COVID-19: Practical information about the Wage Subsidy and Leave Support Schemes

By Robyn Walker & Darren Johnson

With the confirmation that COVID-19 Alert Level 3 will remain in place until 11:59pm on Sunday 30 August we set out in this article what relief is available to businesses from 1pm on 21 August.

Wage subsidies

Businesses (including self-employed people) feeling the effects of COVID-19 will have the following options available to them:

1. If a business is not currently receiving the Wage Subsidy Extension (WSE), they can apply for the Resurgence Wage Subsidy Scheme (RWS) if they meet the eligibility criteria. The RWS will provide two weeks of support, being $1,171.60 per full-time worker and $700 per part-time worker.
2. If they have not yet applied for the Wage Subsidy Extension (WSE), a business will continue to have until 1 September to satisfy the eligibility criteria and make an application. The WSE provides eight weeks of support through a lump sum payment of $4,686.40 per full-time worker and $2,800 per part-time worker. Further details of the WSE are available here. Critically, a 40% revenue drop must have already occurred prior to applying for the WSE. This may be difficult for businesses who were well on the way to recovery; however, with the period from 12 August to 30 August being impacted by Alert Level 3, more businesses may now be eligible to apply before the WSE closes on 1 September.
   

To keep matters simple, the eligibility criteria for the RWS will be largely consistent with the previous schemes, with some refinements to reflect the current context we find ourselves in.

Key RWS eligibility criteria include:

• The business has had, or predicts it will have, a 40% decline in revenue over a 14-day period, and:
  
  • The revenue drop must be related to COVID-19.
  • The revenue drop must occur between 12 August 2020 and 10 September 2020.
  • The revenue drop must be compared to a similar period in 2019 (or to a period that gives the best estimation of the decline due to COVID-19 for high-growth businesses or businesses that have been operating for less than a year).
• The business must have taken active steps to mitigate the financial impact of COVID-19, which can include drawing on cash reserves (if appropriate), making an insurance claim, talking to the bank, and seeking advice from an accountant or other support networks, such as a chamber of commerce or industry association.
  
• The employees named in the application need to remain employed for the two weeks covered by the RWS. Applicants must have obtained employee approval to be included in an application.
  
• The employer must endeavour to pay at least 80% of each named employee’s normal wages or salary for the duration of the subsidy, or pass on at least the full amount of the subsidy claimed to the employee for the two-week subsidised period (unless the employee is ordinarily paid less).
   

How to measure revenue and find a comparative period

Because the RWS applies for only a 14-day period, those businesses who only prepare periodic invoices (e.g. monthly) may struggle to specifically isolate the revenue which relates to a particular 14-day period – either in 2020 or in the 2019 comparative period. There is not currently any guidance as to how businesses should measure revenue in these circumstances.

A pro-rata approach may be one solution. We recommend that anyone seeking to make use of the RWS clearly document the basis on which any application is made, as all payments made will be subject to reviews and audits by the Ministry of Social Development.

Which one to apply for?

If a business that has been affected by COVID-19 has not yet applied for the WSE, it will have a decision to make as to whether it makes a claim under the RWS or the WSE. Given the WSE is for a period of eight weeks, as compared to two weeks for the RWS, businesses should give consideration as to the extent of the impact of COVID-19 on the business as a result of the change in alert levels and the level of support actually required.

Businesses who haven’t had the necessary reduction in revenue to date to meet the WSE criteria may be able to satisfy the criteria under the shorter RWS, given the revenue drop is measured over only 14 days, and can be based on a predicted revenue drop through to 10 September (noting that this then needs to result in an actual 40% revenue drop).

The WSE needs to be based on an actual 40% revenue drop, so businesses may need to wait until the end of Alert Level 3 on 30 August to get an accurate measure of revenue and put in an application by the WSE closing date of 1 September.

COVID-19 Leave Support Scheme

Since early April 2020, there have been a number of variations on the Leave Support Scheme. Beginning life as the Essential Worker Leave Support Scheme (EWLS Scheme), the EWLS Scheme was designed to ensure that essential workers who were required to take leave from work to comply with Ministry of Health public health guidance continued to receive income if they could not work from home.

From 1 May, the EWLS Scheme was extended to all businesses, organisations and self-employed people experiencing hardship due to COVID-19 and was renamed the COVID-19 Leave Support Scheme (LSS). Currently an employer needs to have been financially affected by COVID-19 in order to be eligible for the LSS; from 21 August this will no longer be required. We outline below some key information about the LSS as it applies from 21 August.
 

Who can use the Leave Support Scheme?

Employers (including the self-employed) will be able to apply for the LSS on behalf of individual employees if those employees cannot work, and an employee has advised that they are in one of the affected groups:

• They are deemed 'higher-risk' if they contract COVID-19 and Ministry of Health guidelines recommend they remain at home for the duration of the COVID-19 public health restrictions.
• They have household members who are deemed 'higher-risk' if they contract COVID-19 and Ministry of Health guidelines recommend the employee also remains at home to reduce the risk of transmitting the virus to other household members.
• They have come into contact with someone who has contracted COVID-19 and are required to remain at home for 14 days (as required by Ministry of Health guidelines).
• They have tested positive for COVID-19 and are required to remain off work until they've been cleared by a health professional to be released from self-isolation.
  
  

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

• Discussed the application with the employee(s) before making it.
• Received employee consent to the relevant points outlined in the declaration.
• Confirmed the employee(s) 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).

Employers are also expected to have a conversation about how best to support the employee. For example, they may choose to use existing sick or annual leave, with the LSS used to support paying that. If full paid leave options aren't available, the subsidy could be used to top up what is available. Employers are expected to endeavour to pay the relevant employees at least 80% of their usual wages or pay at least the LSS payment amount.
 

What do you get?

The LSS makes a payment for a period of four weeks at a time for each affected employee. The weekly LSS 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 received for full-time and part-time workers respectively. If an employee ordinarily earns less than these amounts, they should be paid their ordinary amount and any surplus should be used to pay other staff or returned.

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.
 

Can a business get both the WSE, the RWS and the LSS subsidy?

No - employers cannot receive a wage subsidy and a Leave Support Scheme payment in respect of the same employee at the same time.

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 the nation is affected by COVID-19. This includes aiding businesses as they access government support and entitlements.

The content of this article is accurate as at 25 August 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 get in touch. 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.