Work and Income - COVID-19 Wage Subsidy

Background Information

The legislation around the COVID-19 Wage Subsidy has been released in a rush so there has been some confusion around your obligations as an employer when your business receives the COVID-19 Wage Subsidy payment.

There are some potential Bogeys that you need to be aware of.

1. Public Purse

The COVID-19 Wage Subsidy comes from the ‘Public Purse’ and therefore it is critically important that you can show that the COVID-19 Wage Subsidy has been used for the intended purpose, as per the COVID-19 Wage Subsidy documentation.

The COVID-19 Wage Subsidy is made available to cover a period of 12 weeks

(This is $585.80 per week for each staff member working 20 hours or more per week and $350.00 per week for each staff member working less than 20 hours per week. )

The COVID-19 Wage Subsidy:

  • must be used for wages only, and
  • must be released to employees at the weekly rate over the 12 week period

Finance Minister Grant Robertson advised at today’s press release ( 27/3/2020 ) that employers must keep their employees employed for the entire 12 weeks once the COVID-19 Wage Subsidy has been received by employers.

It would be unwise to use the COVID-19 Wage Subsidy payment for anything other than wages.

It would be sensible to put the lump sum COVID-19 Wage Subsidy payment into a separate bank account and release it evenly over the 12 week subsidy period.

2. Requirements/conditions attached to the COVID-19 Wage Subsidy payment

To qualify for the COVID-19 Wage Subsidy you must meet certain requirements/conditions and it would be foolish not to adhere to these, given that the subsidy is coming out of the Government Public Purse.

The following is one of the more confusing requirements/conditions for the COVID-19 Wage Subsidy:

“you must make best efforts to retain employees and pay them a minimum of 80% of their normal income” for the subsidised period of 12 weeks.

It would appear this requirement/condition should actually be read as follows; “you must make best efforts” to retain employees and “you must make best efforts” to pay them a minimum of 80% of their normal income.

The overriding intention of the New Zealand Government in making the COVID-19 Wage Subsidy is for you the employer to retain your employees through this period.

Paying your employees a minimum of 80% of their ‘normal income’ over the 12 weeks is secondary to ensuring the retention of your employees.

If you have to pay your employees less than 80% of their normal income to ensure the retention of your employees you surely cannot be wrong.

To establish what you should pay your employees during the 4 week lockdown period you should establish what your business can pay. You currently have no sales, so what can you pay?

3. Four Week Lockdown of New Zealand

Do you truly believe New Zealand will only be lockdown for four weeks??

The COVID-19 Wage Subsidy is for 12 weeks and the recent mortgage payment holiday announced by the Government is 6 monthsAny hints there?

The Government has to completely eradicate the COVID-19 virus otherwise the current lockdown of New Zealand will have been in vain and there will likely be a round two at a later date. It will also be likely that areas of New Zealand will be re-opened as they become clear of the COVID-19 virus, however you may not be able to get in and out of those areas.

Any business owner who does not do their budgets allowing for an 8 week lockdown of New Zealand is being irresponsible. We would also believe it would be wise to consider the possibility of a 12 week lockdown of New Zealand in your budgets.

4. Wage Subsidy – Pay this on to Employees through the PAYE System

The COVID-19 Wage Subsidy is received GST free.

The COVID-19 Wage Subsidy must be set aside and applied only to wages.

The COVID-19 Wage Subsidy must be paid to staff evenly over the 12 week subsidy period

(at $585.80 a week for staff working 20 hours or more per week and $350.00 a week for staff working less than 20 hours per week ).

The COVID-19 Wage Subsidy is a subsidy for wages and must be paid to your employees through the PAYE System, with tax being deducted.

5. Employer Obligations

The COVID-19 Wage Subsidy is being administered under the high trust model and employers will not be asked for verification before the subsidy is approved.

However the Ministry of Social Development will have the ability to check applications and verify information at a later date.

Where false or misleading information has been provided, employers can be subject to fraud investigation.

6. Where does this appear to leave us ?

  • The COVID-19 Wage Subsidy must be used for wages only (must be passed on to employees)
  • The COVID-19 Wage Subsidy must be released evenly over the 12 weeks to employees
  • Employers must be able to prove the COVID-19 Wage Subsidy has been passed on to employees
  • It would be sensible to keep the COVID-19 Wages Subsidy in a separate bank account
  • As an employer you must make best efforts to pay employees a minimum of 80% of their normal income – secondary objective of the New Zealand Government and secondary to the primary objective, as above
  • One interpretation of this is; if you have no money available ( because you now have no sales ) and your primary objective is to retain employees you may have to pay employees less than 80% of their normal income in order to achieve the primary objective of retaining employees. This appears to be in line with ”you must make your best efforts”, as per the COVID-19 Wage Subsidy announcement.
  • Do we truly believe the lockdown of New Zealand is only going to be for 4 weeks?
  • Would it be foolish (and also dangerous for our businesses ) to not plan for an 8 week lockdown of New Zealand in our budgets now?
  • Should we discount the possibility of a 12 week lockdown of New Zealand in our budgets now?


The COVID-19 Wage Subsidy legislation has been prepared and released in a rush and there is therefore currently little information available for interpretation of this new legislation. There is also currently a lot of confusion around the conditions attached to the COVID-19 Wage Subsidy. In order to try to provide some clarification, which is urgently needed, we have prepared this discussion document. Because this document is a ‘discussion document’ we cannot accept any liability to any person who places reliance on the contents of this discussion document. You must seek your own independent specialist advice before making any decisions around your particular circumstances.

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