Wage subsidies: 5 key questions beyond the amount | What employers and employees need to know (part one)

New Zealand moved to Alert Level 3 this week. If all goes well, a timetable for a further reduction could be announced in two weeks. Everything seems to be moving in the right direction, but we will ultimately have to face some harsh realities: the wave of redundancies already under way at large companies, the struggle for survival facing small and medium-sized businesses, and the fact that the government's 12-week wage subsidy period is already more than halfway through.

We plan to publish a series of articles examining the issues facing businesses and staff, employers and employees, in the hope of providing useful guidance and support. Today, we begin with some questions about wage subsidies.

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COVID-19 Does the wage subsidy affect an employer's ability to make staff redundant?

On 17 March, the government announced that employers would receive a lump-sum wage subsidy covering 12 weeks, to pay employees' wages and help businesses retain staff. This makes redundancies somewhat more complicated at present than they would normally be. There are three possible situations:

• The employer has neither applied for nor received the COVID-19 wage subsidy.

In this situation, the business can still dismiss employees as usual. Employers must, of course, follow the usual dismissal process, and the dismissal must be for restructuring purposes. In the current circumstances, these two principles are particularly important in protecting employees' interests. In all cases, employers have a duty to carry out redundancy processes fairly and in good faith.

• The employer applied for the COVID-19 wage subsidy for employees before 4h in the afternoon on 27 March 2020.

Under the government's wage subsidy rules at the time, these employers must make their best efforts to retain staff currently receiving the COVID-19 wage subsidy. However, if those best efforts are unsuccessful, they may make staff redundant. Again, employers must follow the usual dismissal process, and the dismissal must be for restructuring purposes. In the current circumstances, these two principles are particularly important in protecting employees' interests.

• The employer applied for the COVID-19 wage subsidy for employees after 4h in the afternoon on 27 March 2020.

The employer must then retain these employees throughout the 12 weeks covered by the wage subsidy. Otherwise, the employer will breach the obligations they committed to when receiving the subsidy.

 

In either situation 2 or 3, once an employer has applied for the COVID-19 wage subsidy, they must promptly notify Work and Income of any staffing changes following the application, including changes to the employment circumstances of any employee listed in it.

At the same time, however, even if an employer has received the wage subsidy, they can begin a redundancy consultation process at any point during those 12 weeks.

 

Can an employer pay wages below the subsidy amount?

This largely depends on the employee's normal pay.

• The employee's normal pay is higher than the subsidy.

If an employer has received the COVID-19 wage subsidy and an employee's normal pay exceeds the full subsidy amount, the employer must try to pay at least 80% of the employee's normal wages. If this is not possible, the employer must still pay the employee the full subsidy amount.

• The employee's normal pay is lower than the subsidy.

If an employee's normal pay is lower than the subsidy, the employer must pay their normal wages in full. However, the employer may retain the balance of the subsidy to pay other employees or to continue paying that employee after the 12 weeks.

 

Can an employer ask employees to take a pay cut or work fewer hours?

An employer can reduce an employee's pay or working hours only with the employee's agreement. It is unlawful for an employer to reduce pay or working hours without the employee's written consent.

If an employee and employer agree to reduce pay or working hours, and the employer has already received the wage subsidy, the employer must report the changes to Work and Income.

 

What happens if an employee leaves partway through the 12 weeks?

If an employee resigns during the 12 weeks for which their employer receives the wage subsidy, the employer does not need to repay the subsidy to the Ministry of Social Development (MSD). However, the employer must inform MSD that the employee has left.

 

What can employees do if mistreatment by their employer forces them to resign?

 

If employees believe their employer has mistreated them or has failed to carry out redundancies reasonably and fairly, the usual dispute resolution process applies under the terms of their employment agreement. This includes raising a personal grievance with the employer in writing and/or taking a claim to the Employment Relations Authority.

If the employer has received the wage subsidy, employees can also complain to Employment NZ by calling 0800 20 90 20 or emailing info@employment.govt.nz.

 

Please note that the views above concern general circumstances. As New Zealand's business economy evolves, the employment law situation is also changing rapidly. For advice on your particular circumstances, contact a lawyer, as everyone's situation is different. This article does not discuss possible exceptions in depth.

About the author
Sonny Lam

has 10 years of litigation experience and previously worked as an immigration officer at Immigration New Zealand. He is currently an immigration lawyer at Forest Harrison Lawyers.

After leaving Immigration New Zealand in 2015, he began specialising in immigration, bringing a distinctive perspective to specialist immigration issues and the effective preparation of immigration applications. He can offer sound professional advice from the perspectives of both applicants and the immigration officers assessing their cases.