The purpose of this blog post is to supplement our previous advice (here) with new information and frequently asked questions.
At alert level 4, all businesses that do not provide essential services must close. Businesses that can provide work from home are able to do so.
What changes have been made to financial support?
Wage Subsidy
The government have removed the $150,000.00 cap on payments. Businesses who have already applied and received a cap payment will receive a further payment. The 12 week limit still applies and the amounts payable to each staff member are the same.
Leave scheme
The Leave Scheme which had been announced to provide support for employees having to self-isolate in accordance with health advice has been removed as it is no longer fit for purpose in a total lockdown situation. All applications now need to be made under the Wage Subsidy.
Loan Scheme
The government have also announced the Business Finance Guarantee Scheme which will assist business with turnover between $250,000.00 and $80 million to secure loans. Loans will be of up to $500,000.00 across a term of three years. Further details are to come.
Change to tax
There have also been changes announced to some aspects of business taxation to ease cashflow concerns for businesses. These include increasing the provisional tax threshold, increasing the small asset depreciation threshold and allowing depreciation on commercial and industrial buildings. We recommend that you seek accountancy advice to see whether and how these might assist you.
I think my business might be an essential service. How can I find out?
In short, essential services are things that relate to the necessities of life. These include food, healthcare, internet, telecommunications and accommodation (among others). Businesses that assist in the supply chain of these essential services are also able to remain open to the extent necessary to provide essential services.
The best source of information is on the official government website: Unite Against COVID-19. This has information about what businesses are considered essential services and is being regularly updated to clarify further.
The government have set up a helpline to allow individual businesses to call for an assessment of whether they are an essential service: 0508 377 388.
My business is an essential service. Do we need to operate differently to keep staff safe?
Some essential service businesses may be able to provide work remotely (for example, IT support). Those that can, should do so.
For businesses that can’t operate remotely, practical steps should be taken to reduce the risk of passing on COVID-19. This could include additional cleaning, provision of PPE, managing rostering to assist with social distancing and limiting direct contact as much as possible.
Is the payment of the Wage Subsidies taxed?
Payment of these subsidies to the employees is considered regular income so will be subject to the usual deductions of PAYE, Kiwsaver, and Student Loan.
Businesses do not incur GST on receiving the payment of the Wage or Leave Subsidy money.
The subsidy amount we receive is higher than the staff member’s usual wages. What amount should they be paid?
In this instance, you should pay the employee 100% of their usual wages. It is unclear what employers are expected to do with the excess amount of the subsidy in these cases. Businesses should be mindful that it may be that this excess needs to be paid back to the Government.
Our business has had to close down. Can we make staff use their annual leave?
Under the Holidays Act, you can require an employee to use annual leave only after you have consulted with them and you must provide two weeks’ notice.
We may need to make some staff redundant. Can we do this?
Yes but you should first of all consider applying for the government Wage Subsidy. If you have already applied for the subsidy, it is worth considering whether redundancies may impact your eligibility for this.
When applying for the grant, businesses need to certify that they will undertake best endeavours to retain staff. It is not yet clear how this will be treated if a business later needs to undertake redundancies to stay afloat. We recommend that caution is exercised and other options are investigated prior to redundancies.
Can I suspend payment to staff?
This will only be possible where their employment agreements contain a business interruption/force majeure clause. You will still need to consult with staff before making a decision.
A business interruption clause means that the employment relationship remains on foot, but you can suspend pay after consultation.
Frustration of contract may also be able to be used. This applies where parties are no longer able to perform the duties and obligations in a contract because of an external force. However, frustration requires that the contract be terminated.
We’d recommend seeking advice specific to your situation before making this decision.
Our team are working remotely through the lockdown to provide assistance to employers and employees navigating these issues. Please feel free to contact James Pullar, Amy Kennerley, Amanda Butler and Graeme Randle for specific assistance.
