Financial Support for Employers During Covid-19

Financial Support for Employers During Covid-19

In response to the Covid-19 outbreak the Government has announced a $12.1 billion support package to support the economy.  If you are an employer, contractor, sole-trader or self-employed, you may be eligible to apply for financial support.

Work and Income New Zealand are aiming to make payments to approved applications within five working days after receiving an application and its supporting documentation.

1. Leave Support:

From 3.00 pm 27 March 2020 employers are now unable to apply for a Leave Subsidy payment. The subsidy was available for employees who need to self-isolate, or because they, or a dependent, are sick with Covid-19. If you are an employer who applied for this subsidy before this date, your payments will be processed as normal. This subsidy will be paid at a flat rate of:

  • $585.80 to a person working 20 hours or more per week.
  • $350.00 to a person working less than 20 hours per week.

Employers must pass the payment onto their employees in full. For further information, please visit:  Work and Income - Leave Payment

Tax Implications

An employer receiving the leave payment on behalf of an employee does not have to pay GST on the leave payment. For employees, leave payment is treated as income for tax purposes. This means the payment is subject to PAYE, Student Loan, KiwiSaver deductions etc.  

Use of Other Leave

Employers and employees can alternatively agree to use any form of paid leave (such as annual leave) to cover their period of self-isolation. However, employees are not required to use any or all of their paid leave entitlements before they can receive this payment.

2. Wage Subsidy Scheme:

Wage subsidies will be available for all employers that are significantly impacted by Covid-19 and are struggling to retain employees as a result. The scheme will be open to all businesses, including sole traders and the self-employed. As of 23 March 2020 the subsidy now also applies to contractors, sole-traders, self-employed, registered charities and incorporated societies.

The subsidy is paid as a one-off lump sum and covers 12 weeks per employee. This subsidy is for wages only. It is to help you keep your staff employed while you consider changes that may be needed while the disruption continues, and to ensure the future viability of your business.

For applications made before 27 March 2020, to qualify:

  • your business must be registered and operating in New Zealand
  • your 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, and that decline is related to Covid-19
  • your business must have taken active steps to mitigate the impact of Covid-19
  • you must make best efforts to retain employees and pay them a minimum of 80% of their normal income for the subsidised period.

For applications made after 27 March 2020 to qualify:

  • your business is registered and operating in New Zealand;
  • your employees are legally working in New Zealand, including employees who:
    -  have a New Zealand work visa
    -  have a condition on their New Zealand temporary visa that allows them to work in New Zealand
    -  are international students whose visa allows them to work in New Zealand
  • the business has experienced a minimum 30% decline in actual or predicted revenue over the period of a month, when compared with the same month last year, and that decline is related to Covid-19
  • your business has taken active steps to mitigate the impact of Covid-19
  • you must retain the employees named in your application for the period of the subsidy.

The Covid-19 Wage Subsidy will be paid at a flat rate of:

  • $585.80 for people working 20 hours or more per week
  • $350.00 for people working less than 20 hours per week.

Tax Implications

The wage subsidy is classified as excluded income, therefore employers do not need to pay tax on the wage subsidy.

Employees will need to pay tax on a wage subsidy payment, as it is paid to them as part of their normal wages.  This means the payment is subject to PAYE, Student Loan, KiwiSaver deductions and so on.  

$150,000.00 Cap Removed

The Government has removed the cap of $150,000.00 per business on wage subsidies that can be paid to employers affected by Covid-19.

If you have already applied for and been granted the wage subsidy for your employees and the Government has capped the amount paid, you do not need to do anything because the Government will top up the difference.

If you have applied for the wage subsidy for your staff, and claimed only enough to meet the cap, once you have used this subsidy, you can reapply.

Employees That Work Multiple Jobs

Employees who are employed by two or more different businesses can receive the wage subsidy from multiple employers as long as they meet the usual criteria. The wage subsidy rate should reflect whether the employee is part-time or full-time by that employer.

You can apply at: Work and Income - Wage Subsidy

Application Forms

Businesses with 100 employees or less can apply at: Work and Income - Wage Subsidy Application - 100 Employees or Less

If you are a large business (if you employ more than 100 employees) there is a separate application form available at: Work and Income - Wage Subsidy Application - More Than 100 Employees

If you require any assistance on the above financial assistance schemes, please contact our teams:

Albany Office: James Turner at jturner@mcveaghfleming.co.nz or Leo Huang at lhuang@mcveaghfleming.co.nz.  

City Office: John Burley at jburley@mcveaghfleming.co.nz, Craig Andrews at candrews@mcveaghfleming.co.nz or
Sonam Pala at spala@mcveaghfleming.co.nz.

We are working remotely and can schedule a meeting with you via Zoom, WhatsApp or telephone.

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© McVeagh Fleming 2020

This article is published for general information purposes only.  Legal content in this article is necessarily of a general nature and should not be relied upon as legal advice.  If you require specific legal advice in respect of any legal issue, you should always engage a lawyer to provide that advice.