With the constant Government updates being released through numerous sources, Into the Blue NZ Limited and Business Support Studio Limited have teamed up to update you on new government information releases and provide clarity around funding and other information.
Into the Blue NZ Limited and Business Support Studio are also directly approaching government departments on behalf of their clients to obtain clarity that is not being widely distributed by the government.
Today’s subject Wage Subsidy will directly impact on most businesses
Wage Subsidy – the intention of the Wage Subsidy was to provide a fair funding mechanism to all small and medium sized businesses (SMEs).
The Wage Subsidy is not an employee right. It is a government subsidy to help businesses survive initially through the lockdown and then level 3 whilst retaining as many employees as possible.
- The Wage Subsidy is in the first instance to be used for paying employee wages during the lockdown period. The government expected businesses to top-up the Wage Subsidy to 80% of the employees’ wages.
- The Employer only has to use the Wage Subsidy to top-up employee wages to what they are usually paid. If the Wage subsidy for an individual employee is higher than what they would normally be paid which is often the case with part-time staff and casual staff, the balance is to be used to top-up other employee wages not covered by the Wage Subsidy and then to pay business expenses.
- When employees start to go back to work on reduced hours the Wage Subsidy is to be used firstly to top up wages to the employees’ normal wages and then for paying business expenses such as rent, power, telephone, etc.
- The Wage Subsidy only needs to be refunded if a business is either unaffected by Covid-19 (full refund) or bounces back to normal trading after lock down and level 3 (partial refund).
- If the business needs to restructure owing to a downturn in revenue that is unlikely to be recovered in the short-term then, after consultation (over a significantly reduced time frame to normal practice) with the affected employee(s), the employer can let surplus employees go without repaying the Wage Subsidy provided:
i. The surplus Wage Subsidy money is used to pay business expenses.
ii. The names and IRD numbers are provided to Work and Income, who originally provided the Wage Subsidy, to allow the redundant employee to be able to sign-on with Work and Income as required.
The Wage Subsidy was the first support package offered by the Government to keep New Zealand businesses afloat during the lock down period and to allow then to retain as many employees as possible. Many business owners have taken a good hard look at their business’s, often with the support of government funded Business Advisors, during the lock down period and level 3 and have made the hard decision to reduce the size of their businesses to meet the new market conditions.
Discussions with Work and Income have confirmed that the Wage Subsidy was a calculation tool to provide small and medium sized businesses with funds to help them survive Covid-19 until they could, hopefully, restart trading again. Where businesses need to let some staff go in order to survive the surplus Wage Subsidy money is to be used in the business.