Covid 19: the wage subsidy and high-income employees; and preserving your business reputation in times of crisis

04 June 2020

The requirement of businesses to top-up the wage subsidy to 80% of wages is causing problems for many businesses with high income employees because they are concerned about not having the funds to do so. Here is my view on it.

Wage subsidy is designed for the most vulnerable

My impression of the Government’s intent is that the wage subsidy is designed for the most vulnerable workers in our society to give them a cushion as we work through this pandemic. Clearly, high income employees are not the most vulnerable in our society and so if you cannot afford to top up the income of a high-income employee to 80% then you should be making alternative arrangements with that employee that don’t involve the wage subsidy.

In other words, you should be consulting with that employee over a temporary salary reduction to a level which you can afford without having to apply for the wage subsidy. A wage reduction should be possible to agree because the alternative is redundancy. Any agreement reached needs to be reasonable in light of the circumstances of the business and the need of the employee to continue to receive some income as we work through this. What you can’t do is apply for the wage subsidy and then top up to a lower amount than 80% because you have signed a declaration to pay 80%. Whilst the declaration is on a ‘best efforts’ basis, in my view you would only be excused from paying the 80% if your business circumstances changed after you signed the declaration and you had exhausted all other ways of paying the 80% (e.g. finance from your bank). I was also suggest notifying WINZ that’s what you intend to do before doing it.

The reality is that we don’t know yet how the Government is going to deal with those who don’t comply with the declaration but what we do know is that breach of the declaration is a crime so it would pay to take is seriously.

Rather than look for loopholes, just comply.

Business reputation

It struck me this morning that in a post Covid 19 era, the reputation of a business could be determined by how the business deals with Covid 19. That is, reputation amongst your customers and reputation with your employees. If you show compassion and understanding during difficult times, people should remember and you will be rewarded with loyalty. If you are not compassionate and flout the rules, then people will definitely remember when you are trying to get your business up and running again.

I believe the businesses that will survive this pandemic are those that adopt a policy of social responsibility and compassion in times of crisis.

NB SInce this article was published the Government has indicated that the requirement to meet 80% on a best endeavours basis is not strict and employers should still apply for the subsidy if the alternative is redundancy.

Location map View in Google Maps