COVID-19 Extension to the existing Wage Subsidy Scheme

Thursday 14 May 2020

Authors: Tim Clarke and Sarah McFetridge

​​​​In today's Budget the government announced plans to make a Wage Subsidy Ex​​​tension Payment available to support employers who are still significantly impacted by COVID-19 after the existing Wage Subsidy ends.​

Why has the wage subsidy been extended?

While the full impact of COVID-19 around the world remains to be seen, the government has recognised that many businesses (tourism, hospitality and retail, in particular) are "far from trading at normal levels" and will continue to struggle as a result of COVID-19. This extension is targeted at those businesses.

The Wage Subsidy Extension forms part of the COVID-19 Response and Recovery Fund established through today's Budget.

The extension is intended to stimulate the economy, help keep people in work, and allow businesses more time to re-establish and re-orientate their operations as we move through Alert Level 2. The extension is no doubt also motivated by the government's expectation that unemployment will increase significantly, peaking at 9.8% in the Q3 2020, driven by the public health steps taken to eliminate COVID-19, the reduction in international tourism activity, the reduction in global demand and lower business and consumer confidence.

Who is eligible to apply?

According to government guidance, to be eligible employers must have had, or expect to have, a revenue loss of at least 50% for the 30 days prior to the application, compared to the closest period last year. It will follow on directly from the end of the first 12-week scheme and will be available for a further eight-week period from the date an application is submitted, from 10 June until 1 September 2020. Employers cannot apply for the Wage Subsidy Extension for an employee until the 12-week Wage Subsidy received in respect of that employee has ended.

What is required?

Early guidance suggests that employers will be asked to agree to similar obligations to those contained in the current Wage Subsidy application declaration. We expect further guidance to be provided shortly, but the Work and Income website currently states that employers will need to agree to pass on the subsidy to employees, retain employees for the duration of the subsidy, do their best to pay employees at least 80% of their normal pay, and take active steps to mitigate the impact of COVID-19 on the business.

If you have any questions about the matters raised in this article, please get in touch with the contacts listed, or your usual Bell Gully adviser.

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Disclaimer

This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.

For more information
  • Tim Clarke

    Partner Auckland
  • Liz Coats

    Partner Auckland
  • Rachael Brown

    Partner Wellington
  • Andrea Pazin

    Senior Associate Wellington
Related areas of expertise
  • Employment and workplace safety