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Article:

Wage Subsidy Extension FAQs

20 August 2020

On 14 May 2020 the Government announced a targeted extension to the COVID-19 Wage Subsidy Scheme, which will see a further $3.9 billion of funding provided to help employers through these difficult times.

The extension provides an additional 8 weeks of payments to employers and self-employed persons who meet the eligibility criteria.

The employer must demonstrate a revenue loss of at least 40% for a continuous 30 day period. This period needs to occur in the 40 days immediately prior to making the application (but not before 10 May 2020), when compared to the closest comparable period last year.

New businesses and high growth will also be eligible for the extension, as will pre-revenue R&D start-up firms that are recognised by Callaghan Innovation.

Applications open on 10 June 2020 and will remain open until 1 September 2020.


Read the Wage Subsidy Extension frequently asked questions on the following topics:

 

Recently added insights & FAQs

For details on the accounting and tax treatment of the COVID-19 Wage Subsidy, Wage Subsidy Extension or Resurgence Wage Subsidy, please refer to the following articles:

Accounting and Tax Treatment of the Wage Subsidy for Employers

Accounting and Tax Treatment of the Wage Subsidy for Employers

What are my obligations to my employees while receiving the Wage Subsidy?

 

The declarations provide an additional set of requirements that must be met to be eligible, and remain eligible, for the wage subsidies.

The declaration does not override your obligations under employment law or what has been agreed in individual employment agreements.

You can contact Employment NZ on 0800 20 90 20 if you have any questions about your obligations as an employer.

 

Can I apply for the Wage Subsidy scheme more than once?

 

You can only receive the Wage Subsidy scheme payment for the same employee once. You may need to submit more than one application for the following reason:

  • You did not apply for all your employees the first time
  • You missed an employee
  • You have a new employee whom you would like to obtain the subsidy for

 

Should wage subsidy payments be separately identified on my employee’s payslip?

 

The subsidy does not need to be separately identified when filing your Employment Information with Inland Revenue.

You can include the subsidy, along with any employer-funded pay, as 'total wages paid' for each employee.

You can identify the subsidy separately if you choose to, and some software packages may require you to do this. If you are not sure what to do, check with your software provider.

 

Should movements in investment portfolios (gains and losses) be included in the revenue calculation for the Wage Subsidy scheme?

 

Movements in investment portfolios should not be considered revenue for the purpose of Wage Subsidy applications. This is because investment returns naturally fluctuate with the market and interest rate movements and are a normal part of the managed funds industry.

 

My business suffered a fire during this time last year, can I use another comparative period?

 

If your business experienced an event, such as a fire, your comparative period for calculating a decline in revenue may not be the best period to use.

In these specific cases you may use another period that will better reflect the decline in revenue suffered by your business.

The comparative period selected cannot be prior to January 2019.

 

Eligibility criteria

When are applications open for the wage subsidy extension?

 

Applications for the wage subsidy extension will be open from 10 June 2020 until 1 September 2020.

You cannot apply for the wage subsidy extension until your original 12-week wage subsidy period has finished.

 

How much can I receive through the wage subsidy extension?

 

The wage subsidy extension will be paid at a rate of:

  • $585.80 per week for people working 20 hours or more (full-time rate)
  • $350.00 per week for people working less than 20 hours (part-time rate)

The wage subsidy extension will be paid as a lump sum for 8 weeks per employee from the date you submit your application. That is $4,686.40 per full time employee, and $2800 per part time employee.

During this time, you will not be able to receive any other COVID related payments for those employees (i.e. Leave Support Scheme, Wage Subsidy, or Wage Subsidy Extension Payments).

 

What is the revenue loss criteria to qualify for the wage subsidy extension?

 

The employer must demonstrate a revenue loss of at least 40% for a continuous 30-day period. This period needs to occur in the 40 days immediately prior to making the application (but not before 10 May 2020), when compared to the closest comparable period last year.

Revenue means the total amount of money a business has earned from its normal business activities, before expenses are deducted.

Practically, we envisage that income will be calculated on the same basis as it was in the period against which the comparison is being made.

 

Can new and high growth businesses still apply for the wage subsidy extension?

 

Yes - Employers who have been in operation for less than one year, or who have experienced high growth, will still be able to apply for the wage subsidy extension.

This also includes pre-revenue R&D start-up firms that are recognised by the Callaghan Innovation.

These employers may therefore need to demonstrate their revenue loss against a comparable 30-day period in another comparable month within the last 12 months as opposed to a year on year comparison.

 

I am receiving the Leave Support Scheme payment for one of my employees. Can I apply for the wage subsidy extension for them too?

 

You are not able to receive more than one COVID-19 payment from Work and Income for the same employee at the same time.

COVID-19 Payments include:

  • Wage Subsidy
  • Leave Support Scheme
  • Wage Subsidy Extension
     

What obligations will I have to meet to receive the wage subsidy extension payment?

 

When you apply for the wage subsidy extension, you will be required to declare that you agree to meet certain obligations in respect of the payment.

Similar to the first wage subsidy, these obligations will include:

  • That you pass the subsidy on to your employees
  • That you retain your employees for the duration you are receiving the subsidy for them
  • That you make best endeavours to pay your employees at least 80% of their normal pay
  • That you take active steps to mitigate the impact of COVID-19 on your business

 

What does it mean to take active steps to mitigate the impact of COVID-19?

 

Your business must have taken active steps to mitigate the impact of COVID-19

This includes:

  • activating your business continuity plan
  • drawing from cash reserves (when appropriate)
  • making an insurance claim
  • proactively engaging with your bank or lender

In addition, you could also seek advice and support from:

  • BDO
  • the Chamber of Commerce
  • a relevant industry association
  • the Regional Business Partner programme
     

My business reports financial results on whole calendar months so I cannot prove the 40% reduction in the 40 days prior to 10th June 2020. Can I still apply?

 

You will need to keep evidence of the 40% drop in revenue when applying for the wage subsidy extension.

As the wage subsidy extension is open from 10 June 2020 until 1 September 2020, you have a large window to apply.

It may be easier for you to make your application on 1 July 2020. You will then be able to use the 30 days (being the calendar month of June 2020) to make you application.

 

Can I apply for the wage subsidy for an employee I had notified was being made redundant?

 

Yes – but only if the redundancy notice is withdrawn.

 

I have received the wage subsidy for my employee, and this is more than they would ordinarily be paid, what do I need to pay them? 

 

Where the ordinary wages of an employee are below the amount of the subsidy, then the employee should be paid 100% of their normal wage. 

The balance of the subsidy can be used to pay the wages of other affected employees.

If there are no other affected employees to use the subsidy for, then the remaining amount should be paid back.

 

What are the circumstances where a person cannot apply for the wage subsidy extension?

 

  • An employee or self-employed person who is currently receiving payments from ACC. They will need to wait until they ACC payments end before they can apply for the subsidy
  • An employee or self-employed person who is currently receiving another COVID-19 payment (e.g. Leave Support payment). They will need to wait until the other COVID-19 payment ends before they can apply for the subsidy
  • A beneficiary of a Trust is not eligible for the wage subsidy extension as beneficiary income is discretionary, not allocated due to personal efforts, and they do not meet the required definition of an employee
  • If the employer or self-employed person does not meet the required eligibility criteria

 

Should the funds receipted from the first wage subsidy be included in the revenue calculation for the Wage Subsidy Extension?

 

Revenue means the total amount of money a business has earned from its normal business activities, before expenses are deducted.

The funds receipted from the original wage subsidy should not be included in the revenue loss calculation, as it is not earned from normal business activities.

 

How do I determine if my casual employee is eligible for the full-time or part-time wage subsidy extension?

 

You should calculate the average hours per week the employee has worked over the last year (or full length of employment if this is less than 1 year), and apply on that basis.

 

Can I claim the wage subsidy extension for a new employee?

 

Yes – there is nothing to preclude you from applying for the wage subsidy extension for a new employee.

You can submit an application for the new employee provided you meet the eligibility criteria and sign the declaration regarding your obligations to them for the next 8 weeks.

 

Does my business or legal structure preclude me from receiving the subsidy?

 

At the highest level, the intention of the wage subsidy extension is to keep people employed through these difficult times.

The specific legal structure of your business, or specific employee & contractor agreements, should not preclude you from being eligible.

The wage subsidy extension is designed to be accessible by all NZ employers with NZ employees.

So, you can be an incorporated society, trust, charity, etc and still qualify. A sole trader or contractor will claim for themselves and any staff that they employ.

The wage subsidy extension will not apply to any state sector employers.

What are State Sector Employers?

State sector employers include the following;

  • Government agencies
  • Crown entities eg Kāinga Ora, ACC
  • Schools
  • Tertiary Education Institutions such as:
    • Universities
    • Polytechnics/Institutes of Technology
    • Wānanga

Private businesses contracted to provide services to state sector employers (e.g. Cleaning, security) are not state sector employers, and can apply for the wage subsidy extension provided they meet the other criteria.

A state sector organisation can ask for an exception to become eligible to apply for the Wage Subsidy Extension. State sector organisations should contact their monitoring agency directly if they wish to discuss this.

 

Application process and evidence

I have made a mistake on my application – how do I fix this?

 

You can correct the mistake by contacting Work & Income on 0800 40 80 40. You do not need to submit another application.

 

I don’t have any evidence to support my claim for the wage subsidy extension. What do I need to do?

 

When making the application you are signing a declaration that the application has been made in accordance with the eligibility criteria.

If you have provided false or misleading information or receive any subsidy or payment that you were not entitled to receive, you may be subject to an investigation including for offences under the Crimes Act 1961.

Given this declaration, it is important that you review the criteria to ensure that you have evidence to support your claim.

Evidence will include documentation on how you arrived at a 40% drop in revenue.

The active steps criteria will mainly include seeking advice from a third party but may also incorporate all internal actions that assist with mitigating the impacts of COVID-19.

Therefore, while you may not be required to submit the evidence with your application, it is crucial you get this information together as all payments made by the MSD are subject to an audit. Payments claimed in error may be subject to repayment.

 

When does the 8-week period start regarding my obligations under the declaration?

 

Your obligations under the wage subsidy extension declaration start from the date you submitted your application, as this is when you agreed to fulfil them.

The Wage Subsidy is to support you to pay 8 weeks of wages for your employees from the date you submitted your application. You must adhere to all other aspects of the declaration during this time.

 

Should I apply for this or ask my financial adviser to make the application?

 

We encourage you to complete the declaration and seek guidance from us if you require.

 

I have 200 employees and the application form online will take me a long time to fill out. Is there a different way of submitting my application for the wage subsidy extension?

 

Yes – there is a large employer form you can use to apply for the wage subsidy extension.

You can follow the instructions set out on Work and Income's website.

 

My employee works part-time for my company, but also part-time for another business. Can both businesses claim the Wage Subsidy Extension?

 

You can apply for the part-time wage subsidy extension for the employee using the Employer Application. 

The other employer can also apply for the part-time wage subsidy extension for the employee using the Employer Application.

If the employee is self-employed, they must apply for themselves on a part-time basis using the Self-Employed Application.

 

 

Declaration and privacy

Will information about my wage subsidy extension claim be made available to the public?

 

Yes - MSD have set up an Employer Search which is available to the public.

This will show the name of the company, the number of employees whom the claim was made for, and the total amount paid.

 

I don't have a copy of the declaration I signed; how can I get one?

 

The declarations is available on the following link:

Wage Subsidy Extension Declaration

 

Do I have to tell my employee if I included them in my application for the wage subsidy extension?

 

As part of the declaration you made to access the wage subsidy extension, you declared that you had discussed with them their inclusion on your application and gained their consent to having their information shared with MSD.

Employees who have been included on your application should therefore already be aware of their inclusion.

 

Wage subsidy repayment

What are the circumstances where I would need to repay the wage subsidy extension?

  • you no longer meet the criteria for the subsidy (e.g. where a 40% drop in revenue has not occurred)
  • you are no longer using the subsidy to retain and pay your employees
  • you received insurance for costs which were also covered by the wage subsidy
  • you provided false or misleading information in your application for the wage subsidy

If you think you have applied in error, or are no longer eligible for the Wage Subsidy Extension, please get in touch with your local BDO advisor for assistance.

 

Employer obligations and employee entitlements

Can I pay my employees sick leave while my business remains closed as a result of the national COVID-19 alert level?

 

Provided the day would have been ‘otherwise a working day for the employee, an employee may take sick leave if—

(a) the employee is sick or injured; or

(b) the employee’s spouse or partner is sick or injured; or

(c) a person who depends on the employee for care is sick or injured.

 

My staff are working from home, what do I need to pay them?

 

If employees are working from home during the lockdown, or otherwise working as usual, then they should continue to be paid as normal (unless otherwise agreed).

Any amendments to an employee’s individual employment agreement are not a matter of right and we recommend you talk to your lawyer regarding your legal obligations.

 

My employer is not paying me because the business is physically closed and I cannot work from home. Can I go on an unemployment benefit instead?

 

While you remain an employee of the business, you will not be able to access an unemployment benefit.

Check if you are eligible for a benefit.

 

My employees are not able to work at the current alert level, what do I need to pay them?

 

If employees cannot work from home, and the business remains physically closed, then there is no legal requirement to pay the employees. They are ‘ready and willing’ to work, but they are not ‘able’ to work.

We suggest you seek legal advice on this matter.

If the employer has claimed the Wage Subsidy, they have made a declaration to use their best endeavours to pay employees at least 80% of their normal wage.

 

Do I need to pay my employees special leave if they cannot work during Alert Level or 3?

 

Employees can request special leave from their employer, however this would be by agreement with the employer, as there is no obligation for the employer to pay this.

 

Can my employees take annual leave during Alert Level 3?

 

Employees can request to utilise their leave entitlements i.e. Annual Leave, Annual Leave in advance etc.

These requests should be considered and paid in line with their individual employment agreements and the Holidays Act 2003.

An employer must not unreasonably withhold consent to an employee’s request to take annual holidays.

 

Calculating ordinary pay and payroll treatment

I have received the wage subsidy for my employee, and this is more than they would ordinarily be paid, what do I need to pay them?

 

Where the ordinary wages of an employee are below the amount of the subsidy, then the employee should be paid 100% of their normal wage.

The balance of the subsidy can be used to pay the wages of other affected employees.

If there are no other affected employees to use the subsidy for, then the remaining amount should be paid back.

 

Can I pay my employees 80% of their normal pay if they are working as normal?

 

An employee's hours or pay cannot be changed without the employee’s agreement.

In the event that the employee's contract permits the employer to make this change, the employer must still act reasonably and in good faith.

An employee must still never be paid below the minimum wage for the hours they work.

 

Should I pay the wage subsidy to my employees as a lump sum?

 

The wage subsidy extension is designed to assist the employer with the payment of wages, and to help retain their employees, for the 8 week period to which the subsidy relates.

We recommend that you continue to pay your staff in line with their normal pay cycle as opposed to making a single lump sum payment.

You should consult your BDO advisor regarding implications of paying the subsidy as a lump sum, which may include additional tax and Student Loan implications for your employees.

 

I have applied for the wage subsidy extension for my casual employee. Should the 8% holiday pay be paid on top of the subsidy amount?

 

The employee should be paid their casual holiday pay on top of the subsidy (or any amount that has been paid).

 

Do I need to pay PAYE on top of the subsidy amount, or is it inclusive?

 

The wage subsidy extension is a gross payment, and the relevant employee deductions should be paid from this amount (not on top of it).

Note the employer kiwisaver contribution, ESCT and other similar items would be paid on top of the subsidy amount.

 

My employees have requested annual leave and/or sick leave. Can I use the wages subsidy extension to pay these?

 

Wages includes the payment of annual leave and/or sick leave as appropriate.  The wage subsidy can be used to pay for these.

 

I have an employee who works variable hours. How do I calculate their ordinary pay?

 

In this instance, you should look at the number of hours the employee would usually work for the business and calculate the average.

Use the average hours worked each week:

  • over the last 12 months, or
  • over the period of time they have been employed (if it is less than 12 months).

If the average hours are:

  • 20 or more, apply for the full-time rate
  • less than 20, apply for the part-time rate.

 

 

Case Study – How to correctly apply for the Wage Subsidy Extension.


My business applied for the original wage subsidy when applications first opened, and my 12-week payment will expire on 9 June 2020.

I am going to apply for the wage subsidy extension on 10th June 2020 when the applications open.

As the revenue decline needs to be for a continuous 30-day period, but can’t be before 10 May 2020, I will need to use my financial results for 10 May 2020 to 9 June 2020 in my application.

My financial results for this period have not been prepared yet, but I am confident I have a 40% drop in revenue.

I will be sure to check my financial results and confirm the reduction has actually occurred as soon as this information is available to me.

The financial results will be compared to the closest period last year but could be a day or two off because of weekends or public holidays.

I will keep evidence of the 40% drop in revenue, as well as the active steps I have taken to mitigate the impact of COVID-19, should these records be required by MSD in the event of an audit.

I am aware that if the 40% revenue drop does not occur,  I would not have been eligible to receive the wage subsidy extension payment, and may be required to repay the funds back to MSD.

Once I have applied for the wage subsidy extension, I will retain all of the employees for whom I have applied and make my best endeavours to pay them 80% or more of their normal wages.

I will always act in good faith to my employees and abide by any other requirements of the wage subsidy extension set out to me (likely by way of a declaration when you apply for the wage subsidy extension).

 

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