Wage Subsidy + Leave FAQs

FAQs compiled from Findex, Great South, Business NZ and Employment lawyer Susan Hornsby-Geluk.

Is the wage subsidy payment subject to GST?

No – An Order in Council is being drafted to treat it as exempt (Section 5(6E)(B)(iii GST Act)

Is the wage subsidy paid to the employer taxable?

No- It is excluded income (Section CX 47 ITA)

Is the wage subsidy deductible when paid by the employer as part of wages to the employee?

No – it is not deductible

Is the wage subsidy taxable to employees?

Yes – As it is included as part of their normal wages it is subject to the usual PAYE, Student Loan, Kiwisaver deductions, etc.

Is the leave payment for self-isolation subject to GST?

No – An Order in Council is being drafted to treat it as exempt (Section 5(6E)(B)(iii GST Act)

Is the leave payment for self-isolation paid to employees or self-employed persons subject to tax?

Yes – It is paid to replace taxable income so is subject to tax.

Can a business still get the wage subsidy if they can't continue to pay staff 80% of their normal pay? If there is no revenue at all currently, can the business claim wage subsidy and pay staff just using that?

To be eligible for the wage subsidy, an employer must make the best endeavours to pay employees at least 80% of their usual pay. This is not an absolute requirement, so if the employer can not afford to pay this amount, but has made the best efforts, they are still entitled to the subsidy.

Are staff who cannot work from home eligible for the LEAVE subsidy rather than the WAGE subsidy? If so, does that mean the employer would have to pay them the $585, but not have to top them up to 80%?

No. Employees who are sick or caring for sick dependents can access the leave subsidy. Employers can access the wage subsidy to help them to pay employees at least 80% of their income. The employer needs to determine the best way for their business to address ‘unable to work from home’ issue.

"Pay a minimum of 80% of normal income" - does normal income include shift allowances, overtime, commissions, Employer KiwiSaver Contributions?

Yes. The wage subsidy is to help employers pay wages, it does not change anything else

Can a business place staff on leave without pay rather than making them redundant? If so, can they access unemployment benefits?

If the employer and employee agree, then yes. We anticipate the wage subsidy would mean that employers can place a worker ‘on leave with pay’. If the employee remains employed then they cannot access the Job Seeker Allowance. There may be other allowances that the employee can access (such as accommodation or hardship)

Can you make someone redundant because of Covid?

The usual rules relating to redundancy apply - the employer has to show that retaining staff is not sustainable or that the business can continue more efficiently without them. Given that this is likely to be a temporary situation the employer would be expected to consider reasonable alternatives such as using the wage subsidy and agreeing with employees to reduce pay and hours as an interim measure. Redundancies would only be justified if the employer was not able to get through this temporary situation and could demonstrate that cost-cutting was required now to keep the business viable.

With the agreement of your employee can you amend contract hours?

Definitely, an employer and an employee can agree to reduce hours and pay rates on an interim basis, and this is what many employers are doing. The variation should be confirmed in writing. Also the rate of pay to the employee should not drop below the minimum wage for the hours that they are actually required to work.

Can employees use sick days instead of annual leave?

Employees are only entitled to sick leave if they are actually sick. For those people who are at home, but not unwell, they would not be entitled to sick leave unless their employer agrees to allow this as an exception.

What do you do if you were supposed to start a job in the next couple of weeks?

If you have entered into an employment agreement to start work, you are deemed to be an employee and would have the same rights and entitlements as other employees from the date you were supposed to commence.