Covid-19 wage subsides for businesses

Since moving to COVID-19 Alert Level 4 in Aotearoa, the government has changed the way employers apply for a wage subsidy. 

Previously called the COVID-19 Leave Payment Scheme, this is now replaced with the Wage Subsidy Scheme and extends to include those who are self-employed, contractors, sole traders, registered charities and incorporated societies. Employers are also now eligible for the scheme where they have a 30% revenue drop (actual or projected) attributable to COVID-19. 

We've worked with accountants Doyle and Associates to bring you this summary. If you've got any questions, feel free to email them on admin@doyles.co.nz

How much will I get? 

There are two flat rates available: 

  1. $585.80 gross for people working 20 hours or more per week (full-time rate)
  2. $350.00 gross for people working less than 20 hours per week (part-time rate)

Employers must apply for an employee based on the number of hours a week they work. 

For casual employees, calculate their average weekly hours over the last 52 weeks, or since their employment start date if shorter

The subsidy is paid as a lump sum and covers 12 weeks per employee. 

How it all works 

Employees must endeavour to pay each employee at least 80% of their usual wage. If this isn't possible, employers need to pay at least the subsidy rate (full or part-time). 

It's recommended employers discuss exactly how subsidy top-ups will be made with each employee or establish a general rule for their organisation. 

The general guidelines are: 

  • If an employee is working from home doing their usual hours, then they should be paid their ordinary wage. This should make up the full subsidy plus a top-up
  • If an employee is working from home but doing fewer hours, then the employer should endeavour to pay at least 80% of their usual wage using the full subsidy plus a top-up
  • Whether a top-up is taken from the employee's annual leave or paid as ordinary hours is a decision best left between the employer and employee
  • If 80% of the employee's usual wage is less than the subsidy, then the employee should receive the full subsidy. However, if the subsidy is more than their usual wage, the employee should receive their ordinary wage. Any remaining subsidy can be used for other employees as the wage subsidy is designed to keep your employees connected to you

For your accounts 

  • The wage subsidy is not subject to GST, and it is non-deductible for income tax purposes. However, your employee will need to pay tax on their wage subsidy which is a gross amount as it is subject to the usual deductions – PAYE, Student Loan, KiwiSaver, ACC and so on
  • Receipts of wage subsidies need to be coded to non-deductible income
  • Payments of wage subsidies to employees need to be coded to non-deductible expenses
  • Talk to your accountant about how best to set this up in your accounts. He or she will be able to set up codes for you and guide you through the payroll process

Here are some examples: 

Carl:

  • Carl is a full-time employee working 40 hours a week at $30 p/hr. His usual gross wage is $1,200
  • Carl is able to work 40 hours from home so would be paid his ordinary gross wage of $1,200 comprising the full subsidy of $585.80 plus a top-up of $614.20
  • If he was able to work partially from home, his employer might choose to pay him 80% of his usual wage, being $960, comprising the full subsidy plus a top-up of $374.20

Helen:

  • Helen is a full-time employee (under the subsidy definition) working a 25-hour week at $20 p/hr. Her usual gross wage is $500
  • Because her usual wage is less than the $585.80 subsidy, Helen would be paid her usual wage of $500, with the remaining $85.80 able to be used for other employees

Jim:

  • Jim also works a 25-hour week at $27 p/hr so his usual wage is $675
  • If his employer chose to pay him 80% of his usual wage this equates to $540. Since this is less than the full subsidy of $585.80, Jim would be paid the full $585.80

Make an application 

To apply, visit Work and Income's Wage Subsidy Scheme website