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Article:

COVID-19 Leave Support Scheme

21 September 2020

Jessica Powell & Leisa Kelsen |

The time of wage subsidies has drawn to a close, but the COVID-19 Leave Support Scheme (Previously called COVID-19 Essential Workers Leave Support Scheme) is still available for all employers who meet the required criteria.

The COVID-19 Leave Support Scheme is broadly available to all New Zealand employers, whose employees have met the required health criteria and are unable to work from home.

We answer all your frequently asked questions on the COVID-19 Leave Support Scheme below.

FAQ

 

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

The COVID-19 Leave Support Scheme is designed to be accessible for all NZ employers with NZ employees including:

  • Registered Charities
  • Non-Government Organisations (NGOs)
  • Self-employed and Sole Traders
  • Contractors
  • Incorporated Societies
  • Post-settlement Governance Entities
  • Local Government Organisations
  • Kindergartens and Early Childhood Centres.

State sector organisations are not eligible to receive the COVID-19 Leave Support Scheme unless they have asked for (and been granted) an exception to become eligible for the scheme via their monitoring agency. State sector organisations should contact their monitoring agency directly if they wish to discuss this.

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

Your business must also be in New Zealand. This means that at the time of application, your business must be:

  • Registered with the New Zealand Companies Office
  • Physically located in New Zealand
  • Employees are legally working in New Zealand

If you are not sure whether your employees are legally working in New Zealand, feel free to visit the Employment New Zealand website here.

Sole Traders are not required to be registered with the New Zealand Companies Office, but will instead be required to provide the following information in respect of their application:

  • Personal IRD Number
  • Government licenses and permits for their business needs (as applicable)
  • Qualifications or registrations for their trade or profession (as applicable)

 

What is the health criteria my employees must meet to be eligible for the Leave Support Scheme 

There are four main categories where an employer may be able to apply for this scheme on behalf of their employee:

  1. The employee is at a higher risk if they contract COVID-19 and Ministry of Health Guidelines recommend they self-isolate
  2. The employee has encountered someone who has tested positive for COVID-19 and they are required to self-isolate for 14 days per the Ministry of Health Guidelines
  3. The employee themselves has tested positive for COVID-19 and they are required to self-isolate until they have been cleared by an appropriate health professional
  4. The employee had household members who are at a higher risk if they contract COVID-19 and the Ministry of Health recommends that they self-isolate to reduce risk

You can refer to the Ministry of Health Guidelines here.

What employees would not be covered by the COVID-19 Leave Support Scheme 

The scheme does not cover employees in the following situations (among others):

  • The employee is sick with COVID-19-like symptoms (but not COVID-19 itself) – even if the Ministry of Health guidelines require them to self-isolate
  • The employee cannot work as they are required to care for dependents – even if they could not access care elsewhere
  • The employee is unable to work as they hold a reasonable belief that continuing work during the COVID-19 pandemic is harmful to their physical and/or mental health
  • The employee is unable to work for any other reason e.g. Bereavement Leave

These situations are not covered by the COVID-19 Leave Support Scheme as there are other payments available to the employees in respect of these scenarios. E.g. Sick Leave, Bereavement Leave.

Can I receive more than one COVID-19 payment at a time 

No – you cannot apply for the Leave Support Scheme for an employee if you are already receiving payments for the COVID-19 Wage Subsidy, Wage Subsidy Extension or Resurgence Wage Subsidy.

Do I need to tell my employee if I am applying for the COVID-19 Leave Support Scheme on their behalf 

Yes – you must discuss the application with your employee prior to submitting it

  • To ensure you gain their consent to apply and have their information shared, and
  • To confirm that they fall into one of the health criteria groups.

Part of this discussion should include whether the employee should utilize other leave options, such an annual leave or sick leave, including what (if any amount) should be used to top-up the Leave Support Scheme payment. The idea of this discussion is to facilitate open communication between the employer and employee and ensure the employee is well-supported during this time.

The Ministry of Social Development will not be verifying health-related information for employees.

Does my business need to have been financially impacted to be eligible for the COVID-19 Leave Support Scheme 

Applications made on or after 1pm on 21 August 2020, do not need to have been financially impacted to be eligible for the scheme.

For applications made prior to this date, the declaration included specific criteria around this, stating that a business must have:

  • experienced a minimum 30% decline in actual or predicted revenue over the period of a month when compared to the same month last year, or a reasonably equivalent month for a business operating less than a year, and that revenue loss is attributable to the COVID-19 outbreak; or
  • your ability to support your employee due to the COVID-19 public health restrictions was negatively impacted.

How much will I receive 

The Leave Support Scheme is paid at a rate of:

  • $585.80 for employees working ≥ 20 hours per week (full-time rate)
  • $350.00 for employees working < 20 hours per week (part-time rate)

The Leave Support Scheme will pay out for a fixed four weeks per employee (it is not possible to apply for less than this).

What should I do if my employee returns to work and I have leftover funds from the Leave Support Scheme 

Leftover funds can be used to:

  • Pay other employees who are also unable to work due to COVID-19
  • Top up the wages of employees receiving another COVID-19 payment (e.g. Wage Subsidy) and are being paid less than their usual rate

If the remaining amount cannot be used to pay other employees, then you will need to repay this amount.

How long does it take to receive the subsidy 

MSD have not advised of a timeframe for payment.

We are aware they are checking information provided in the applications against the information held by IRD, and any discrepancies may result in delays or your application may be declined.

Your application may be declined if you apply to early. i.e. In the case of re-applying for an employee, this cannot be done any earlier than the 4th week of the original payment period.

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

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.

How do I apply for the COVID-19 Leave Support Scheme 

What should I do if I made a mistake on my application 

You do not need to submit a new application to MSD.

You can call them on 0800 40 80 40 and they will correct the error for you.

What are my obligations if I apply for the COVID-19 Leave Support Scheme 

The COVID-19 Leave Support Scheme does not override employment law, or your obligations to employees under their individual employment agreements.

The scheme does set out additional criteria and obligations you must meet in order to receive and use the subsidy, these can be found here.

What do I have to pay my staff while receiving the COVID-19 Leave Support Scheme 

Per the MSD Website, you must make best endeavours to pay your employees at least 80% of their usual wages. In situations where this is not possible, you must pass on at least the Leave Support payment.

You must pay 100% of the employee’s usual wages if these are less than the Leave Support Payment.

The COVID-19 Leave Support Scheme does not override employment law, or your obligations to employees under their individual employment agreements.

If you intend to modify employment agreements as part of your response and recovery from COVID-19, we encourage you to seek independent legal advice.

You can also refer to the Employment New Zealand website here.

You should also give consideration to the minimum wage, as employees should not be paid below this under any circumstances.

Is the COVID-19 Leave Support Payment subject to tax 

 
GST (Goods and Services Tax) NO
PAYE, Student Loan, Kiwisaver etc Yes – wages paid to employees from the Leave Support Scheme are subject to the usual employer deductions
Income Tax - Employers No – the Leave Support Scheme is classified as Excluded Income. This means you won’t be required to pay tax on the subsidy, nor will you be allowed to claim any deduction for wages paid from the subsidy
Income Tax – Self-Employed Yes – the Leave Support Scheme is to replace lost earnings and is therefore liable for income tax in the hands of a self-employed person

Should I pay the Leave Support Scheme as a lump sum to the employee 

We recommend making payments to employees in their usual pay cycles. Making lump sum payments can have adverse implications for your employees in other areas, including:

  • Working for Families entitlements
  • Marginal Tax Rates

Where can I find a copy of the declaration for the COVID-19 Leave Support scheme 

The declaration can be accessed below for:

What are the circumstances where I should repay the COVID-19 Leave Support scheme 

You may need to repay the COVID-19 Leave Support Scheme if:

  • you no longer meet the eligibility criteria
  • you are not meeting your obligation to retain and pay your employees
  • you provided false or misleading information in your application
  • your employee returns to work before the 4-week period is finished (and there are no other employees you can use the subsidy for)
  • your employee voluntarily resigns (and there are no other employees you can use the subsidy for)
  • your employee has been made redundant (you will need to repay the remaining subsidy to MSD, after you have paid the employee their wage and leave entitlements)
  • your business has closed
  • you have applied for the wrong payment rate (e.g. you applied for the full-time rate and you only needed the part-time rate)

How do I repay the COVID-19 Leave Support scheme 

You can repay the subsidy using the application form found here.

Can I apply for the COVID-19 Leave Support scheme more than once 

Yes – if you want to re-apply for the sane employee (meaning the payment is required for more than 4-weeks), then you can submit this application in the 4th week.

You can re-apply for the same employee for as long as the payment is required, and they meet the eligibility criteria.

The forms can be found below:

  1. If you have people working for you
  2. If you do not have people working for you
  3. If you are a large employer (>100 employees)

 

 

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