The Government has announced some significant changes to the COVID-19 Wage Subsidy. These changes apply to any employer applying for the COVID-19 Wage Subsidy from 4pm on Friday 27 March 2020. These changes do not apply to employers who applied before 5pm on Friday 27 March 2020.
The most significant of these new obligations are that the employer must now agree to:
- not make any changes to any obligations under an employment agreement, including to rates of pay, hours of work and leave entitlement, without the written agreement of the employee;
- retain the employees named in the application as employees for the period the employer receives the Wage Subsidy;
- not unlawfully compel or require any of the employees named in the application to use their leave entitlements for the period the employer receives the Wage Subsidy;
- only use the Wage Subsidy for the purposes of meeting the named employees’ ordinary wages and salary and the employer’s obligations in relation to the Wage Subsidy; and
- for the period the employer receives the Wage Subsidy:
- use best endeavours to pay at least 80 per cent of each named employee’s ordinary wages or salary; and
- pay at least the full amount of the Wage Subsidy to the employee; but
- where the employee normally earns less than the Wage Subsidy (i.e. less than $585.80 or $350), pay the employee that amount.
The MSD’s COVID-19 Wage Subsidy web-page makes it clear that employers cannot make employees redundant during the period of the Wage Subsidy.
These changes place employers who apply for the Wage Subsidy from now on between a (likely unintended) rock and a hard place.
If an employer applies for the Wage Subsidy they cannot change their employees pay without the employees’ consent (and the employees could refuse to provide their consent) and the employer cannot make them redundant. A potential redundancy might have been a useful way of getting employee ‘buy-in’ to salary or wage reductions. Now redundancy is off the table, it is difficult to see how employers can achieve these reductions – the new Wage Subsidy declaration requires employers to agree that they will not make unilateral variations to employees’ salary or wages.
We think that the above issue is likely to be clarified in the next few days as the Minister of Finance and the Wage Subsidy web-page make it clear that the fall-back position is that employees stay employed even if they are only receiving the Wage Subsidy from their employer. What seems to have been missed is how an employer can get to that position, without the ability to make unilateral changes or consider redundancy. If an employer can no longer meet their obligations under the Wage Subsidy they can return the funds to the MSD. This may be the way of addressing a situation where an employer needs to consider redundancy during the 12 week period.
The Government has also failed to consider the practical difficulty of obtaining written consent from large workforces now dispersed and isolated in their homes.
The Government has clarified that employers can apply for the Wage Subsidy for any casual employee(s) that:
- are employed at the time the employer applies; or
- who would have been expected to work during the time the employer receives the Wage Subsidy.
As casual employees may have variable hours, the employer should average their hours over the last year. If this average is 20 hours or more, they can apply for the full-time rate, and if it’s under 20 hours they can apply for the part-time rate. If the casual employee has worked for less than a year, the employer should average the hours worked during their total employment period.
Employers can now rehire employees and receive the Wage Subsidy if:
- the employees were employed by the employer as of 17 March 2020;
- the employer had to let them go because of COVID-19; and
- the employer did not apply for the COVID-19 Wage Subsidy for the employees.
It is ‘expected’ that employers would look to re-hire on at least the same terms and conditions. In light of the above difficulties with the Wage Subsidy, we think it is unlikely employers will rehire employees.
The approach to the Wage Subsidy and employers’ obligations when they receive it are changing on a daily basis. We will keep you up-to-date as things continue to rapidly progress.
Quigg Partners is continuing to support its clients through this unprecedented situation. We are doing this remotely while maintaining our high levels of service. We are advising daily on:
- reduced hours;
- reduced pay;
- stand downs or leave without pay; and
If you have any queries regarding COVID-19 and its potential effects on your business, please get in contact with one of the members of the employment team.
+64 (0)21 456 411
+64 (0)21 224 2620
+64 (0)27 635 8775
+64 (0)27 438 8894
+64 (0)22 392 0370