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Wage Subsidy Covid-19

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The New Zealand Covid-19 Wage Subsidy is designed to subsidise the employer in paying wages to their employees. New Zealand employment law applies during the Covid-19 pandemic.

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Wage Subsidy Covid-19

The normal employment laws apply during the Covid-19 pandemic. Employers are still required to pay their employees in terms of their employment agreements unless an alternative arrangement is reached, but the employee would need to have given consent in writing.

The wage subsidy is not for the employee, it is for the employer to help provide the employee with wages, and will not necessarily be to the full amount, but to provide part of it.

In accepting the wage subsidy an employer is subject to a number of conditions which include retaining the employees in their employment and to use best endeavours to pay at least 80 percent of their employees wages. The 80 percent stipulation were part of the conditions of the contract between an employer and the Ministry of Social Development when the employer applies for and receives the subsidy.

Wage Subsidy employee claims

If an employer does not pay their employees appropriately while receiving the wage subsidy, employers could face consequences:

  • Not paying full wages can amout to an unlawful deduction if a worker has not consented to the deduction in writing in terms of the Wages Protection Act 1983.
  • If an employee is not paid any wages while the employer receives the wage subsidy, the employee can bring a personal grievance for unjustified disadvantage and claim their wages in this way.
  • Whether the Minimum Wage applies to employees being paid for not working in terms of the Wage Subsidy is still to be decided by the Court of Appeal.

Wage Subsidy advice for employers

We are now into our second year of Covid-19 and lockdowns. We appreciate that every situation is different and we endorse that employers should get specific advice for the situation that they face.

  • If an employer wishes to pay less than full wages during lockdown, try and entice your employees to consent in writing to reduced wages.
  • For new employees, employers would be smart to include a specific deduction clause regarding Covid-19 lockdowns and the wage subsidy to obtain written consent from the outset of employment with new employees.
  • Until the Court of Appeal resolves the recent challenge to Gate Gourmet New Zealand Ltd v Sandhu [2020] NZEmpC 237, pay at least the minimum wage when passing on the wage subsidy. But be aware of the other issues that arise as discussed here.
  • Employers paying out holiday pay to top up employee pay is an option. Be careful that you are doing so under the rules prescribed by the Holidays Act 2003.

Read our full article

We write employment law commentary for the Deals on Wheels magazine. Read our full article:

Wage Subsidy Covid-19 Download File: Wage Subsidy Covid-19

Last Updated: September 7, 2021 0800 WIN KIWI