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Additional information on temporary variations and how to pay employees

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In response to member queries, we summarise below information on how to pay your employees when you are operating with a reduced capacity, or if you are closed.

The most important point for you to keep in mind is that employees must be paid in line with their employment agreements. This obligation remains, even when a business has been forced to close, or operate at a limited capacity.  

If you are unable to continue to pay your employees as usual, one option available to you is to consult with your employees in good faith and seek their agreement to a temporary variation to their employment agreement. This could take the form of a temporary reduction to an employee’s hours, pay, or duties, or even a combination of the three.  

Any variation must be agreed by the employee in writing. You cannot simply impose a variation. 

There is no limit to the number of hours you can ask an employee to reduce their hours by. However, as any variation must be by agreement, keep in mind that an employee is unlikely to agree to an unreasonably large reduction to their hours.  

If you are seeking an employee’s agreement to reduce their pay, you must ensure that the employee will be paid at least the minimum wage for each hour that they work.  

Please find a link to our Guide to Temporary Variations here (please login first to access this member-only guide).  

(Note, you must be logged in to your Restaurant Association account in order to view this document.)

How does the Wage Subsidy affect this? 

If your business is in receipt of a Wage Subsidy, there are a few additional points to keep in mind. 

If you are in receipt of a Wage Subsidy, you are still obliged to pay your employees in line with their employment agreements (unless they agree to a temporary variation). To do this, you use the Wage Subsidy as a base, and use business funds to top up an employee’s pay to 100% of their usual wages. 

There has been a bit of confusion about whether employers who are in receipt of a Wage Subsidy only have to pay 80% of their employees’ usual wages. As you know, when you applied for the Wage Subsidy, you agreed to use your “best endeavors/ best efforts/ try your hardest” to pay your employees at least 80% of their usual wages. This does not mean that employers can simply impose a reduction to 80% of an employee’s usual wages. Unless an employee has been consulted with and has agreed to a reduction to their pay or hours, they must be paid 100% of their usual wages.  

If you simply cannot afford to even pay your employees 80% of their usual wages you may be able to seek your employees’ agreement to a greater reduction (for example, that they only work as many hours as their Wage Subsidy payment is worth). However, to do this you must show that you have tried your hardest to be able to pay them at least 80% of their usual wages. This could mean keeping a note of approaches to your landlord to seek a rent reduction or rent holiday, of conversations with your bank, accountant, or insurer, and of any other cost cutting measures you have considered or implemented. If you are not able to show that you have tried your hardest to be able to pay your employees at least 80% of their usual wages, and yet you still seek their agreement to a reduction which means they are paid less than 80%, you will likely be in breach of your Wage Subsidy declaration, and may have to pay some, or all of it back. 

If an employee agrees to only be paid the Wage Subsidy, you should be careful to only roster them on for as many hours as their wage subsidy payment is worth. For example, a full-time employee on $20 per hour should only be rostered on for 29.29 hours per week if they are to stay within their $585.80 limit.  

If an employee works more hours than their Wage Subsidy payment is worth, they should be paid for each of those additional hours in line with the hourly rate stated in their employment agreement (or any agreed temporary variation to their hourly rate).  

But what if we’ve been forced to close fully? 

If your business has been forced to close fully due to Government imposed restrictions, we have created a Payments and Temporary Closures Guide to help you understand your obligations around paying your employees.  

If your business has been forced to close fully, and you have an appropriate Business Interruption Clause in your employment agreements, you may be able to rely on the Business Interruption clause as a means of not being obliged to pay your employees for the duration of the business interruption. 

If your business is able to carry out a contactless operation, it is unlikely that you will meet the high threshold for being able to rely on a Business Interruption clause. If you are operating in any capacity, we encourage you to instead consider consulting with your employees and seeking their agreement to a temporary variation to their employment agreements. 

The Employee Payments and Temporary Closures Guide also sets out advice for Members who have been forced to close fully, but who do not have a Business Interruption clause (or have an old version of the clause) in their employment agreements. The Guide also discusses how receiving a Wage Subsidy affects your payment obligations and options if the business is closed fully.  

Please find a link to the Employee Payments and Temporary Closures Guide here (please login first to access this member-only guide).  

(Note, you must be logged in to your Restaurant Association account in order to view this document. )

If you have any questions about either the Guide to Temporary Variations, or the Employee Payments and Temporary Closures Guide please feel free to get in touch with the Helpline on 0800 737 827.

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