How we can help
If you need advice or support as you work through your changing staff and business arrangements, our team are here to offer support with practical advice relevant to your specific situation.
We also encourage you listen to the regular Government updates and follow their Covid-19 website for further information as it unfolds.
Redundancy: If you need guidance with making staff redundant, please see our redundancy kit.
Continuity Planning: Here is a link to some government information on continuity planning that may be helpful.
Regular updates including FAQ’s will be emailed to anyone subscribed to our newsletter.
BUSINESS CONTINUING OR CLOSING DURING LEVEL 4
Yes, subject to employees remaining at home.
If the employer can’t provide work due to a Government shutdown, in most circumstances employees will still be required to be paid. An exception may be if there is a “force majeure” clause in the employment agreements. “Force majeure” clauses ordinarily state an employer is not required to pay an employee in the event of something out of the control of the employer. It is essential the wording of any “force majeure” is checked to ensure the current situation aligns with the wording of the clause.
If an employer cannot afford to pay their employees, or you do not envisage recommencing trading at the conclusion of this crisis, redundancies are likely to be the outcome. You are still required to follow your good faith obligations, communicate and consult with your employees, and follow a fair and reasonable process before reaching that decision.
One consideration you will need to include is the government subsidy and whether that will allow the business to retain employees.
An employer can require employees to take annual leave but must consult with them first and provide 14 days’ notice.
Continue to operate as required remembering to conduct the risk analysis and put in whatever additional measures are required to protect your employees from the virus.
GOVERNMENT WAGE SUBSIDY AND PAYING EMPLOYEES
If your business has either experienced a drop in income of 30% or more, or you anticipate it will, due to the virus, the business is eligible. Apply online here without delay. It is an incredibly easy process. The subsidy must be used for wages and no other purpose (e.g. other operating costs). If you receive business interruption insurance you are not eligible for the subsidy so check your insurance.
Yes. Part of an employer’s obligations in receiving the subsidy is that you must declare you:
- have discussed the application with the employees named in your application and that they have consented (in writing, if practicable) to the information about them in the application being:
– provided to the Ministry of Social Development; and
– used by the Ministry of Social Development to make decisions about your application and to audit and review any subsidy that is granted; and
– shared by the Ministry of Social Development with other agencies to the extent required by MSD, it’s staff and auditors to make decisions about your application and to audit and review any subsidy that is granted
Here is a basic form you can send your employees to get their consent –DOWNLOAD HERE. You can text it, or mail it, or whatever remote communications works for you. You do not necessarily need a signature. You can say that by replying to the communication with a simple “I agree” will be sufficient.
Yes, if you don’t use it in the manner required or things change for you. Remember you have obligations if you receive the subsidy.
You are agreeing to repay any subsidy made to you if you:
- were not or stop being entitled to the subsidy
- provide false or misleading information in your application;
- receive business interruption insurance
If your circumstances change, for example you are not able to keep your employees, or reduce someone’s work hours from full time to part time, you must advise the Ministry. You are required to use your best efforts to retain employees so ensure you consider and record what those efforts are.
The COVID-19 Wage Subsidy will be paid at a flat rate of:
$585.80 for people working 20 hours or more per week
$350.00 for people working less than 20 hours per week.
The subsidy is paid as a lump sum and covers 12 weeks per employee.
You must make best efforts to retain employees and pay them a minimum of 80% of their normal income for the subsidised period.
Yes. The government has not changed this requirement. The minimum wage went from $17.70 to $18.90. If you are paying the $585.80 subsidy value, and not topping up, and require employees to work, you still have to meet the minimum wage requirements. That means an employee receiving $585.80 can work up to 31 hours a week (subject to written agreement to change their terms and conditions).
You cannot unilaterally change an employee’s terms and conditions. If you are no longer paying an employee the amount specified in their Employment Agreement, or in the absence of an up to date one what you normally pay them, you can only do this if you have their agreement in writing. If you had their verbal agreement, now is the time to follow up on the paperwork. Send an email, text or whatever written communication method you are using, setting out what was agreed and ask them to message/text/email you back with a simple ‘I agree’. Employer and employee obligations still apply, so don’t forget to tell them they can seek independent advice before agreeing.
The employee should be raising any issue they have with you as soon as they are aware of it. However, they don’t always do that or the issue remains unresolved. A wage claim is not the same as a personal grievance (PG). Where a PG in most circumstances must be raised within 90 days, an employee has 6 years to raise an unpaid wage claim. So please take heed of the advice above and get any reductions in pay agreed in writing.
The Ministry of Social Development Q&A suggests that where an employee’s normal pay is less than the subsidy, the employer can redistribute the remainder to others. It is our view that this is wrong, and quite contrary to the declaration the employer signed to claim the money. We suggest having a separate bank account to hold the subsidy money in, and drawing on it each pay period. This will provide clear evidence you have used it in the way required and any unspent subsidy can be returned to MSD.
What do I have to pay them? If you have an employee working under these types of visa there is a requirement to pay them a minimum salary/wages (this is different to the minimum wage). It is significantly above the $585.80 weekly subsidy. The government has advised they are working on a solution for this. In the meantime you are still required to pay the minimum specified by the visa requirements.
Do a cash flow analysis. Remember, depending on your business, others may not be able to pay you. Identify points in time, when reserves hit certain points, or if particular events happen (for example the stage 4 period is extended), when you need to make further decisions.
Talk to other business’s, your accountant, trusted advisors. They may have ideas you haven’t yet considered. Can you pivot your business to provide a different type of service or product. For example the distillery now making hand sanitizer.
Here is a link to some government information on continuity planning that may be helpful.
A force majeure provision is an exception to the usual consequences of breaching a contract. It recognises that there can be failure to meet contractual obligations due to an event that is beyond the control of either party.
The wording in the clause is important. If it has a list of events and that includes “epidemic” that is very helpful, but not absolutely determinative. The World Health Organisation classifies COVID-19 currently as a pandemic. If your clause is not specific, that does not mean the clause is not valid for current circumstances. Many clauses will include words along the lines of “and any other event beyond the control of the parties”.
Even with the clause, to enforce it, you must show that performance of the contract (Employment Agreement) was prevented by the event in question. This may be COVID-19 itself or the government’s decision to take the country to Level 4.
Remember you may have force majeure clauses in other commercial contracts. Check these as well as they may impact your business.
Check the specific actions it provides when the clause is triggered.
Covid-19 may count as an “epidemic” triggering event under some force majeure provisions. In the event that your employee disagrees Covid-19 constitutes an epidemic for the purposes of an Employment Agreement, it will ultimately be up to a court to decide.
In attempting to trigger a force majeure provision, it is critical to show that continued employment was prevented by COVID-19 or the government’s decision to implement Level 4.
Even if the force majeure provision doesn’t specifically refer to “epidemics”, it could still be triggered by Covid-19.
Start discussions/consultation with your employees. Even a force majeure clause does not eliminate an employer’s good faith obligation to be communicative and responsive.
Be honest with your staff. Tell them why you think the force majeure clause is relevant to your current circumstances, what you have done or considered to mitigate the impact, and give them a timeframe to respond. Once this period has past, consider the feedback and make your decision, then inform your employees. The termination must still be done as per the terms of the Employment Agreement. For example you must give the required notice (or payment in lieu), and pay out any holiday pay owing.
Termination using a force majeure clause is not a redundancy (technically), although the outcome is the same. Where defining between force majeure and redundancy may make a difference, is if you have redundancy provisions such as paying redundancy compensation.
Step 1: Check the Employment Agreement (contract). Agreements should have a termination clause that has some important information you will need. Make sure you follow whatever process or requirements the Employment Agreement (or policies you already have), states. The Employment Agreement may also have a ‘force majeure’ clause in them which may give you additional options for managing this crisis.
Step 2: If there is no force majeure clause, and the reason for terminating your workers’ employment is the COVID-19 crisis, here is a free step by step fact sheet on the process, a base proposal letter and redundancy letter you can you. If you have a force majeure clause refer to the section above.
Step 3: If you have received the government subsidy for wages, you cannot use it for other purposes. Once you have terminated the employment of any or all your employees, put the remaining money in a separate account and leave it so you can pay it back when required. We suggest you have a separate account for the subsidy from the time you receive it and only transfer each pay period the amount permitted. This way you can clearly demonstrate it was only used for wages. There will no doubt be audits carried out when the COVID-19 crisis is over.
OPTIONS OTHER THAN REDUNDANCY
COVID-19 Wage Subsidy: See above.
Annual Leave: You could discuss with your employees that they take annual leave. Even if you make them redundant this must be paid out. In the first instance your obligation is to try to reach agreement on taking annual leave. However if agreement can’t be reached, you can require an employee to take any annual leave entitlement they have, giving a minimum of 14 days notice. You cannot require an employee to take annual leave in advance of their entitlement.
Reduced Hours: By agreement hours of work could be reduced, thereby reducing your payroll. However keep in mind the requirements of the government wage subsidy and ensure you are still complying with that.
Alternative duties: Are there other tasks the employee could do from home? Database cleansing, writing policies or procedures, a marketing plan for after the crisis, business planning. Discuss these options with your employee.
Yes. There has been no government announcement that this is to change in any way.
An employee can apply for a KiwiSaver contributions holiday for financial hardship or ill health. Here is the information on what they should do if they want to apply. https://www.kiwisaver.govt.nz/already/change-contrib/stop-contrib/
CHILD SUPPORT AND OTHER COMPULSORY DEDUCTIONS
If you’re deducting child support from an employee’s pay, the maximum amount of child support you can deduct is 40% of their net earnings (after tax). This is called ‘protected net earnings’.
Protected net earnings only apply to child support. Other deductions should still be made even if these add up to more than 40% of their pay.
If the child support deduction IRD asked you to make is more than 40% of your employees net pay, you should only deduct 40% of their net pay amount. IRD will arrange with your employee to pay the balance, so you do not need to make up the missing amount in future pays.