Wage Subsidies

The Government is acting to support people in New Zealand through these changes with a $16.1 billion package that includes:

  • a wage subsidy scheme. The previous cap of $150,000 per business removed
  • leave and self-isolation support
  • business cash flow and tax measures
  • mortgage repayment holiday scheme for 6 months — via retail banks
  • business finance guarantee scheme.

Your usual financial support, such as benefits, will continue.

More about COVID-19 support on the Work and Income website

 

Learn who’s eligible for the wage subsidy scheme and how to account for it in Xero.

 

 

 

A COVID-19 Wage Subsidy Scheme has been developed to help businesses and affected workers in the short-term, as they adjust to the initial impact of COVID-19.

 

About the scheme

The Government’s Wage Subsidy Scheme supports employers and their staff to maintain an employment connection and ensure an income for affected employees, even if the employee is unable to actually work any hours. 

The Wage Subsidy Scheme:

  • supports employers adversely affected by COVID-19, so that they can continue to pay their employees, and
  • supports workers to ensure they continue to receive an income, and stay connected to their employer, even if they are unable to work.

The Wage Subsidy Scheme is available to all businesses (including the self-employed, contractors and sole traders), registered charities, incorporated societies and post-settlement governance entities, that are adversely affected by COVID-19. It is also available to employers who recently let employees go because of COVID-19, provided they re-hire those employees.

The scheme excludes state sector organisations.

For full criteria and to apply, see the Work and Income website. 

COVID-19 support for employers - Work and Income

 

Eligibility

To be eligible for the wage subsidy businesses must declare that they:

  • have had a 30% revenue drop attributable to COVID-19
  • will retain named employees for at least the duration of the grant (12 weeks)
  • will pay named employees, at a minimum:
    • for any work they do at their normal rates
    • at least 80% of income where reasonably possible (for employees working reduced hours while self-isolating)
    • the full subsidy received for each named employee, except where a person’s income is normally less than the subsidy amount, in which case they can be paid their normal salary.

 

Subsidy rates

Payment rates under the modified Wage Subsidy Scheme are unchanged from the original COVID-19 leave and wage subsidy schemes. They are:

  • $585.80 (gross) per week for full-time employees, where full-time is 20 hours or more per week
  • $350.00 (gross) per week for part-time employees, where part-time is less than 20 hours per week.

Employers must pass the full amount received onto the employee, except where a person’s income is normally less than the subsidy amount (i.e. $250 a week), in which case they can be paid their normal salary. Any difference should be used for the wages of other affected staff - the wage subsidy is designed to keep your employees connected to their employers.

If your employer has received the subsidy, but you haven’t received a payment, you don’t think you’ve received the right amount, or you have questions about how the subsidy is being applied to you, it is important that you talk to your employer in the first instance.

If you have talked to your employer and cannot resolve your problem, or think your employer has behaved fraudulently in relation to the subsidy, you can make a complaint with us.

Wage Subsidy Scheme: Complaints about employers

Payment frequency

The subsidy will be paid as a lump sum and covers 12 weeks per employee. This is consistent with applications paid to date.

Employers can pass on the subsidy and additional wages through their usual pay cycles, or at other intervals.

Tax treatment

The modified Wage Subsidy Scheme, and the previous COVID-19 leave and wage subsidy schemes, are considered excluded income to businesses and are also GST exempt. When passed on as wages, businesses don’t get a deduction for income tax purposes.

Payments to employees under the modified Wage Subsidy Scheme, and the previous COVID-19 wage subsidy and leave schemes, are wages. Therefore, they are subject to standard deductions like PAYE, ACC levies, KiwiSaver contributions and student loan repayments.

Wage Subsidy Scheme case studies

Case study: Non-essential business + minimum waged worker

James is a barista at a Wellington café. James earns the minimum wage. The café is closed for the lockdown and has had a 30% loss in revenue. James’ employer cannot afford to pay any wage to James, but wants to keep him on. James does not want to use his annual leave entitlements.

James’ employer can access the wage subsidy and pay $585.80 per week to James, without James being required to do any work. James retains his annual leave entitlements to use at a different time.

Case study: Able to do some work from home + full-time worker

Sam is a civil engineer. He usually works 40 hours per week at $30 per hour, with a usual gross income of $1200 per week. The business is non-essential and closed for the lockdown and has had a 30% loss of revenue. Sam can do some work from home over this period. He works 30 hours per week for the duration of the Alert Level 4 lockdown period. 

Sam’s employer can access the wage subsidy and pays Sam his usual salary at the agreed reduced hours, which is $900. Sam’s employer can use the $585.80 per week to subsidise Sam’s wages, this means Sam’s employer will top up the wage subsidy with $314.20 to compensate the hours Sam worked.

Case study: Non-essential business + part-time worker

Phil is a HR advisor in a medium-sized business and works part-time. His hourly rate is $25 per hour, and he usually works eight hours a week. The business is non-essential and closed for the lockdown and has experienced a near total loss of revenue.

Phil’s employer can access the wage subsidy. Their revenue has dropped so much that they are worried they will be unable to retain their staff. Under the subsidy scheme requirements, Phil must receive his normal pay of $200 per week, which will be paid from the wage subsidy. His employer can use the remaining money from the subsidy for other affected employees.

Case study: Non-essential business + unable to work

Craig is a waiter at a successful restaurant chain that also needs to close during the lockdown. Craig was getting paid $1,000 per week. Craig’s employer has committed to paying full wages to their staff as they know that such workers will be in demand as the lockdown ends. The restaurant has suffered a 30% loss in revenue due to COVID-19.

Craig’s employer can access the wage subsidy scheme to pay Craig $585.80 per week, and the employer can then top that up with $414.20 per week to ensure Craig receives his full income.

Case study: Essential business + able to work

Steve is an essential services worker, ensuring certainty of electricity supply. Steve is really busy, working his normal hours and getting paid at his normal rate, and his business has not been affected by COVID and does not require support to pay or retain its staff.

Steve’s employer is not eligible for the Wage Subsidy Scheme.

Essential Workers Leave Scheme

Some people who work in an essential service may be in situations where they need to stay away from work and cannot work from home. They or someone they live with may be sick with COVID-19 or have had close contact with someone with COVID-19. They may be at higher risk of severe illness if they contract COVID-19 and have agreed with their employer that they will not work.

For these groups of essential workers, the government has created the Essential Workers Leave Scheme. It is designed to support public health goals and financially help workers who need to stay at home because of these. Employees and employers should work together to identify if they are eligible for the scheme.

Essential Workers Leave Scheme

More information

Find out more about the wage subsidy scheme, including how to apply, and other support for businesses at: