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Wage Subsidy – Your obligations as an employer
April 20th, 2020
Chris Lynch, Managing Director
We want to help you keep your business afloat and keep your team together.
By now, many whose businesses have been affected by COVID-19 have applied for support through the wage subsidy. If you are one of them, keep in mind that the subsidy comes with specific conditions.
What do you need to know for your business?
Main requirements of the subsidy
Providing evidence of loss of revenue - The wage subsidy is for businesses that have experienced a 30% decline in actual or predicted revenue because of COVID-19 and have taken active steps to mitigate the impact. This includes talking to your bank, drawing on cash reserves, making an insurance claim. You need to be able to provide evidence of the impact on your business and the steps you have taken. We can help you with this.
- Payment to employees - Employers are required to their best to pay employees 80% of their pre COVID-19 income for the period of the subsidy. If this is not possible then you pass the entire wage subsidy on to employees. This applies to all employees, and they all must at least receive the full value of the subsidy. Where the ordinary wages or salary of an employee was lawfully below the amount of the subsidy before the impact of COVID-19, you can pay the employee that amount.
- Your obligations as an employer - The scheme requires that you keep your employees employed for the 12 weeks period of the subsidy. If an employee voluntarily leaves their employment you must advise MSD, and you cannot claim any more subsidy for that person. You will not need to pay back the subsidy that is already paid.
- Employment law and the Holidays Act still applies under Covid-19 - You can only vary employment agreements with employees with their agreement.
What are the active steps you should take to help mitigate the impact of Covid 19?
Before you make an application for the wage subsidy, there are a number of steps you can take, such as:
- activating your business continuity plan
- drawing on your cash reserves (as appropriate)
- making an insurance claim
- proactively engaging with your bank
- seeking advice from the Chamber of Commerce, a relevant industry association or the Regional Business Partner programme.
Following the rules
Finally, under the rules of the scheme you are required to repay the subsidy if you:
fail to meet any of the obligations
- provide false or misleading information
- receive insurance such as business interruption insurance for any costs covered by the subsidy.Businesses may be subject to civil proceedings to recover any amount received that you are not entitled to and/or to prosecution for offences under the Crimes Act 1961.
Employer register - on making the application you will be consenting to the MSD publishing information about your business and the level and duration of any subsidy provided to you on a publicly available register.
If anything changes that may affect your eligibility or entitlement to the subsidy, you must notify the Ministry of Social Development (MSD) within 5 working days.
If you have more questions on the wage subsidy or other business grants, talk to us. We are here to help.
Chris Lynch, CA
Managing Director, Lynch & Associates Limited
Get in touch by Email or Phone: +64 9 366 6008
Chris is the founding Director of Lynch & Associates Limited.
He qualified as a CA in 1973 and is a full member of the College of NZICA now merged with CAANZ. His expertise is in the areas of tax, accounting, business development, forecasting, and auditing. He has a clear focus on adding value to his clients lives and businesses and seeing the people behind the numbers.
Chris experience includes working as a CFO and company secretary for some of New Zealand’s leading companies before starting his own CA firm in 1999. In his previous roles Chris has worked in the wool, dairy, engineering FCG, banking and investment banking and stock broking industries.
Today he uses this vast experience to assist his clients add value to their businesses and personal lives.