The Government’s economic response to COVID-19: What employers and businesses need to know

The Government has now released its Economic Response Package (Package) for organisations in New Zealand.  This is Phase One in the Government’s economic response to the COVID-19 pandemic.

The Package is significant and has been designed to support workers taking leave and businesses who are facing heavy losses in the wake of the impact of strict self-isolation measures and the economic effects of a reduction in trade and business.

What is the Package?

The Package consists of two key areas for employers:

1. Leave and self isolation scheme

The purpose of this Government scheme is to support workers financially while they are ill with COVID-19, or during a period of self-isolation, or while caring for a dependent in self-isolation or who is ill with COVID-19.

It is not available to those workers who can work from home during the period of self-isolation and who can be paid normally by their employer.

Other key aspects of this scheme are:

  • Workers includes not just employees legally working in New Zealand but also the self- employed and contractors;
  • Employers need to apply for the leave on behalf of any employee who is self-isolating or sick (payments can be backdated to 17 March 2020);
  • Payment is made by the Ministry of Social Development (MSD) to employers directly who must then pass it onto the affected employee in full;
  • Payments of $585.80 per week will be available for full-time workers (more than 20 hours a week) or $350 per week for part-time workers (20 hours a week or less). These payments will be available for an eight week period from 16 March 2020;
  • Workers taking sick leave before 17 March 2020 cannot access the scheme for any period of sick leave prior to that date;
  • Workers who are in self isolation in accordance with public health guidance (and who register with Healthline) and are unable to work from home will be entitled to payment for the 14-day self-isolation period. If further instances of such self-isolation are needed then employers can make additional applications for the same worker for each 14 day period;
  • Workers who travel overseas from 16 March 2020 are not able to access this scheme; and
  • Employers must continue to comply with all minimum entitlements.

2. Wage subsidies

The Government has announced a wage subsidy for employers.  The key aspects of this subsidy are:

  • Any employer that has suffered, or is projected to suffer, a 30 per cent decline in revenue compared to last year for any month between January 2020 and June 2020 will be able to apply for the wage subsidy;
  • Employers must have taken active steps to mitigate the impact of COVID-19, for example engaging with their banks or financial advisors, and must sign a declaration to that effect;
  • From 17 March 2020 employers can apply to MSD for the subsidy, which is for a maximum 12-week period per employee;
  • The maximum amount any one employer can receive is $150,000 payable in one lump sum;
  • Employers also need to declare that they will use best endeavours to continue to employ affected employees at a minimum of 80% of their income for the subsidy period; and
  • Payments of $585.80 per week will be available for full-time employees (20 hours a week or more) or $350 per week for part-time employees (less than 20 hours a week).

What else do I need to know?

Although employers can agree with employees to use any form of paid leave (such as annual leave) to cover their period of self-isolation, employees are not required to have used any or all of their leave entitlements before they can receive the leave payment.

The application form for the wage subsidy will be available on the Work and Income New Zealand website from 17 March 2020.  MSD will aim to make payments no later than 5 working days from when applications are received.  Employers must sign a declaration that the information is true and correct when applying for wage subsidies.

The Government has announced that it will deal with large scale employers that require specific support on a case by case basis.  If you consider that you may be in this category, we recommend that you seek advice about this.

Our team are happy to assist with any questions you may have about the Government’s announcements or generally as you navigate the changing landscape and plan ahead.

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