Article:

Wage Subsidy Extension FAQs

10 June 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.

 

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.

 

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).