Employment April 2020 and the Covid-19 Pandemic
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.
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.
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.
– 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.
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
Does my business qualify for the Wage
a business to qualify for the Wage Subsidy, they must meet the following
- 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
- 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
Non-Essential Employer or Employee – How does the
package affect you?
What does the Wage Subsidy offer?
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.
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.
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.
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?
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.
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
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
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
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.
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
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.
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
- Using annual leave or taking unpaid
- Reduced income for a fixed period
- Reduced hours