pm 27 March must declare that they will “not make any changes to obligations under any employment agreement, including to rates of pay, hours of work and leave entitlements, without the written agreement of the relevant employee”.
Employers are still required to obtain the consent (in writing, if practicable) of all employees named in the application for the employer to provide information about them to the Ministry of Social Development as part of the application, among other things, before applying for the subsidy.
As set out in our previous article, employers who access the wage subsidy must use ‘best endeavours’ to continue to pay employees at least 80% of their regular income for the period of the subsidy. Note that where an employee’s normal income is less than the wage subsidy (for example for some part time employees), the employer must pay their normal salary, not the full wage subsidy.
Payment of 80% of an employee’s regular income is not a mandatory requirement, but if the employer is not able to do so, for example where there is much less or no work available, the employer must still pass on the entire wage subsidy to the employee, and must keep the employee employed for the period of the subsidy. · However, if this amounts to a change in the employee’s rate of pay or hours of work then the written agreement of the employee must be obtained.
The sick leave scheme has been combined into the wage subsidy scheme to prevent employers double-dipping.
In addition, employment law continues to apply, including the duty of good faith owed by both parties. If you are an employer who has or will be receiving the wage subsidy, but are now having to look at other measures to reduce wage costs, please contact us to discuss your specific obligations pursuant to both the wage subsidy scheme and employment law.