COVID-19 UPDATE – What you need to know about the economic response package & wage subsidy
Few days into the nationwide lockdown, I suspect most of us are still reeling from the enormity of what just happened and the sombre thoughts of what’s to come. A huge boulder of uncertainty sits ahead of us as we wonder how dire will the consequences of COVID-19 be on our businesses, the economy and on our personal health and finances?
In the next series of blogs, we will do our best to gather and provide as much information to help you prepare for what might be ahead and help you navigate through these evolving and uncertain times.
In this blog we outline the Economic Response Package announced on Friday by the Government and what it means for Employers.
On Friday 27th March at 3pm, The Finance Minister Grant Robertson announced that the COVID-19 Leave Payment Scheme will be disestablished and wrapped up into the Wage Subsidy Scheme.
Further information announced on Friday were:
- Employers who receive the wage subsidy must make every effort to pay employees at least 80% of their wages, and if they are unable to do this then they must pass on the full wage subsidy to employees
- Employers will not be able to terminate an employee whilst they are receiving wage subsidy for that employee
- Names of employers receiving wage subsidy will be made publicly available
Qualifying for Wage Subsidy
- The employer must be registered and operating in New Zealand
- Employees must be legally working in New Zealand
- Employer must have taken active steps to mitigate the impacts of COVID-19
- Employer must make best efforts to retain employees and pay them a minimum 80% of their normal income for the subsidised period.
How much can you get?
- A flat rate of $585.80 for people working 20 hours or more per week
- A flat rate of $350.00 for people working less than 20 hours per week
- There is no cap on the subsidy (originally there was a cap of $150,000 per organisation.)
Compiled from various sources.
Q. Is the Wage Subsidy taxable?
A. Wage subsidies should be passed onto the employee by the employer and processed as part of the employee’s normal wages. All deductions (such as PAYE, KiwiSaver and child support) should be made as normal.
Q. Who is eligible for the wage subsidy scheme?
A. The scheme covers employers, contractors, sole traders, the self-employed, registered charities, incorporated societies, non-governmental organisations and post-settlement governance entities.
Q. If, as an employer I am receiving the wage subsidy on behalf of an employee, do I have to pay GST on the subsidy and does the employee need to pay tax on the wage subsidy?
A. An Order in Council has confirmed that the subsidy is exempt from GST.
Inland Revenue’s view is:
- The wage subsidy is taxable to the employee as part of their normal salary and wages.
- The wage subsidy is not taxable to the employer but there is no deduction when the employer pays the employee’s wages.
Q. My employee normally receives less than the Wage Subsidy amount each week. Do I have to pay them all of it anyway?
A. No. If your employee normally works less than 20 hours per week and receives less than $350 per week (or works more than 20 hours per week and receives less than $585.80 per week), then you only need to pay them for what they would normally receive for a week.
Q. Can an employee use their other leave entitlements during the lockdown period?
A. Employers and employees can agree to use any form of paid leave (e.g. annual leave) to cover their period of self-isolation. However, employees aren’t required to have used any or all their paid leave entitlements before they can receive the Wage Subsidy support paid to an Employer.
Q. Am I required to track my employees’ hours if they are working from home?
A. No. As your employees are still working their normal hours and being paid accordingly, there is no requirement to track this information.
Q. Do I have to pass on the Wage Subsidy to my employee?
A. Yes, you are required to pass on the Wage Subsidy to your employee. And if you can, it is expected that you top this up to 80% of your employee’s standard wages/salary.
Links to apply for the wage subsidy online:
- Large employer application (over 100 employees) https://www.workandincome.govt.nz/products/a-z-benefits/covid-19-large-employers.html
Also, if you are having trouble paying your terminal tax on the 7th of April or the last Provisional Tax on 7th of May, there is assistance available from IRD. In a media release on the 25th March, IRD have advised that they will waive late payment penalties and interest if you or your business have been impacted financially by COV-19. They currently don’t have a criteria for this however taxpayers need to get in contact with IRD before the taxes become due.
Finally, if you have any questions either on the topic above or anything else please email us. We are keen to obtain feedback from you on the challenges you are currently facing that perhaps we might be able to help you with or refer you to advisors in our network.
Also email us if you think your business will require additional capital either as loan or equity as we still have access to lenders and investors.
Keep Safe and All the Best!!