Subsidy Requirement Changes

On Friday  afternoon the government announced some changes to the wage subsidy, and the declaration form the employer is required to now sign has some significant changes.

Finance Minister Grant Robertson included in his announcement that these changes were effective from 4pm on Friday (27 March). As such, if you had applied for the subsidy and signed the original declaration you remain bound by those terms. The new requirements however do provide some clarification of what the government expects and that receiving the subsidy does not remove the employer’s obligations under the Employment Relations Act, and most importantly an employer cannot unilaterally change the terms and conditions of an Employment Agreement.

In practical terms this means if you are unable to pay your employees 100% of their normal wage/salary, you must have the employees’ written agreement to reduce it. If the employee does not agree and your business is only able to pay the $585.80 subsidy per week you will need to go through a redundancy process.

The new declaration also requires an undertaking that the employer “before making your application for the subsidy, you have taken active steps to mitigate the impact of COVID-19 on your business activities (including but not limited to engaging with your bank, drawing on your cash reserves as appropriate, making an insurance claim)”. This is far more prescriptive than the previous declaration and means you must engage with your bank and use your cash reserves (if you have them). Only time will tell what ‘as appropriate’ means, however it suggests the business will have to have a very good reason for not using them.

In business terms the most significant change is the requirement to retain your employee (who you have claimed the subsidy for), for the subsidy period (12 weeks). This is a significant implication. In essence, prior to applying for and receiving the subsidy, your business will need to make the difficult decisions on who you can retain for the full 12 week period, determine if you have the funds to cover all the overheads you can’t cut and have sufficient funds to close the business at the end of the 12 week period (if that is a possibility), and have agreement in writing from your employees on any changes to their terms and conditions you need in order to remain viable.

Finally you are unable to ‘unlawfully compel or require your employees to use their leave entitlements’. It doesn’t say you can’t require employees to take leave, it simply must be in a lawful way. The legislative requirement is that in the first instance you try to reach agreement. If you can’t reach agreement then the employer can require the employee to take annual leave entitlement provided they give a minimum of 14 days notice. It is important to understand at this stage the difference between annual leave entitlement and leave accrual, as you can only require ‘entitlement’ to be taken. At each 12 month anniversary date of the employee starting work with you, they are ‘entitled’ to 4 weeks annual leave. As leave accumulates between one anniversary date and the next, that is annual leave ‘accrual’. If both the employer and employee agree, leave accrual and leave in advance can be taken, but that must be by agreement.

There is no entitlement to sick leave being paid unless the employee is sick or injured, or someone dependent on them for care (at this stage that could only be someone in their bubble), is sick or injured.