COVID-19: Summary of the Wage Subsidy Scheme and Essential Workers Leave Support Scheme

Update for businesses – 7 April 2020

On 1 May 2020 the Essential Workers Leave Support Scheme is being expanded. Please click here for the most up to date information about the Leave Support Scheme and the Wage Subsidy Scheme.

Since first being introduced on 17 March 2020, the Wage Subsidy Scheme has undergone a number of transformations including changes and refinements to the scheme. In this article, we summarise the key features of the Wage Subsidy Scheme and the newly introduced Essential Workers Leave Support Scheme.

Wage Subsidy Scheme

It is important to note that the Wage Subsidy Scheme was varied from 4pm on 27 March 2020 with slightly different requirements for applications pre and post this time. The Minister of Finance has also indicated that the support may continue to be varied as needs change. 

The requirements for applications made prior to 4pm on 27 March 2020 are available here

The requirements for the current Wage Subsidy Scheme are set out in the declaration, which needs to be made at the time of applying. The declaration should be considered in full by all businesses looking to claim the Wage Subsidy. You can read it here.

About the Wage Subsidy

Given the rapidly evolving nature of Government support for businesses at this time, we remind you of the key features of the regime which was first introduced on 17 March, then modified on 23 March and again on 27 March, with a clarification issued on 28 March.

What is the Wage Subsidy? The Wage Subsidy allows qualifying organisations to claim NZ$7,029.60 for a full-time employee and NZ$4,200 for a part-time employee (working less than 20 hours per week). The total amount in respect of all employees is paid out in a lump sum that covers a 12-week period.

Who is eligible? Every organisation in New Zealand can apply for the Wage Subsidy including employers, contractors, sole traders, self-employed people, registered charities, incorporated societies, non-governmental organisations and post-settlement governance entities, provided they meet the other eligibility criteria.

All recipients of the Wage Subsidy will have their details published on the Ministry of Social Development (MSD) website from 6 April 2020, including company name, number of employees the Wage Subsidy was paid for and the amount paid. You can search the register of Wage Subsidy claimants here

What are the eligibility criteria? As of 4pm 27 March the eligibility criteria are:

  • The employees (including you if you are a sole trader or self-employed person) named in your application are legally employed by your business and are employed in New Zealand; and
  • Your business has experienced a minimum 30% decline in actual or predicted revenue over the period of a month (between January and 9 June 2020) when compared to the same month last year, or a reasonably equivalent month for a business operating less than a year (or high-growth businesses), and that revenue loss is attributable to the COVID-19 outbreak; and
  • Before making your application for the subsidy, you have taken “active steps” to mitigate the impact of COVID-19 on your business activities; and
  • Employers and businesses accessing the Wage Subsidy are expected to take “best efforts” to retain employees and remunerate them at least 80% of their normal income. Where this is not possible, the Government expects that, at a minimum, employers pass on the full value (less taxes) of the subsidy to employees (i.e. either $585.80 or $350 per week for 12 weeks) unless the employee is ordinarily paid less than these amounts; and employers must also retain employees for the duration of the subsidy (12 weeks).
  • Employees, or the applicant, are not currently receiving the COVID-19 Wage Subsidy or COVID-19 Essential Workers Leave Subsidy in respect of any of the employees named in the application. 

What are active steps? An employer should have taken active steps to mitigate the financial impact of COVID-19 before applying for the Wage Subsidy. There are a range of activities which businesses should be considering and these can include:

  • Engaging with your accountant
  • Activating your business continuity plan
  • Drawing on cash reserves (as appropriate)
  • Making an insurance claim• Proactively engaging with your bank
  • Seeking advice from the Chamber of Commerce, a relevant industry association, or the Regional Business Partner programme

What does it mean when it says employees need to be remunerated at least 80% of their normal income? The Wage Subsidy is intended to help employers keep their employees employed during this disruptive time by contributing towards salary and wage costs. However, in some instances even with the Wage Subsidy, some employers may have trouble funding full salary and wage costs when suffering from reduced cash flow due to COVID-19. In some instances, employers and employees may renegotiate employment terms to reduce the working hours or salary and wages.

During the 27 March announcement, the Finance Minister clarified that nothing under the Wage Subsidy scheme overrides employers’ legal obligations, especially with respect to leave entitlements and matters of employment relations. Employees should not be compelled to take leave to receive the subsidy. This position is reinforced by the following Q&A replicated
from the MSD website

As an employer, what are my obligations under employment law at this time?

Your obligations under employment law haven’t changed.

As an employer, if I have already received a COVID-19 Wage Subsidy for an employee, do the new obligations of the COVID 19 Wage Subsidy (after it was modified on March 27 2020) now apply?

No. The obligations for the COVID-19 Wage Subsidy remain the same as at the time you applied.

As an employer, what happens if I make my employee redundant during this time?

You need to try your best to retain your employees you are currently receiving the COVID-19 Wage Subsidy for. If you applied for the COVID-19 Wage Subsidy for any employees after 4pm on 27 March 2020, you must retain those employees or you will be in breach of your obligations.

What do I do if the subsidy is higher than what I usually pay my employee?

The wage subsidy is designed to keep your employees connected to you. Any difference should be used for the wages of other affected staff.

If one of my employees who I have made an application for, voluntarily leaves during the 12-week period for another job opportunity or because of caring responsibilities, do I need to pay the money back to MSD?

No – where your employee voluntarily leaves their employment you must advise MSD, and you cannot claim any more subsidy for that person. However, you do not have to return the subsidy already paid. 

As an employer, I’m currently receiving the Flexi-Wage subsidy for my employee(s). Can I also apply for the COVID-19 wage subsidy?

Yes – the COVID-19 wage subsidy is available on top of the Flexi-Wage subsidy that you are already receiving for your employee(s). All wage subsidies that you receive must be paid to your employees.

How do you apply for the Wage Subsidy and Leave Payment Scheme? If
you are an employer, use this link to apply. If you are self-employed / a contractor, use this link to apply.

To prepare for the application process, you will need to:

  • Have proof that you are registered and operating in New Zealand, and that your employees are legally working in New Zealand; 
  • Be comfortable that you meet the eligibility criteria and can agree to the declaration with MSD; 
  • Collect your bank account, IRD number, New Zealand Business Number (NZBN) and organisation contact details; and 
  • With employee consent, collect employees’ names, dates of birth, IRD numbers and employment types (i.e. more or less than 20 hours of work per week).

How long do you have to apply for the Wage Subsidy Scheme? The Wage Subsidy allows you to apply if there is a 30% decline in revenue through to 9 June 2020; therefore, applications will remain open until 9 June (being 12 weeks after the commencement of the scheme). This application date allows employers time to undertake all the steps required of them before applying. 

How do you measure 12 weeks? A criteria of the Wage Subsidy Scheme is that you must retain employees for the duration of the 12 weeks subsidy. You measure 12 weeks from the date of application; i.e. if you were to apply on 7 April 2020, you must retain your employees until 30 June 2020.

What is the tax treatment of the Wage Subsidy Scheme? When an employer receives the wage subsidy, this amount is exempt income to the employer (i.e. it does not pay tax on the lump sum, and also is not allowed a tax deduction when it spends the Wage Subsidy). The employer also does not have to return GST on the receipt of the Wage Subsidy. When the employer pays its employees’ salary and wages using the Wage Subsidy this is treated like any other payment to an employee which has PAYE, KiwiSaver contributions, student loan, ACC and child support deducted. Employers also need to fund employer KiwiSaver contributions on top of the payments. 

While the receipt of the Wage Subsidy is exempt income to an employer, if the recipient of the Wage Subsidy is a self-employed person then this should be treated as a payment for loss of income and this amount should be included as taxable income in the relevant tax return.

Should employers pay employees in a lump sum? While the Wage Subsidy is paid to an employer as a lump sum covering a 12 week period, the expectation is that employers should use this to pay employees over the following 12 weeks like a normal salary or wage payment (i.e. weekly, fortnightly or monthly). If an employer were to pay the subsidy onto its employees as a lump sum there would be over-taxation of the employees due to the way lump sum payments are taxed. 


Tall Trees Limited has eight full-time employees. After watching the 27 March announcements, the CEO, Alex, evaluates that she will be unable to pay 80% of normal income to her team for the foreseeable future as Tall Trees Ltd is unable to operate during the COVID-19 lock down and its employees are unable to work from home. During this period, there is no income coming into the business. After working through the employment law implications carefully with her staff and having the staff agree to receive only the Wage Subsidy amount during the lock down period, Alex applies on 31 March for the Wage Subsidy for all eight staff. Tall Trees Ltd receives a payment from MSD on 3 April for $56,236.80. Over the course of the next 12 weeks, the eight staff receive a minimum of $585.80 (less normal employment taxes), with Tall Trees Ltd undertaking to increase its payments to staff as the business restarts earning income at the end of the lock down period.

Blue Sky Limited has 20 part-time employees who each earn between $100 to $400 per week. Blue Sky Ltd is eligible to claim the Wage Subsidy in respect of its employees. Blue Sky Ltd receives a total Wage Subsidy of $84,000. Blue Sky Ltd must pay all its 20 staff a minimum of $350 per week for the next 12 weeks if its employees ordinarily earn $350 or more, and their normal wage to employees who would ordinarily earn less than $350 per week.

Blake works two jobs. He works 40 hours per week at a bakery (Crunchy Cookies Limited), where he earns a minimum wage of $756 per week. At the weekend he also works 8 hours per week for a local bike shop (Bike Life Limited), earning $160 per week. Assuming they each meet the eligibility criteria for the Wage Subsidy, Crunchy Cookies Ltd and Bike Life Ltd would each apply for the Wage Subsidy in respect of Blake. Crunchy Cookies Ltd will receive a Wage Subsidy of $7,029.60 and Bike Life Ltd will receive a Wage Subsidy of $4,200 in respect of Blake. Over the next 12 weeks Crunchy Cookies Ltd would ensure that Blake receives a minimum of $585.80 per week and Bike Life Ltd would continue to pay Blake his usual wage of $160 per week. Bike Life Ltd would have an excess amount of Wage Subsidy of $2,280 ($350 less $160 per week, times 12 weeks). This amount does not need to be returned to the Government, but in the spirit of the Wage Subsidy Scheme should be applied towards paying the wages of other staff whose wage is not fully covered by the Wage Subsidy Scheme.

Calm Seas Limited has 100 full-time employees and 50 part-time employees. Calm Seas Ltd is potentially eligible for a Wage Subsidy of $912,960. John, the CEO of Calm Seas Ltd, implements the business continuity plan he put in place, speaks to his accountant, and establishes that there are insufficient cash reserves to be able to commit to retaining all 150 employees for the next 12 weeks without receiving the Wage Subsidy. John and his accountant have forecast that the receipt of the Wage Subsidy would allow him to commit to retaining all 150 employees. Calm Seas Ltd makes an application for all 150 staff.

Rolling Hills Limited has 500 full time employees who are on average paid $52,000 each per year. Rolling Hills Ltd anticipates it will suffer over a 50% reduction in revenue. Rolling Hills Ltd has activated its business continuity plan, spoken to its accountant and bank, and has prepared forecasts based on its cash reserves and available credit lines. Rolling Hills Ltd believes that it could afford to retain its full workforce if its salary costs were halved; that is, it is only able to pay each staff member a maximum of $500 per employee per week if the business is to survive. Rolling Hills Ltd applies for the Wage Subsidy and receives an additional $585.80 per employee per week. Over the 12-week period, Rolling Hills Ltd continues to pay all employees their full weekly salary of $1,000; being funded $585.80 using the Wage Subsidy and $414.20 from its own funds.

White Cloud Limited has 10 full-time employees, each earning $104,000 per annum. White Cloud Ltd therefore has a weekly salary cost of $20,000. White Cloud Ltd is anticipating a sharp reduction in revenues and is potentially facing having to make 4 staff members redundant. After discussing the situation with all its staff members, all staff members agree that they would each be prepared to take a 20% reduction in salary for the duration of the COVID-19 issues, in order for all staff to keep their jobs. With the agreement of staff, the weekly salary cost reduces to $16,000 (or $192,000 over 12 weeks). White Cloud Ltd is able to apply for the Wage Subsidy; it receives a Wage Subsidy of $70,296 for the 12-week period. White Cloud Ltd pays its staff using the Wage Subsidy of $70,296 and $121,704 of its own funds.

Troy is a self-employed consultant; his main line of work is the co-ordination of show-jumping tournaments. As a result of COVID-19, all the tournaments he was working on have been cancelled and there is limited interest from his usual customers to schedule tournaments in the near to medium term. While Troy plans to diversify his specialist skills into other business opportunities involving horses, in the interim he has suffered a more than 30% reduction in revenue. Troy applies for and receives $7,029.60 on 25 March 2020. When Troy receives this amount, he must include it in his personal tax return as an amount of income. Troy is responsible for paying tax on this amount. Because Troy received the $7,029.60 in the 31 March 2020 tax year, but some of subsidy relates to the year ended 31 March 2021, Troy should recognise 1/2th of the subsidy in the 2020 year and 11/12th in the 2021 year.

*Please note in respect of all examples that these are gross amounts. All payments to employees remain subject to PAYE and other usual deductions.

Essential Worker Leave Support Scheme

At midday 6 April 2020, the Essential Worker Leave Support Scheme (“EWLS Scheme”) was established. The EWLS Scheme is designed to ensure that essential workers who are required to take leave from work to comply with Ministry of Health public health guidance continue to receive income if they cannot work from home. The EWLS Scheme makes a payment for a period of four weeks at a time for each affected employee. 

MSD has confirmed that businesses “can apply for both payments [EWLS and Wage Subsidy]; however, you can't receive both payments for the same employee at the same time.”  

Employers are able to re-apply for the same employee after each four-week period (if required) and can submit multiple applications relating to different employees.

To apply for the EWLS Scheme, click here if you are an employer and click here if you are self-employed. You will need to collect the same information as when applying for the Wage Subsidy.


Essential business employers will be able to apply for the EWLS Scheme (on behalf of employees) if they have:

  • Workers who are self-isolating in accordance with Ministry of Health guidance because they have contracted the virus or have come into close contact with someone who has contracted the virus (or have a dependent they need to care for who is sick or self-isolating);
  • Workers staying at home during lockdown (and potentially longer), in accordance with recommendations under the Ministry of Health guidelines, due to the worker being deemed at a higher risk if they contract COVID-19 (e.g. they suffer from respiratory disease, they are over 70, they are pregnant); or
  • Workers who have household members who are deemed at higher risk if they contract COVID-19, and as such should self-isolate for the duration of the lockdown (and potentially longer) to reduce the risk of transmitting the virus to that household member (in accordance with Ministry of Health guidance). 


Employers intending to access the EWLS Scheme will also have to read, understand and agree to a declaration when making an application. Importantly, employers will have to confirm that:

  • They have confirmed that employees meet the Ministry of Health Guidelines at the time of application (it is only necessary for the employee to confirm to the employer that they meet one of the criteria, they do not have to confirm what it is);
  • They have talked to employees about “how [to] best support them at this time” (e.g. use of sick / discretionary leave); and
  • They cannot “financially support [the] employee due to the COVID-19 public health restrictions” (e.g. the cost of paying for your employees' leave and paying for replacement staff is significant).

While MSD notes the EWLS Scheme will be run using a high trust model (i.e. verification will not be undertaken prior to approval), it is important for applicants to carefully consider the terms of the declaration in full.

How to pay employees

When an application is approved in respect of an employee, the employer will receive a payment covering four weeks of leave. The weekly EWLS Scheme payment amount is the same as for the Wage Subsidy, being $585.80 for a full-time worker, and $350 for a part-time employee. Therefore, payments of $2,343.20 and $1,400 are to be received for full time and part time workers respectively.  

Employers accessing the scheme should pay workers at either: 

  • 80% of their usual weekly income before COVID-19;
  • If this isn’t possible, then pass through the full value of the EWLS Scheme payment;
  • If your employee's usual wages are less than the EWLS Scheme payment, you must pay them their usual wages. Any difference should be used for the wages of other affected staff.

In all circumstances, employers must continue to comply with all employment laws.

The Ministry for Social Development has also published a helpful FAQs guide, covering discretionary leave entitlements, evidential basis, the application process, eligibility and other categories.


Greg works for Harry’s Cleaning Limited. Harry’s Cleaning Ltd is responsible for cleaning common areas in government buildings in Wellington. Greg enjoys cleaning so much that he has continued working full-time into his early 70s. Unfortunately, due to his age, Greg is considered at high risk of COVID-19 and is required to self-isolate and cannot work. Harry’s Cleaning Ltd, while an essential service, is making less revenue than usual because of the Level 4 lockdown and cannot afford to pay Greg sick leave and also fund the payment of a replacement cleaner. Harry’s Cleaning Ltd makes an application under the EWLS Scheme and receives a payment of $2,343.20 which it passes through to Greg at $585.80 per week over the next four weeks. Harry’s Cleaning Ltd treats the payment like a normal salary payment and withholds PAYE and other required deductions.

Beachy Keen Limited is a business which hires beach equipment to visitors to Herne Bay beach. Beachy Keen Ltd has a number of employees, including Darren. Darren has advised Beachy Keen Ltd that he has an unspecified medical condition which places him at high risk of illness from COVID-19, meaning that he cannot work at the beach. Darren has asked Beachy Keen Ltd to apply for an EWLS Scheme payment on this behalf. In this instance, Beachy Keen Ltd and Darren would not qualify for the EWLS Scheme as Beachy Keen Ltd is not an essential business. Beachy Keen Ltd should evaluate whether it has any entitlements under the Wage Subsidy Scheme.

The content of this article is accurate as at 7 April 2020, the time of publication. This article does not constitute professional advice. If you wish to understand the potential implications of current events for your business or organisation, please contact your usual Deloitte advisor.

Thanks to the careful planning and systems we have already implemented as a firm, we are well positioned to provide advice and support to all of our clients as we self-isolate as a nation. This includes aiding businesses as they access government supports and entitlements. In short, while our physical offices are closed to aid in the fight against COVID-19, we are still open for business. 

Should you need support during this challenging time, please get in touch with your usual Deloitte contact. Alternatively, our COVID-19 webpages provide information about our services and provide contacts for relevant experts who can help you navigate this quickly evolving situation.

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