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Frequently asked questions – wage subsidy extension

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When do the applications open for the wage subsidy extension?

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Applications are open now. Click here to find out more and make your online application. Note, you cannot apply for the wage subsidy extension until your original 12-week wage subsidy period has finished.

When can I apply for the wage subsidy extension for my employee(s)?

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You can apply to cover the wages of your employees over an 8-week period from 10 June 2020. If you have applied for the previous Wage Subsidy for your employee(s), you need to wait until just prior to those payments finishing before you can apply for the Wage Subsidy Extension. You can’t receive more than one COVID-19 payment for the same employee at the same time.

In general, the Ministry of Social Development (MSD) will email employers before their current 12-week Wage Subsidy ends. The email will let them know when and how to apply for the 8-week COVID-19 Wage Subsidy Extension and will list the staff who were paid the 12-week COVID Wage Subsidy, and give details about when the employer can apply for the Wage Subsidy Extension for them and any other staff. However, it is not confirmed yet whether this will occur in all instances, so it is best to keep an eye on the applications page, work out roughly when your current Wage Subsidy period expires, and if you meet the criteria look to apply prior to the expiry of receipt of the 12 week period from when you received your last payment.

Am I am able to apply for a wage subsidy extension for my business which is facing a reduction in sales of 26-27% in comparison to 2019. This reduction in revenue is purely due to Covid-19 and even though it does not reach the benchmark of 40%, it is significant for my business. I understand the application for the wage subsidy extension is on a case by case basis.

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While we appreciate that 27% is a significant drop, the benchmark policy from the government stipulates 40% and if they are audited and their actual decline in revenue is 27% against a 40% benchmark they will be required to pay back the subsidy.

I have a new employee, so hadn’t applied for the wage subsidy before for them. Can I apply for the wage subsidy extension?

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Yes, you can apply for the Wage Subsidy Extension for your employee, even if you haven’t applied for the Wage Subsidy for them before.

My business has been open for less than a year. Can I still apply for the Wage Subsidy Extension?

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Yes, new businesses which have been operating less than a year can apply for the Wage Subsidy Extension.

To determine whether your business meets the 40% decline in revenue assessment, you need to demonstrate revenue loss against a comparable 30-day period in another comparable month within the last 12 months, as opposed to a year on year comparison.

For example, 40% loss of revenue attributable to COVID-19 comparing the 30 days before you apply to the closest period in 2019.

What does it mean when it says a decline in revenue for a continuous 30-day period, over a 40 days before I apply?

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Your business must have experienced a minimum 40% decline in revenue for a continuous 30-day period. This period needs to be in the 40 days before you apply (but no earlier than 10 May 2020) and must be compared to the closest period last year. The decline must also be related to COVID-19.

For example, you apply on 29 June 2020. Your 40% decline in revenue must be for a continuous 30-day period between 19 May and 28 June 2020.

Revenue means the total amount of money a business has earned from its normal business activities, before expenses are deducted.

How much is the Wage Subsidy Extension?

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As with the original wage subsidy, the extension will be paid at a rate of:

$585.80 per week for people working 20 hours or more (full-time rate); or

$350.00 per week for people working less than 20 hours (part-time rate).

The wage subsidy extension will be paid as a lump sum for 8 weeks per employee from the date you submit your application. That is $4,686.40 (gross) per full time employee, and $2800 (gross) per part time employee.

Can I make someone redundant when they are receiving the Wage Subsidy Extension?

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When you apply for the Wage Subsidy Extension, you will be required to declare that you agree to meet certain obligations. Like the first Wage Subsidy, these obligations will include:

That you pass the subsidy on to your employees.

That the employees are legally employed by your business and have not been given notice of redundancy at the date you apply.

That you retain your employees for the duration you are receiving the subsidy for them.

That you make best endeavours to pay your employees at least 80% of their normal pay. However, please note, that employment law still applies requiring there to be a valid contractual variation signed by all parties to the employment relationship for the employer to pay the employee less than what is agreed in their employment agreement. Also, the MSD declaration requires this, so in the absence of a valid contractual variation, you would be in a breach of both your employment AND MSD obligations.

That you have taken active steps to mitigate the impact of COVID-19 on your business.

Click here to read the full list of obligations.

I have received the wage subsidy for my employee, and this is more than they would ordinarily be paid, what do I need to pay them?

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As with the original Wage Subsidy, if the employees’ ordinary wages are less than the subsidy, pay them their usual wages in accordance with their Employment Agreement unless there is a valid signed contractual variation. If this is the case, any excess can be used for the wages of other affected staff. If there are no other employees to use the subsidy for, then the remaining Wage Subsidy Extension should be paid back to MSD.

How long will it take for the Wage Subsidy Extension application to be processed?

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MSD are working to pay the COVID-19 Wage Subsidy Extension as quickly as they can. They will need to check the information you have provided is the same as what’s held by Inland Revenue. If it isn’t, there could be a delay. Otherwise, if your application is approved, payment should be made within 2 business days of processing.

I have an employee who usually earns more than the Wage Subsidy amount, but can I just pay them the Wage Subsidy now?

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Under employment law, employees must be paid for each and every hour that they work at their agreed wage rate. Employers and employees can temporarily or permanently agree to vary the agreed wage rate. Any change requires good faith consultation and written agreement.

The Restaurant Association can provide further guidance on this and it is strongly recommended that you contact our Helpline on 0800 737 827.

Case studies

Employee returning to work with reduced hours at a rate higher than the relevant subsidy rate + not eligible for the Wage Subsidy Extension

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Ajay is a barista who works 40 hours per week at a café, earning $20 an hour. The café was closed during Alert Levels 3 and 4 and Ajay’s employer was eligible for the 12-week Wage Subsidy Scheme.

As Ajay’s employer was unable to afford to pay Ajay’s normal wages, or 80% of Ajay’s normal wages, Ajay and his employer agreed in writing that Ajay would receive the full-time wage subsidy rate of $585.80 a week. Ajay would not be required to work and would retain his annual holidays entitlements.

Ajay’s employer reopens the café at the start of Alert Level 2. Because the café is still quiet, staff are needed to work fewer hours during Alert Level 2. Ajay and his employer agree in writing to a five hour a week reduction in his hours of work. Ajay is paid for every hour that he works at the wage rate in his employment agreement, earning a weekly wage of $700. His employer uses the wage subsidy payment to offset the cost of these wages for the remainder of the 12-week subsidy period, paying $114.2 alongside the subsidy amount.

While the café has reduced capacity, reopening results in an increase in revenue. At the end of the initial 12-week subsidy period, the café does not meet the criteria to be eligible for the Wage Subsidy Extension (available from 10 June 2020), as they do not have a 40% revenue loss. Ajay’s employer resumes paying Ajay’s wages of $700 a week independently.

All of the above variations have been recorded in writing.

Employee returning to work with reduced hours at a rate higher than the relevant subsidy rate + eligible for the Wage Subsidy Extension

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Hana is the head chef at a successful catering company that closed during Alert Levels 3 and 4. Hana was getting paid $1,000 for a 40-hour week.

Due to its closure, the company suffered a 30% loss in revenue. Hana’s employer accessed the Wage Subsidy Scheme early in the lockdown period. During Alert Levels 3 and 4, after agreeing in writing, Hana’s employer paid her $585.80 per week, topping that up with $214.20 to $800 per week, to ensure Hana received 80% of her normal wages.

Under Alert Level 2, the catering company reopens. However, there is less work than usual. Hana agrees to return to work for 30 hours a week. Hana and her employer sign a variation to Hana’s employment agreement for the new reduced hours.

Because of the slowdown in demand, Hana’s employer can no longer afford to top up Hana’s wages to 80% of what she was earning prior to the impacts of COVID-19. Instead, they pay Hana at her usual rate for the adjusted 30 hours a week, meeting their employment obligations to pay Hana for each hour of work she completes. Hana’s employer passes through the subsidy amount of $585.80, along with $164.20, making up Hana’s weekly wage of $750. Hana’s employer continues this for the remainder of the 12-week subsidy period.

The impact of the public health restrictions during Alert Level 2 mean that the company meets the 40% decline in revenue test to qualify for the Wage Subsidy Extension at the end of the initial 12-week subsidy period. This enables Hana’s employer to continue to meet the cost of paying Hana her wages for the 8-week extension period, including when Hana moves back to working 40 hours a week under Alert Level 1.

Employee with normal wage lower than relevant subsidy rate + eligible for Wage Subsidy Extension

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Jennifer is a chef in a restaurant and works part-time. Her hourly rate is $25 per hour, and she normally works eight hours a week. The business is closed for Alert Levels 3 and 4 and has experienced a near total loss of revenue.

Jennifer’s employer was eligible for the 12-week Wage Subsidy Scheme, which they accessed a couple of weeks into the scheme becoming available. Her employer continues to pay Jennifer even though she was not working under Alert Levels 3 or 4. Under the subsidy scheme requirements, Jennifer must receive her normal pay of $200 per week, because her normal pay is less than the part-time wage subsidy rate of $350. Her employer uses the remaining $150 a week to top-up the pay of other affected employees who would usually earn more than the rate of the subsidy.

After moving to Alert Level 2, Jennifer resumes working 8 hours a week, and continues to receive $200 in wages for the hours she is working.

Towards the end of the 12-week wage subsidy period, the business is still experiencing more than a 40% revenue loss. Jennifer’s employer tells her that the business plans to reapply to Work and Income for the Extended Wage Subsidy once the initial 12-week subsidy period ends and that it will continue to use the payment to offset the cost of wages for Jennifer and other affected employees.

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