As you may now be aware, the deadline for the current Wage Subsidy Scheme is tomorrow (Tuesday 9th June), with the Wage Subsidy Extension Scheme becoming available on Wednesday 10th June.
To help illustrate how the Wage Subsidy Schemes may apply to your organisation, we have put together a case study from the Construction Sector.
Case Study – Construction Sector
Mike’s Builders Ltd has a single commercial construction project underway. The company was unable to operate under Level 4, so missed one month of work. With revenue more than 30% down, compared to the same 30-day period in 2019 and all other criteria met, the company can claim the wage subsidy for all its employees, including Mike (who takes drawings but is credited with a shareholder salary at the end of each year).
Under Level 3, the company was able to return to the construction site, however the requisite social distancing restrictions slowed the job down. As a result, the company’s unadjusted progress claims will be down 20% on the previous year while social distancing rules continue to apply. Mike was able to negotiate a claim for increased costs from the client, which equates to 5% of monthly billing. As revenue will therefore only be down a net 15%, Mike will not be entitled to the extension of the wage subsidy scheme, due to commence on 10 June 2020.
Mike received calls from two of his builders this morning - Steve and Dave.
Steve and Dave both know that Mike has received the Government COVID-19 Wage Subsidy. This is because Mike contacted all his employees prior to applying for the subsidy, to obtain their consent to provide their information to MSD.
Steve heard from his friends that Mike must pay him the subsidy even if he refuses to work, so he tells Mike he isn’t coming into work until the subsidy period ends. Mike doesn’t think this sounds right, so he contacts his local BDO adviser to get some advice.
Can Steve refuse to attend work?
Mike should consult with Steve to find out why he is refusing to work. Mike should act in good faith towards Steve, understand his reasoning, and attempt to find a solution.
Situations where an employee can refuse to work:
- The employee is sick with COVID-19, or is required to self isolate in line with the guidance issued by the Ministry of Health
- The business is prohibited from operating at the current alert level
- The business is not abiding by the Health and Safety at Work Act 2015
- The employee meets one of the criteria set out by the COVID-19 Leave Support Scheme
As Steve’s reasoning is not consistent with any of the above, Steve may be considered as being in breach of his employment contract.
Does Mike have to continue paying Steve if he doesn’t attend work?
Mike can place Steve on unpaid leave if he refuses to work without an appropriate reason. Mike may then start the organisation’s disciplinary process with Steve if he refuses to work without good reason(and which may ultimately result in termination of employment).
Mike should contact his employment lawyer when considering this process, and always act in good faith towards the Steve.
Does Mike have to repay the wage subsidy if Steve isn’t being paid?
Mike should contact MSD and let them know that Steve is on unpaid leave as a result of the employee refusing to return to work without a legitimate reason. MSD will advise whether any wage subsidy needs to be repaid.
Dave has been feeling unwell this morning, but thinks it is just something he ate. Dave is still keen to work, and rings Mike to check that it is ok for him to come into work. Mike isn’t sure whether Dave should come into work, so he rings his local BDO adviser for assistance.
As Dave is not feeling well, he should remain home for the day (and any further days where he remains unwell). Mike has an obligation to the other builders on the site ensure the workplace is a safe place for them, and to ensure that anyone feeling sick is not on the building site. This will ensure Mike continues to abide by the Health and Safety at Work Act 2015.
If Dave remains unwell, or experiences any symptoms relevant to COVID-19, he should contact his doctor. Mike should pay Dave any sick leave to which he is entitled while he is away from work and Mike can use the wage subsidy he receives for Dave to assist with this.