Since our Government has had to act quickly to ensure the containment of Covid 19 many issues are unclear and are being worked out as we speak. I have received a lot of questions about the subsidies being offered and other related issues, and whilst I don’t profess to have all the answers I am happy to share the guidance I have given to those who call in the hope it will assist thoughtful decision-making over the next days or weeks. I provide the caveat that, like many, I am working with the best information I have at hand and that the information available today may change tomorrow.
Can anyone now apply for the leave subsidy?
Many have wondered whether since we are all now in self-isolation whether we are all entitled to the leave subsidy. In my view, no. The leave subsidy was put in place before we moved to Levels 3 and 4 to assist those who had to self-isolate due to international travel or Covid 19 symptoms. One requirement of the leave subsidy is registration with Healthline who presumably confirm that you are eligible, having either travelled recently or have experienced symptoms. Simply because you are at home and cannot work, doesn’t mean you are eligible. Instead, speak to your employer about the wage subsidy.
Can a business use employees’ annual leave to top up the wage subsidy to 80%?
In my view, no. When you apply for the wage subsidy for an employee you provide a declaration that you will pay 80% of wages. Annual leave is an entitlement which an employee has already earned by working in the past – it is not ordinary time wages. Essentially, you would be using the employee’s own money to meet your obligations. However, an employee could agree to take annual leave to increase their wages from 80% to 100% but it is their option to do that.
What if I have received the wage subsidy and can no longer meet the requirement to pay 80% of wages?
The agreement to pay 80% of wages is based on ‘best endeavours’. If your business’ financial situation changes such that you can no longer meet the obligation, then it is likely that will be permitted as a reason not to pay the 80%. However, with the government releasing details of the availability of business loans I suspect that you will be expected to explore that option first before electing not to pay. I am anticipating that reasons for not paying the 80% will be extremely limited and the ‘best endeavours’ requirement is to do all you can to ensure it is paid.
What if I need to make an employee redundant and I have already received the wage subsidy for that employee?
If you have already received the wage subsidy for an employee, you would need to have a very good reason to make them redundant which didn’t exist at the time you made the application (i.e. changing circumstances). The important point is that the wage subsidy belongs to the employee, not your business. You are simply acting as an agent in passing on that subsidy to the employee. In my view, if you proceed with a redundancy you must pay that subsidy to the employee. I am not aware of any ability to pay the money back to government.
I am an essential service and have received a wage subsidy, but my employee is refusing to work due to Covid 19 risks – do I have to pay the top up to 80%?
Whilst there would appear to be an inherent unfairness in some employees working and others not out of choice, if you have applied for and received the wage subsidy then you must meet the obligation to pay 80% of wages.
Can I require an employee to take annual leave?
Yes, by providing 14 days’ notice under the Holidays Act. However, you can’t use the wage subsidy to meet your obligations to pay annual leave. Requiring employees to take annual leave is the best option for businesses or organisations who don’t meet the criteria for the wage subsidy and there is no work available.
if you are applying for the wage subsidy, think carefully about which employees you apply for. If redundancies are inevitable for an employee either because you can’t meet the 80% requirement or for other reasons, then don’t apply for the subsidy for that employee. Similarly, if you are an essential service consult with your employees about their preparedness to work before you apply for the subsidy. If an employee in this situation is not prepared to work, then consider options around them taking annual leave instead.