COVID-19 Alert Level 4: Update 3 – 3 April 2020

As New Zealand enters its second week of the Alert Level 4 lockdown, we have put together the following update to address the recent developments within employment law, which, as expected, largely relate to the COVID-19 crisis.  As Easter quickly approaches, we also address some concerns employers may have regarding public holidays that fall during the lockdown.
Where an employee earns less than the relevant subsidy amount
Building on our most recent update of 28 March 2020, where we confirmed the good news that “if a person’s income is normally less than the subsidy they can be paid their normal salary”, Work and Income New Zealand (“WINZ”) has provided further guidance around how employers should treat the ‘leftover’ wage subsidy payments. 
WINZ has advised that:
If your employee’s usual wages are less than the subsidy, you must pay them their usual wages.  Any difference should be used for the wages of other affected staff – the wage subsidy is designed to keep your employees connected to you.
This means that residual subsidies from staff whose ordinary income is less that their applicable subsidy, can be used to benefit other (higher) earners.  It is very clear that employers cannot simply pocket the excess. 
Residual subsidies of employees who are made redundant (provided the employer applied for the subsidy before 4pm on Friday 27 March 2020) can also likely be treated this way.  Namely, instead of WINZ requiring an employer to pay back the subsidy excess if an employee receiving the subsidy is made redundant, it now appears that employers can use leftover subsidy payments to top up other employees’ subsidies.
Choosing the subsidy rate where the employee’s hours fluctuate
Further guidance has been provided from WINZ for determining what subsidy rate to apply for.  If an employee’s hours fluctuate, the employer should calculate the employee’s average hours per week for the previous 12 months (or for the total period of employment if less than 12 months). 
If the employee worked 20 or more hours per week on average, then the employer should apply for the full-time subsidy.  If the average was less than 20 hours per week, then the part-time subsidy should be applied for.
Assessing “usual/ordinary income” for purposes of topping-up subsidy (or paying less than the subsidy)
WINZ has also advised that for wage subsidy applications made after 4pm on 27 March 2020, “ordinary income” is:

  • the salary or wages specified under the employee’s employment agreement as at 26 March 2020; or
  • if the employer ended the employment relationship with any employee named in their subsidy application as a result of the business being adversely affected by COVID-19, and has re-employed that employee on or after 17 March 2020, then the salary or wages as specified in the employee’s employment agreement as at the date that the employment relationship ended.

In our view, this guidance will also apply to applications made before 4pm on 27 March 2020.  It will be particularly relevant in situations where an employee’s employment agreement specifies their minimum hours, but their average hours are substantially different. 
Following the guidance from WINZ, employers would be entitled to apply the averaging method to determine which wage subsidy rate to apply for, and rely on the hours specified under the employment agreement when determining how much to top-up the wage subsidy by to reach at least 80% of the employee’s “ordinary income”.
While employers would have an argument in the alternative, they may choose to adopt a conservative approach and apply the averaging approach when determining which subsidy rate to apply for, and when determining the employee’s “ordinary income”.  Ultimately, this will be a commercial decision for employers, as they are entitled to rely on this new guidance from WINZ.
Public holiday payments during Alert Level 4 lockdown
This question is relevant where employees are unable to work from home, and they will not be able or expected to work on the public holidays that are covered by the Alert Level 4 lockdown.
Whether the employee is entitled to public holiday pay will depend on whether the public holiday falls on a day that would have “otherwise been a working day for the employee”.  Where it is not clear whether a day would otherwise be a working day for the employee, the employer and employee must take into account the factors listed under s 12(3) of the Holidays Act 2003, with a view to reaching agreement on the matter. 
Pursuant to these factors, the following are of significant relevance:

  • the reasonable expectations of the employer and the employee that the employee would work on the day concerned; and
  • whether, but for the day being a public holiday, the employee would have worked on the day concerned.

It is arguable that, but for the public holiday, employees would still not be expected to work on the public holiday, due to the Government enforced lockdown.  On this basis, employees would not be entitled to payment for the public holidays during the Alert Level 4 lockdown and therefore, subject to consultation, would continue receiving the same manner of lockdown payment (if any) i.e. just the subsidy or less than the subsidy if their ordinary income is less. 
However, whilst employers have an argument in the alternative, they may wish to adopt a conservative approach and pay employees 80% of their ordinary income or in full (relevant daily pay) for the public holiday.  This will be another commercial decision for employers to make.
In spite of the above, employees who are able to continue working during the Alert Level 4 lockdown (either from home or as Essential Services) are still entitled to public holiday pay as usual.
Leave scheme announced for Essential Workers
Yesterday, the Government announced that an ‘Essential Workers Leave Scheme’ (“the Scheme”) has been established.  The Scheme will commence on Monday 6 April 2020 and will be administered by the Ministry of Social Development.
The Scheme will operate at the same rates as the wage subsidy scheme ($585.80 per week full-time and $350.00 per week for part-time workers).  It is designed to support the following three groups of essential businesses workers:

  1. Workers who are self-isolating in accordance with public health guidance because they have contracted COVID-19 or have come into contact with someone who has contracted COVID-19 (or have a dependent they need to care for who is sick or self-isolating).
  2. Those deemed at higher risk if they contract COVID-19, in accordance with public health guidance and as such, should self-isolate for the duration of the lockdown (and potentially longer).
  3. Those who have household members who are deemed at higher risk if they contract COVID-19, in accordance with public health and as such, should self-isolate for the duration of the lockdown (and potentially longer) to reduce the risk of transmitting COVID-19 to that household member.

The Government is yet to define who it classifies as “higher risk”, but guidance around this is expected to be made available online before the Scheme goes live on Monday.
Employers accessing the Scheme should pay workers at either:

  • their ordinary weekly income before COVID-19, if this is less than the relevant wage rate provided; or
  • a minimum of the full leave rate, if the workers’ ordinary income before COVID-19 exceeds the relevant rate, and in that case, also make best endeavours to pay at least 80% of the workers’ ordinary income before COVID-19.

More information on the scheme will be provided by the Government on Monday. 
Adult minimum wage rate increase
Amongst the flurry of updates regarding the COVID-19 crisis, it is important to note that, effective 1 April 2020, the Adult minimum wage rate has increased from $17.70 gross per hour to $18.90 gross per hour.
This will be especially relevant for employers that are initiating any proposal to vary their employees’ hours or remuneration in response to the COVID-19 crisis.

If you have any questions regarding the impact of COVID-19 on the workplace, you can contact us on:

                Auckland: (09) 953 9757

                Hamilton: (07) 981 3140 


  • Madeleine Lister, Associate
  • William Buckley, Barrister 
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