Paying employees during COVID-19
The introduction of the Government’s wage subsidy scheme (and wider implications of COVID-19) has caused many employers and employees to question their obligations and rights. This article considers the wage subsidy scheme, essential workers leave and other more common forms of leave, in the context of COVID-19.
Wage subsidy scheme
The Government has announced a wage subsidy scheme to support employers who have been adversely affected by COVID-19. The scheme is available for employers, contractors, sole traders and self-employed. The scheme is to assist in employers paying wages to employees – it does not change any other employment arrangements with the employee (whether under their employment agreement or employment law).
Where an employee is able to work from home or is working as an essential worker, then they should be paid as normal at their usual pay rate.
The wage subsidy is paid at $585.50 per employee working 20 or more hours per week and $350 per employee working less than 20 hours per week. The subsidy covers 12 weeks per employee and is paid as a lump sum to employers.
In order to qualify for the scheme, the following criteria must be met:
the business must be registered and operating in New Zealand;
the employees must be legally working in New Zealand;
the business must have experienced a minimum 30% decline in revenue (actual or predicted) related to COVID-19 over a month compared to the same month in 2019;
the business must have taken active steps to mitigate the impact of COVID-19; and
the business must retain the employees covered by the scheme in employment for the period of the subsidy.
Employers should be making best endeavours to pay employees at least 80% of their normal income (pre-COVID-19). Where this is not possible, the full wage subsidy should still be passed on to employees (or their usual wage, if this is less than the subsidy amount).
Employers cannot unlawfully require or compel employees to use any other leave entitlements for any period during which employers are receiving the wage subsidy.
The subsidy can only be used to meet obligations in relation to paying employee wages – it cannot be used for other costs suffered by the business as a result of COVID-19.
The wage subsidy is considered ‘excluded income’ for income tax purposes for most businesses, however employers will need to make the usual deductions for PAYE, KiwiSaver, child support, student loan repayments and so on before paying on the wage subsidy to employees.
Essential workers leave
Essential businesses are able to continue operating throughout the alert level 4 lockdown, and employees of essential businesses are able to continue working (with health and safety obligations and appropriate processes followed in the workplace). However, not all employees of essential business will necessarily be willing or able to work during alert level 4 (or lower).
The Government has announced a new leave scheme, allowing essential workers who need to take leave in order to comply with the Ministry of Health COVID-19 guidance to be paid at the same rate as employees under the wage subsidy scheme ($585.50 per week for employees working 20 hours or more, $350 per week for employees working less than 20 hours). If employees are on other forms of paid leave, they should be paid at their usual level of pay.
Employers will be eligible to apply if they have experienced a 30% loss of revenue, or their ability to support essential workers needing to take leave has been negatively impacted by the COVID-19 public health restrictions.
The scheme is intended to support employees of essential businesses who:
are self-isolating in accordance with Ministry of Health guidelines because they have contracted COVID-19, have come into contact with someone who has contracted COVID-19, or have a dependent they need to care for who is sick or self-isolating;
are deemed at higher risk if they contract COVID-19, in accordance with Ministry of Health guidelines and are advised to self-isolate for the duration of the lockdown (or longer); or
have household members who are deemed at higher risk if they contract COVID-19, in accordance with Ministry of Health guidelines, and therefore the employees need to self-isolate for the duration of the lockdown (or longer) to reduce the risk of transmission to that household member and this is agreed with their employer.
The scheme is expected to be available whilst the country remains on alert level 4 and is anticipated for review in eight weeks’ time. Payments will be made four-weekly, and employers can re-apply for the same employers after the initial four weeks whilst the scheme remains open.
Employees should be paid either:
their usual weekly income (if less than the government leave allowance); or
the full government leave allowance, with employers making best endeavours to pay employees at least 80% of their normal income.
Sick leave
If an employee, or a dependent for whom the employee cares, is sick (whether with COVID-19 or any other illness), the employee is entitled to use their sick leave entitlement, in accordance with the Holidays Act and their employment agreement.
Employees can only be paid sick leave when they are sick. An employer cannot pay sick leave to an employee who they have required not to come to work due to the employer’s business being closed.
Once an employee’s sick leave entitlements are exhausted, the employer and employee have the option of agreeing that the employee be paid any accrued annual leave to ensure continuity of income.
Annual leave
Employees may wish to take this opportunity to be paid any accrued annual leave; alternatively, employers may wish to require staff to take annual leave where there will be no work available for employees (such as during alert level 4 shutdown or at lower levels).
An employer cannot unreasonably refuse an employee’s request for annual holidays – for example, some employees may now be in the position where they are the primary carer for dependents (small children or elderly family members) and cannot manage care with work commitments.
Employees and employers must reach agreement as to when annual leave can be taken; if no agreement is reached, an employer can require an employee to take annual leave by giving 14 days’ notice, however the employer must have attempted to reach agreement first before taking this step. Employees cannot be forced to take annual leave that has not been accrued (i.e. in advance), nor can they be required to take annual leave with less than 14 days’ notice.
Public holidays
If an employee is required to work on a public holiday, they are entitled to be paid for that day’s work at time and a half of their usual pay; if the public holiday falls on a day that is the employee’s regular day of work, the employee will also receive an alternative day off to be taken at a later date. This is in addition to any other benefits in the employment agreement for working on a public holiday.
If the employee is not required to work on the public holiday but the public holiday (or Mondayisation of the public holiday) falls on the employee’s regular day of work, the employee is entitled to be paid as if they had worked the public holiday as a normal day’s work.
Traditionally, Good Friday and Easter Sunday are non-trading days, and very limited businesses are allowed to remain open. There has been a relaxation of trading laws on Easter Sunday 2020, and supermarkets will be allowed to open (with some restrictions on items that can be sold). Employees can refuse to work on Easter Sunday without providing their employer with a reason and cannot be coerced to work. As Easter Sunday is not a public holiday, employees will not be paid time and a half, although employers can offer higher pay or other benefits as an incentive for staff to work.
Get in contact
If you would like advice about the effect of COVID-19 on your workplace (as employer or employee), or you would like our assistance with another legal matter you are facing, please contact your usual point of contact at Kemps Weir or contact us here.
Disclaimer: This publication should not be construed or acted on as legal advice. It is brief and general in nature. Specific advice should be sought.