The Ministry of Social Development (MSD) has announced the eligibility criteria for the Wage Subsidy Scheme (WSS) as a result of the COVID-19 alert level being elevated to level 4 from midnight 18th August 2021.
The intention of the WSS is to provide some assistance and support to employers over these uncertain and unprecedented times.
The subsidy will cover a two-week period and is paid at the rate of $600 a week for each employee working 20 hours or more and $359 for those working under 20 hours per week. The payment is a once-only payment, paid as a lump sum.
If an employee works variable hours, an average can be used to work out what rate to apply for. The average hours worked per week is to be calculated over the lesser of the last 12 months or the period of time the employee has been employed.
The WSS is, once again, being administered by MSD. You can apply online at:
- For large employers (80 employees or more) https://www.workandincome.govt.nz/covid-19/wage-subsidy/large-employers.html
- For other employers https://www.workandincome.govt.nz/online-services/covid-19/apply-checklist-wage-subsidy-august-2021-employers.html
- For self-employed https://www.workandincome.govt.nz/online-services/covid-19/apply-checklist-wage-subsidy-august-2021-self-employed.html
MSD will start paying the subsidy from Friday 20th August.
If your application is approved you will receive either an email or text once the payment has been made.
If your application is not approved then you will receive an email advising of this. In this instance, it is possible to request a review of the decision to decline the application.
You will require the following information when making an application:
- Business IRD number
- Business name
- New Zealand Business Number, if you have one
- Business address
- Contact name, email address, and mobile number
- Bank account number
- Employee details – name, date of birth, IRD number, part or full-time employment
MSD will validate the information provided before approving the application, therefore, you may be contacted regarding your application.
Your business will need to meet a number of criteria to qualify for the subsidy, including:
- You operate a business in New Zealand that employees and pays employees
- Each employee must be legally working in New Zealand and not have been given notice of redundancy at the date of application
- Your business meets the revenue decline test (see further below)
- You will prepare and retain evidence to support the application
- You acknowledge the granting of the subsidy does not override existing obligations under employment law
- You will not make any changes to your obligations under your employees’ employment agreements, including rates of pay, hours of work, and leave entitlements, without the written agreement of the relevant employee
- You will retain the named employees for the period you receive the subsidy and use the subsidy to pay their ordinary salary and wages
- You will remain responsible for paying the ordinary wages and salary of the employees for whom you have applied for the subsidy
- For the period you receive the subsidy you will use your best endeavours to pay at least 80% of each named employee’s ordinary wages or salary
- You will pay at least the full amount of the subsidy to each named employee
- where the ordinary salary or wages of a named employee on 16 August 2021 is below the amount of the subsidy, you will pay the employee their ordinary salary or wages
- you will provide information about you, your business, and your named employees to MSD
- You consent to MSD sharing information about your application with other agencies
- You consent to other agencies providing information about you to MSD
- You have discussed your application with your named employees and have their consent to information sharing
- You consent to MSD using other information it holds about you or your business
- You have advised your named employees they can request access to the information you have provided in your application under the Privacy Act
- You consent to MSD publishing information about your business and the level and duration of any subsidy provided to you on a publicly accessible register
- You will notify MSD within 5 working days of any changes that may affect your eligibility or entitlement to the subsidy
- You will repay the subsidy in certain circumstances
Revenue Decline Criteria
In order to meet the revenue decline criteria, firstly, your business's revenue has to be, or will be, affected by the move to Alert Level 4 from midnight 18th August 2021.
Furthermore, the business has to have had, or you are predicting it will have, at least a 40% decline in revenue attributable to the change in alert level. The 40% decline in revenue has to be over the continuous 14-day period from 17 August 2021 to 30 August 2021 and compared to a typical 14-day continuous period of revenue in the six weeks immediately prior to the change in alert level. This is known as the “default comparator period”.
For those businesses that have highly seasonal revenue, the comparison can be the same continuous 14-day period in 2020 or 2019. However, this can only be used if it can be demonstrated that the seasonal nature of your business makes it harder to meet the 40% decline using the “default comparator period”.
Disappointingly, there is no guidance from MSD as to what constitutes revenue and whether revenue is calculated on a cash or accruals basis.
For commonly-owned groups where one company in the group employs all of the employees, rather than each company in the group, the revenue decline test is applied across all businesses within the group rather than on a business-by-business basis.
Self-employed / Sole Traders
For the purposes of the WSS, a sole trader or self-employed person is considered an employee, which means these people are entitled to claim the WSS even if they do not employ employees.
The subsidy applies to a wide range of businesses, including contractors, sole traders, self-employed persons, registered charities, incorporated societies, non-government organisations, and some post-settlement governance entities.
It is possible to claim the subsidy for casual employees for their usual hours, as long as you continue to employ them for the subsidy period.
If you claim a subsidy for an employee and they voluntarily leave during the 14-day period the subsidy covers, you need to advise MSD. However, there is no need to repay any of the subsidies received for this employee unless the business has no other employees.
If you make an employee redundant during the 14-day period covered by the subsidy, then any subsidy received for that employee only needs to be repaid in proportionate to the period the employee is not employed. If the employee remains employed until the end of the 14-day period then no part of the subsidy received for that employee needs to be repaid.
It must be remembered that the receipt of the subsidy does not override any obligations you have under employment law. Therefore, you will still be required to meet the terms and conditions of an employee’s employment agreement.
If you are wanting to vary any employee’s employment agreement, including reducing pay rates, you will be required to negotiate and agree on these variations with the employee. Failing to do this could result in a personal grievance being raised which could significantly outweigh any benefit from receiving the subsidy. In these circumstances, we recommend you seek advice from your lawyer before altering employee terms and conditions.
The eligibility criteria requires you to discuss your WSS application with those employees you are applying the subsidy for and gain their consent to sharing their information. Furthermore, you need to advise the employees that they are entitled to request details of the information you have provided to MSD.
For the employees you intend to apply for the subsidy, it is our recommendation that you advise them in writing that you are applying for the WSS, they consent to the matters outlined in clause 6 of the declaration that forms part of the WSS application and that they are entitled to request details of the information provided about them in the application. Include a provision for the employee to sign this. We would recommend that you provide the employee with a copy of the declaration so they are aware of what they are consenting to.
If the application is accepted you then need to advise the employees of the acceptance.
You can find a Wage Subsidy Scheme Employee Consent template we have developed to assist at this link below.
Wage Subsidy Scheme - Employee Consent Template
It is a requirement that records are kept and maintained to support your application, including records that demonstrate how you meet the decline in revenue criteria.
Repaying the Subsidy
One of the eligibility requirements is that the subsidy, or any part of it, must be repaid in circumstances. This includes you:
- failing to meet any of the obligations for receiving the subsidy
- were not or stop being eligible for the criteria
- provide false or leading information the application
- receive insurance such as business interruption insurance for any costs covered by the subsidy
It should be noted that if you predict you will meet the revenue decline criteria, but as a result of your actual revenue you do not, then the subsidy has to be repaid. For this reason, it may be best to hold off making an application until more is known about how long the lockdown will last to determine the impact on your business.
Goods and Services Tax (GST)
The subsidy is not subject to GST so please ensure you do not include this in your GST return.
Payroll Taxes (PAYE etc)
Any salary or wage payments made to employees even if they are subsidised by the subsidy, are subject to the usual employer deductions such as PAYE, student loan, child support, KiwiSaver, etc.
Mitigating Impact on Your Business
One of the eligibility requirements is, prior to applying for the WSS, you must have taken active steps to mitigate the impact of COVID-19 on your business. This includes, but is not limited to, engaging with your bank, drawing on cash reserves as appropriate, or making an insurance claim. Keep a diary note of any discussions held and the outcomes of these.
This subsidy is being administered on a high trust model. While you will not be asked for verification at the time of making a claim you should remember that claims will possibly be subject to audit and verification at a later date.
McIntyre Dick is Here to Help
We recognise that this is a very stressful time for business. Therefore, as a show of support to our clients, we will not be charging for any advice, support, or assistance provided in relation to the WSS and other Government support packages. This includes applying for the WSS on your behalf.
If you wish McIntyre Dick to complete the application on your behalf then please email the following to firstname.lastname@example.org:
1. Confirmation you meet all of the criteria to apply for the subsidy
2. Bank account number for the subsidy to be deposited into
3. Each employee's full name, date of birth, IRD number, and whether they are employed on a part or full-time basis
If you require any further assistance with the WSS then please email us at email@example.com. We are expecting to be inundated with requests so ask that you please be patient as we work through these.
Armed with an extensive knowledge bank, Brad specialises in providing taxation services to clients in the corporate, business, and rural sectors. He also has a keen interest in valuation, asset protection, and estate planning matters.