Following on from last week’s four publications of Covid-19 Advisory Information, we are continuing to keep you informed of developments as much as possible.

We hope that you find the information useful in dealing with the necessary changes that are upon us.

If you have any questions regarding the information in this Advisory, or any of our previous ones, we ask that you contact us as soon as possible so we can assist you.

We are aware that a lot of us are suffering a case of “information overload”, largely as a result of the changing rules and regulations being issued by government. But we will continue to do our best by giving you the current interpretation and application of the regulations supported by working examples to assist with interpretation.

We are still awaiting official release of the banking industries assistance packages. As soon as these are available, we will provide you with the details.

Again, if you have any questions regarding the content of this Advisory or any other matters, please contact your Client Advisor or Client Manager.

The Strawbridge Team

Contents:

  1. FAQS 3 – Wage Subsidy
  2. Case Studies for Clarity

1. Wage subsidy FAQs 3

Same employee multiple business (Incl. self-employed)
We have seen a couple of situations where a person is an employee of several businesses or is an employee for one business and has a side business (self-employed or contractor). A claim can be made for each business in this scenario. The question is how many hours the
person works in each business.

The FAQs on the WINZ website supports this.

Other income sources
We have had several questions around a situation where an employee has another part-time job. Several clients are concerned that the person has other sources of income. This is not relevant the subsidy is looking at how many hours the employee works in the affected business. Remember this
scheme is about the continuity of businesses and keeping people in employment.

Employee takes another job during lockdown
For the reasons applying to the options above, a person taking another job during the close-down does not impact the main employer’s ability to make a claim for them (assuming all criteria are met). Unless the employment agreement says otherwise, then the starting point here is probably that the
original employer has an obligation to pay the employee, although the employee might agree to take leave without pay in these circumstances.

The employee may be in breach of their employment agreement here if they did not receive their employer’s permission, as most employment agreements do not allow employees to work other jobs.

Casual employees
WINZ has updated its guidance on casual employees, and it matches our prior view that if you intend to keep a casual employee on for the subsidy period then they are eligible.

WINZ guidance suggests, that the hours should be averaged over the last year (for employees who have worked for more than a year) to determine if they should be treated as ordinarily working more or less than 20 hours.

We do not think a year is reasonable or practical. Businesses and employees change a lot in the course of a year. We suggest that a four to eight-week period before COVID-19 caused massive disruption would represent a fairer view, however, the WINZ view is what it is so care needs to be taken if applying a contrary view.

Normal hours and the lock down
The rules talk about normal or ordinary hours/pay. Obviously, the lock down ruins everything when considering what is normal hours. For claims lodged before 4pm on the 27th of March a common sense approach should be taken.

In respect of claims made on or after 4pm 27 March, this is spelled out in the terms and conditions as follows:

The ordinary wages or salary of an employee are:

  • as specified in the employee’s employment agreement as at 26 March 2020; or
  • if you ended your employment relationship with any employee named in your application as a result of your business being adversely affected by the COVID-19 outbreak and have re-employed that employee on or after 17 March 2020, as specified in the employee’s employment agreement as at the date that employment relationship ended.

Payment and Processing Times
The Government/WINZ have thrown more resource at processing the applications. Therefore, we are seeing that applications processed since about 25 March have been processed very fast.

Some older applications have not been paid out yet. We understand this is because there were issues verifying data with Inland Revenue or bank accounts. We understand that improvements were made to the data verification processes that stopped the more recent claims being held-up.

Last Friday we were getting calls from WINZ to clear claims that were held-up and we are starting to see the payments for older claims coming through.

We note that the WINZ website now has the following comment:

“We cannot give you information about the status of your application over the phone. We’ll be in touch as soon as we can.”

This means there is no feasible way to follow-up a claim. We are trying to establish a direct communication channel. Sorry, this is very frustrating, and it may cost jobs if the claims are not paid out soon.

Non-resident employee of NZ business
A NZ employer cannot claim in respect of an employee who is working overseas. Likewise, a self-employed person who is NZ tax resident, but derives their income working overseas cannot make a claim.

Please note that Australia has set-up a similar type of Scheme for New Zealanders in Australia.

NZ employee trapped overseas
A NZ employee is trapped overseas is a very different scenario to the one described above. A claim should be available in this situation (if all other criteria are met).

Passive entities
Someone needs to work for the business for a Wage Subsidy to be made. While it could be argued that someone who works zero hours, is less than 20 hours, this is clearly not within the spirit of the rules.

Missed employees
In our previous FAQs, we suggested that if an employee is missed for any reason, you should just make a separate claim for that employee. WINZ website now confirms that this is the correct approach.

Subsidy period
We are seeing some confusion around the subsidy period. The period runs for the 12 weeks from 17 March 2020 until 9 June 2020, not 12 weeks from the date of application.

Payroll FAQ’s

Receipt of a subsidy amount
As we have previously mentioned, the receipt of a Wage Subsidy or Leave Payment has no direct implications to the payroll. The payroll will only include the payments made to the employee.

Accruing leave
We are getting numerous questions about where an employee continues to accrue leave while they are being paid during the lockdown but not able to work. Unless, the employee has agreed to take leave, then it seems that yes, they will be accruing further leave.

Reduction to 80%
We are seeing that many employees are agreeing to have their pay reduced to 80% of normal or down to the subsidy amount. We have then been asked how this would be achieved in payroll.

Normally, we would expect that the reduction would be done by way of reducing the employee’s ordinary hours, not their hourly rate. That being the case, it would simply be a matter of changing the hours in the payroll to reach the desired level of pay.

In the rare circumstances and employer and an employee might agree to a pay rate reduction. In that case, the pay rate would be amended in the payroll giving the required outcome

2. Case Studies to Assist Understanding of the Wage Subsidy Rules

Case study 1

Non-essential business + Minimum waged worker
James is a barista at a Wellington café. James earn the minimum wage. The café is closed for the lockdown and has had a 30% loss in revenue. James’ employer cannot afford to pay any wage to James but wants to keep him on. James does not want to use his annual leave entitlements.

James’ employer can access the wage subsidy and pay $585.80 per week to James, without James being required to do any work. James retains his annual leave entitlements to use at a different time.

Case study 2

Able to do some work from home + Full-time worker Sam is a civil engineer. He usually works 40 hours per week at $30 per hour, with a usual gross income of $1200 per week. The business is non-essential and closed for the lockdown and has had a 30% loss of revenue. Sam can do some
work from home over this period.

He works 30 hours per week for the duration of the Alert Level 4 lockdown period. Sam’s employer can access the wage subsidy and pays Sam his usual salary at the agreed reduced hours, which is $900. Sam’s employer can use the $585.80 per week to subsidise Sam’s wages, this means Sam’s employer will top up the wage subsidy with $314.20 to compensate the hours Sam worked.

Case study 3

Non-essential business + Can do some work from home
Phil is an HR advisor in a medium-sized business and works full time. The business is non-essential and closed for the lockdown and has experienced a 30% loss of revenue. Phil can do some work from home. He does 8
hours per week. His hourly rate is $25 per hour.

Phil’s employer can access the wage subsidy. Their revenues have dropped so much that they are worried as they will be unable to retain their staff. Under employment law, Phil must receive $200 per week for the hours worked. His employer can use the remaining money from the subsidy for other affected employees.

Case study 4

Non-essential business + Unable to work Craig is a waiter at a successful restaurant chain that also needs to close during the lockdown. Craig was getting paid $1,000 per week. Craig’s employer has committed to paying full wages to their staff as they know that such workers will be in demand as the lockdown ends. The restaurant has suffered a 30% loss in revenue due to COVID-19.

Craig’s employer can access the wage subsidy scheme to pay Craig $585.80 per week, and the employer can then top that up with $414.20 per week to ensure Craig receives his full income.

Case study 5

Essential business + Able to work
Steve is an essential services worker, ensuring certainty of electricity supply. Steve is really busy, working his normal hours and getting paid at his normal rate, and his business has not been affected by COVID and does not require support to pay or retain its staff.

Steve’s employer does not need to apply to the wage subsidy scheme.