WAGE SUBSIDY EXTENSION

 

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Last week the Government announced an extension to the Wage Subsidy scheme that could see eligible employers receiving additional wage assistance payments for a further eight (8) week period (10 June to 5 August 2020). Minister Grant Robertson has not ruled out extending the subsidy payment again stating that this will be looked at closely.

The amount of the subsidy will remain unchanged ($585.80 gross) however the criteria for eligibility as been altered, with businesses having to demonstrate that they have incurred an actual or projected revenue loss of at least 40% for a continuous period of 30 days compared to the same period last year.

Interestingly the Government have also advised:

  • You cannot apply for the subsidy for an employee who has already been provided with notice of termination on the basis of redundancy however;
  • You can apply for the subsidy for such employees if you retract the notice period and continue to employ the individual for the length of the new wage subsidy period.

For employers who believe that their business may recover in the short term, this additional financial relief may be beneficial as it will enable them to retain these valuable employees for a longer period, at little actual cost to the business, prior to a final decision being made.

However, for businesses who do not see their recovery reaching this level, this additional payment will simply delay the inevitable termination date while ensuring that the employee continues to receive some payments in the interim.

Currently the number of people on the job seeker benefit has increased to 189,500 – about 6.3% of the estimated working age population with this expected to increase steeply as the initial wage subsidy payment comes to a conclusion over the next two week period.

Heading towards an election on Saturday 19 Sept 2020 the Government are clearly keen to retain the unemployment rates as low as possible through extending this scheme for as long as practically possible.

However, for businesses still facing the significant effects of the COVID-19 Lockdown a choice will need to be made. Do they;

1. Retract the notice period already provided to workers and then apply for the wage subsidy extension payment in that knowledge that:

  • The application could be declined and they will therefore have to consult once again with the worker regarding their redundancy, which may require a new period of notice, and
  • Any decision to keep the employee on will result in the employer having to pay ongoing kiwisaver and annual leave accumulation payments

2. Continue with the original termination date and encourage the employee to apply for the Government Income Relief Payment for workers made redundant due to COVID-19 ($490 nett per week) and therefore eliminate any ongoing costs to the business or dependence on Government funding and potential scrutinization of your financial position.

Option one is really only viable to businesses where there is a greater chance that a turnaround will occur over the next eight (8) week period that would result in the retention of these workers for the longer term.

Option two may therefore be the more viable decision for businesses that continue to hold grave concerns about the longer-term viability of their workforce.

There is not restriction in place, or penalty to be imposed, if a worker subsequently made redundant is subsequently re-employed by the business at a later date if the business does recovery with the only obligation being that the employers should firstly consider re-employing employees recently made redundant over engaging entirely new staff.

If you have any questions that would assist you in making decision regarding these matters, please feel free to contact us.

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