The government is aware that requiring businesses to close during Alert Levels 3 and 4 will create a situation where employees cannot work (not everyone can work from home) and employers cannot pay their employees in the absence of revenue from doing business.
The government has created a comprehensive wage subsidy scheme to try to keep people employed for as long as possible and cushion the blow, at this stage, for at least 12 weeks. Some businesses will ultimately have to shut down regardless, but this financial support allows employers to pay their employees something rather than nothing during the lockdown period.
Employers must proactively apply for the scheme where possible, and they are not permitted to dismiss an employee for whom the subsidy is claimed during the 12-week duration of the subsidy.
Whether the employer applies or not, both parties must fulfil their respective legal obligations and deal with each other in good faith. This includes, for example, when discussing how the parties will manage a reduction in work or hours when the employer is only able to pass on the subsidy alone without a top-up to 80%.
Any business that has or will experience a significant downturn attributable to COVID-19 may apply for a wage subsidy. A significant downturn is a minimum decline in actual or predicted revenue of 30% over a period of a month when compared to the same month last year or a reasonably equivalent month for a business that is less than 1 year old, e.g. February 2020 and March 2020.
You must have taken active steps to mitigate the impact of COVID-19 on your business activities. Such steps may include engaging with your bank, drawing on your cash reserves as appropriate or making an insurance claim but obviously don’t extend to laying off your employees.
The idea behind the scheme is that, if you haven’t experienced a minimum decline of 30% as explained above, you can afford to keep your staff employed during the lockdown period.
If yours is an essential business (check MBIE’s regularly updated list on their website), you may be able to apply for COVID-19 essential workers leave support (despite not experiencing a 30% downturn). However:
You must use the entirety of the subsidy to pay your employees their normal pre-COVID remuneration to the extent that is possible.
You cannot use any part of the subsidy on yourself or for business purposes under any circumstances. The subsidy is claimed on behalf of each employee and must only be used for the purpose of paying that employee 100% of their ordinary wage for at least 12 weeks or to assist you in paying the employee at least 80% of their ordinary wage for 12 weeks (where they earn more than the subsidy).
Some employers have pooled the wage subsidy and simply paid all their workers 80% of their pre-COVID wage. This is wrong. Workers who are normally paid less than the weekly subsidy are entitled to 100% of their ordinary pay – not 80%. Similarly, workers who normally earn considerably more than the subsidy are entitled to the subsidy itself and then the employer’s best endeavours top-up to 80% of their ordinary pay.
You can only use the subsidy of one employee to pay another when you have enough to pay 100% of that employee’s ordinary wage for 12 weeks (because employees aren’t entitled to more than their ordinary wage).
If the subsidy for a worker runs out before the 12 weeks are up because the employer has paid some employees too much while others have been short-changed, they will have to make up the shortfall in full from their own funds. Those workers entitled to 100% of their normal pay will still have to receive that sum for 12 weeks. Failure to do so would open the employer to claims for lost wages by affected employees.
For these workers, you must calculate their average weekly earnings over the past 12 months and pay them 100% of that amount from the subsidy for at least 12 weeks. However, if the employee is legitimately casual and they happen to earn more than the subsidy, they are not entitled to the employer top-up as they are not entitled to pay when not working. Be sure they are in fact still a casual employee and haven’t become permanent part-time staff in reality before declining to top up if necessary.