Yesterday (27 March 2020), several changes were made to the Government’s financial support package for businesses.
Importantly, the changes do not alter the obligations for employers who applied for the Wage Subsidy and Leave Payments before 3pm on 27 March 2020. The declaration made, and obligations agreed to by employers at the time of the application will continue to apply.
For any applications made after 3pm on 27 March 2020, the following changes apply:
- The full amount of the subsidy is to be paid to employees (less tax) even when an employee’s wages or salary is lawfully below the amount of the subsidy:
- $585.80 for people working 20 hours or more per week
- $350.00 for people working less than 20 hours per week.
By way of example, previously where an employee received $60 for a three-hour working week and the employer could retain the difference of $290, the new obligation requires that employee to be paid $350 (less tax).
- There is a requirement to retain the employees named in your application for the duration of the subsidy (currently 12 weeks). Previously, the “best endeavours” obligation applied.
In our view, these are the only material changes. The updated declaration also makes several new references to employers’ obligations pursuant to the Employment Relations Act 2000. This does not change the ongoing obligation for employers to deal with employees in good faith and to consult with employees around changes to employment arrangements.
There is a reference to employers not being able to “unlawfully compel or require” any employees to use their leave entitlements. Some commentators are suggesting that this reference in the declaration means that you cannot direct employees to use their annual leave. This is incorrect. Employers can still direct employees to use their annual leave on 14 days’ notice (as per section 19 of the Holidays Act 2003) if they cannot get an employee’s agreement to immediately use their annual leave.
Some commentators have also been asserting that there is an obligation to pay the minimum of 80% of wages to employees who are not able to work. This is also incorrect. The obligation to make “best endeavours” to top up the wage subsidy to 80% for those employees who are not able to work is unchanged. It is possible for the employer to only pass on the full rate of the wage subsidy and not top up the wage subsidy to 80% or 100%. The employer’s obligation is to consider the commercial viability in making best endeavours to top up. The good faith obligation to give information to staff about any decision not to top up will apply.
- Blair Edwards, Managing Barrister
- Aishleen Sluiters, Managing Barrister