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Employment April 2020 and the Covid-19 Pandemic

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Employment April 2020 and the Covid-19 Pandemic

Employment April 2020 and the Covid-19 Pandemic

In response to the global Covid-19 Pandemic, the New Zealand Government introduced a $12.1 billion support package for the people and the economy of New Zealand. New Zealand Alert Level 4 lockdown means all those working in non-essential businesses to self-isolate at home for a minimum of 4 weeks. Fortunately, the vast array of technology available may provide some Employers with the ability to have their Employees work from home, as we are. However, it is inevitable that businesses will be impacted by Covid-19, which is why Wage Subsidies and Leave Payments were included as part of the support package.

Both the Wage Subsidy and Leave Payments have the same flat rate:

  • For an employee who works 20 hours or more per week, a rate of $585.80 per week;
  • For an employee who works less than 20 hours per week, a rate of $350.00 per week.

It is important to note that these are considered wages, which means that they are subject to standard deductions i.e. PAYE, Child Support, Kiwisaver etc.

LEAVE PAYMENTS

When the package was first announced, Leave Payments were specifically introduced for the purpose of promoting self-isolation and to help slow down the spread of Covid-19 throughout New Zealand. An Employer could submit an application to offer financial support to an Employee who was required to self-isolate because:

  • that Employee could not work for their Employer because they had contracted Covid-19; or
  • that Employee could not work for their Employer as they had to care for a dependent(s) who were required to self-isolate in accordance with the Alert Level; or
  • that Employee could not work for their Employer as they had to care for a dependent(s) who had contracted Covid-19.

Important – From 27 March 2020, Employers are no longer able to submit an application for Leave Payments. If an application had been submitted prior to this date, then the original procedure will be adhered to.

WAGE SUBSIDIES

Wage Subsidies were specifically introduced to keep Employees connected to their Employers and vice versa. Covid-19 has resulted in a great risk of uncertainty for the future.  Some Employers are faced with reducing their Employees’ hours or even start making redundancies within their company.

Does my business qualify for the Wage Subsidy?

For a business to qualify for the Wage Subsidy, they must meet the following requirements:

  • Your business must be registered and operating in New Zealand;
  • Your employees must be legally working in New Zealand;
  • The business must have experienced a minimum 30% decline in actual or predicted revenue over the period of a month when compared with the same month last year, and that decline is related to covid-19
  • Your business must have taken active steps to mitigate the impact of covid-19;
  • You must make best efforts to retain employees and pay them a minimum of 80% of their normal income for the subsidised period.

Non-Essential Employer or Employee – How does the package affect you?

What does the Wage Subsidy offer?

The Wage Subsidy provides an Employer with a lump sum payment for each Employee whom they claimed on behalf. This lump sum payment is for 12 weeks of work for the Employee, at either the full-time ($585.80) or part-time rate ($350.00). This Wage Subsidy is granted on the basis that an Employer must try their hardest to pay the Employee at least 80% of their usual wages. However, if the Employer believes on reasonable grounds that this is not possible, then the Employer only needs to pay that Employee the Wage Subsidy.

If an Employer has an Employee whose usual wages are less than the Wage Subsidy received, then only the usual wages are required to be paid to that Employee. In these situations, the Employer may use the difference between usual wages and the Wage Subsidy on another Employee who is affected from this situation.

The Business Government NZ Website has some useful case study at the bottom of the page, which explores different scenarios of Employees who either cannot work or can work during this period. See https://www.business.govt.nz/news/covid-19-latest-news-and-updates/

Didn’t the Wage Subsidy Scheme change?

Yes, the Wage Subsidy Scheme did change. The Wage Subsidy has two schemes – the original scheme and the new scheme. The original scheme was introduced when the support package was announced. This scheme had a cap of $150,000 per business for any application made. For larger businesses, the cap meant Employers could not claim a Wage Subsidy for all of their Employees.

The new scheme applies to any application submitted on or after 4pm on 27 March 2020. The new scheme removed the cap of $150,000 per business, allowing for businesses to adequately cover all of their Employees during this time. This updated scheme also provided for any Employer who applied under the original scheme, to make another application to include any Employees who were not claimed for initially because of the $150,000 cap. 

Am I going to have to use up my Annual Leave or any other leave entitlement?

Annual leave is an entitlement that is granted to an Employee after 12 months of continuous employment. An Employer and Employee may agree that the Employee can use their Annual Leave entitlement. However, if an Employer proposed to an Employee that Annual Leave was to be used during this period, and an agreement cannot be reached, the Employer can give the Employee 14 days written notice and require that Employee to take their annual leave.

If an Employee has not worked for 12 continuous months, they will not have an entitlement to annual leave. An Employer can agree to an Employee taking annual leave in advance, however in this current climate this could pose a problem if the employment relationship ended.

Can my Employer change my wages and/or my hours?

The short answer is not without agreement from that Employee. However, many Employment Agreements will include a clause that covers for situations described as a business interruption or a force majeure. This applies when circumstances that are outside of the Employer’s control start arising and as a result the business cannot operate normally. In Queenstown, many employment agreements include this clause specifically for “snow days”.  This type of clause in the contract, provides an Employer with the ability to require the Employee to take leave (annual or unpaid), vary the hours of work or even modify the duties of that Employee’s position.

Frustration?

As New Zealand is in Alert Level 4 with all non-essential businesses in lockdown, some businesses may not have the ability to work from home. This raises the question of whether the performance of the employment agreement, the terms and obligations of the contract, can no longer be fulfilled because of events unfolding that were not foreseen or contributed to by either party. If a contract has become frustrated, the relationship and the contract may be terminated.

As at April 2020 it would be difficult for an Employer to show that Covid-19 Pandemic gives rise to frustration of the employment agreement. This is because we know that the lockdown currently is to run for a duration of 4 weeks and the Government has introduced a support package. These factors have an important place as they attempt to give an indication that this situation is temporary, and that frustration may not apply. The opportunity of Wage Subsidies have been introduced to keep Employers and Employees connected during this period, with the purpose of continuing to uphold these contracts.

Can I be made redundant?

The law does not change during challenging times, which means that the normal procedure applies for redundancies during the Covid-19 Pandemic. Employers continue to have to meet the same obligations under the Employment Relations Act 2000 that they had prior to Covid-19.

Section 103A of the Employment Relations Act 2000 states that a dismissal will be justifiable if the actions taken by the Employer, are what a fair and reasonable employer could have done in all the circumstances at the time of the dismissal.

The impact of Covid-19 has left many Employers expecting business to slow down, which will then have a flow-on effect to their ability to pay their Employees. Genuine business decline is an acceptable reason for dismissal, however, a dismissal of an Employee at this point of time would not be considered a genuine reason with the Wage Subsidy support being provided to Employers.

Section 103A requires Employers to engage in conversations with any Employee to raise concerns of dismissal and provide the Employee with an opportunity to respond before the Employer takes action. This conversation could provide a solution for both parties if you are willing to be flexible. Some options to consider are:

  • Using annual leave or taking unpaid leave
  • Reduced income for a fixed period
  • Reduced hours

 

Employment April 2020 and the Covid-19 Pandemic