Wage Subsidy FAQ'S - COVID19
To help you get quick answers to your wage subsidy scheme questions, we’ve put together our most frequently asked questions below. If you need further help, please don’t hesitate to contact us.
Q: How do I calculate if my income has dropped by 30% or more?
A: The employer/business must have suffered a minimum of 30% decline in actual or predicted revenue over the month when compared with the same month last year. The decline must be caused by COVID-19. Revenue means the total amount of money a business has earned from its normal business activities, before expenses are deducted.
Some businesses have closed their doors this week due to the increase in government issued alert levels. The income assistance from the government allows for future forecasts up to and including June 2020. Your accountant can assist with generating forecasts of future revenue trends. Try to be as realistic as possible as there may be a requirement to refund the money received if you get it wrong and under estimate your income.
Q: What active steps must we take to reduce the impact of COVID-19?
A: Your business must have taken any necessary steps to reduce the impact and effects of COVID-19. This should include implementing a business continuity plan, that is, to do whatever is necessary to keep the business going during the isolation period and have plans for reopening once this has concluded, talk to your SBA accountant who can assist with creating this document.
Q: Do I have to pay my employees 80% of their normal wages while receiving the Government Wage Subsidy?
A: You must make ‘best efforts’ to pay 80% of the normal income your employees for whom you have applied for a subsidy. This is part of the application declaration, you must confirm that you have advised employees that you have included them in your application for the wage subsidy. You will need to ensure you have proof that you have done this, signed notice by employee, an email etc.
Q: What happens if I cannot continue to employ someone that I applied for the subsidy?
A: Consult an employment advisor or employment lawyer regarding the employees individual employment agreements, to make sure you are doing the correct process and meeting the legal obligations concerning minimum pay and redundancy before ending their employment.
It is crucial to communicate with employees during this time. If you applied for a wage subsidy in good faith, there is at this stage no need to pay any wage subsidy back. As with any subsidy during this time, be prepared for any received entitlements to be reviewed if you terminate someone’s employment. Terminations that occur shortly after the application for the wage subsidy may be reviewed closely.
Q: Do I need to pass on the entire wage subsidy, for example, if my staff member earns less than $350 per week?
A: The $350 per week subsidy is payed to the employer for permanent and part time employees which is defined as those who work up to 20 hours per week. You will need to consult your employment advisor or employment lawyer regarding whether any casual employees should be regarded as permanent part time employees and if so, then they are eligible for the wages subsidy.
The eligibility criteria stipulates a best effort to pay 80% of an employee’s normal wage.
Q: How do I treat the subsidy with regards to payroll?
A: The payment to staff is separate to the receipt of the subsidy. The subsidy you receive is exempt from tax and should be classified separately in your accounts from other income types. Any wage payments made to employees form part of their taxable income and should have the usual PAYE, KiwiSaver, student loan, etc. deducted from them. The net payment is what goes to the employee. The payment to the employee is non-deductible to the employer, up to the amount of the received wage subsidy. From an income tax perspective, businesses need to clearly identify remuneration paid to employees that has come from the wage subsidy separately from the normal wage or the difference paid to the employee over and above the wage subsidy.
Q: Does my business type prevent me from being able to get the subsidy?
A: The intention of the wage subsidy is to keep people employed through these difficult times. The legal structure of your business, or employee & contractor agreements, should not stop you from being eligible to apply for the government business support package.
Q: Types of employment relationships and how these might affect eligibility
A: The following examples and definitions are to help you determine if employees are part-time or full time and as such mean whether you can apply for the Wage Subsidy.
- Casual employees – could be classed as similar to that of ‘variable income self-employed persons’ (these employees were included in the subsidy announcement on 23/03/20). How many hours did they work during the same time last year – if unsure, seek further advice
- Contractors – Review their contractual agreements, whether there are defined contracted hours in their agreements. The more defined the required hours, the more likely they will qualify for subsidy payments.
- Seasonal Workers – what contractual arrangements are in place, are these for a fixed term? Compare with the hours worked during last-years season.
- Partnerships and Look Through Companies – Non-passive income received by a person from one of these structures is self-employment income.
- Commission Based Employees will still have a contracted minimum hours and pay that can be used to determine their ordinary income.
Q: Does the structure of my organisation matter?
A: No, this subsidy is based on being a NZ employer with NZ employees. You can be an incorporated society, trust, charity, etc. A sole contractor claims for themselves and any staff that they employ.
|Taxable income for employer?||No||No|
|Subsidy attract GST for employer?||No||No|
|When employer pays employee, is the employee subject to tax?||Yes||Yes (i.e. Employer deducts PAYE/KiwiSaver etc when they pay staff as normal but it will be tricky to separate things in the normal payroll.|
|Is the subsidy deductible to employer when paid to employee?||No||No|
Q: How long does it take to receive the subsidy payment?
A: WINZ is managing the subsidy application and payment process, so far we have had clients experience waiting times of between 2 to 9 working days. Early on a lot of businesses applied hence the waiting times were longer, but the timeframes between applying and receiving payment are reducing as the subsidy payment frequency is increasing as the number of applications are reducing.
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