How the $5bn wage subsidy will work

18th March 2020 By Staff Reporter | news@tourismticker.com | @tourismticker

Wage subsidies will be available for employers that are significantly affected by Covid-19 and struggling to retain employees.

The initiative was unveiled by finance minister Grant Robertson this afternoon as part of the Government’s $12.1bn economic response to the coronavirus outbreak.

The estimated total cost of the wage subsidy package was approximately $5.1bn with the maximum amount any one employer could receive capped at $150,000.

Grant Robertson

A spokesman for Robertson said the Government was also working on a package for large and complex businesses yet to be announced.

This might include support for loans and working capital.

The wage subsidy scheme would be open to sole traders and the self-employed as well as firms.

The Government fact sheet gives the example of a tourism operator in Queenstown, with 20 permanent part-time employees and 40 casuals.

The employer may be affected by the decrease in international visitors to the extent their income is down 50%, forward bookings over the next two months are down 30%, and the casual workforce has already been released.

The amount of support is $585.80 per week for a full-time employee of 20 hours or more, or $350 per week for a part-time employee on less than 20 hours.

This means employers will receive a payment of $7029.60 for a full-time employee and $4200 for a part-time employee.

The employer receives $84,000 as a lump sum and uses the subsidy to keep paying all part-time staff their current income over the next 12 weeks.

All payments to affected employers will be made as a 12-week lump sum.

In order to qualify, employers must have suffered, or are projected to suffer, at least a 30% decline in revenue compared to last year for any month between January 2020 and the end of the scheme in June 2020.

Applications can also be made on the basis of forecast revenue loss within the period of the scheme.

Employers will need to declare that, on their best endeavours, they will continue to employ the affected employees at a minimum of 80% of their income for the duration of the subsidy period. This is the equivalent of keeping people working four out of five days of the week.

Employers must also have taken active steps to mitigate the impact of Covid-19, for example by engaging with their bank or financial advisor and sign a declaration to that effect.

Employers can apply to the Ministry of Social Development from today 17 March for the next 12 weeks.

Applications can be made through an online portal on the Work and Income website.

MSD will aim to make first payments no later than five working days from when applications are received.

Another example of how the scheme works is a hypothetical six-person forestry contracting gang severely affected by suspended logging exports and revenue is down 90%.

The employer applying for the targeted wage subsidy would receive $42,117 as a lump sum payment to provide just over $7000 gross, before tax, to each of the employees across the next 12 weeks.

More information on the wage subsidy scheme, including how to apply, and other support for businesses can be found at www.govt.nz/coronavirus, and www.business.govt.nz.