By now most people know they can access a wage subsidy to help those businesses that have been affected by Covid 19. Many clients are asking what “best efforts” to pay staff 80% of their normal wage means.
First of all, apply for the wage subsidy. We’ve been told that for small businesses it has been granted very quickly (possibly the same day but that may slow down as demand for these subsidies increase). Larger businesses are taking up to 5 days.
You’ll receive the subsidy as a lump sum for a 12 week period from 17 March. We suggest you put it in a separate bank account so that it’s used only for subsidising staff wages.
There are certain conditions. To qualify:
- Your business must be registered and operating in New Zealand
- Your employees must be legally working
- Your business must have experienced a minimum 30% decline in actual or predicted revenue over the period of a month when compared to the same month last year and that the decline is related to Covid-19
- Your business must have taken active steps to mitigate the impact of Covid-19
- You must make best efforts to retain employees and pay them a minimum of 80% of the normal income for the subsidised period
The question we are most being asked is what ”best efforts” means. This will differ from business to business and between individual staff members.
You should consider:
- Whether your staff can work some hours or not at all
- Whether you can top up pay for staff who are working less than normal hours.
- If you can’t top staff up can staff use annual leave or other paid entitlements (not sick leave)
Even if staff are working normal hours there may still be difficulties for the business to pay full wages because of a hit to income, and a lack of cashflow. Talk to your bank and keep an eye out for more detail about the borrowing package the government is launching. In those circumstances it may be justifiable to pay less than 100%, or even 80% – but not less than the subsidy itself of course.
Employers have an obligation to consult with staff about paying less than normal wages. In the current circumstances paying a reduced wage, no wages, or terminating a staff member for redundancy may be justifiable.
You should still consult, and individually is better.
A fair consultation process involves setting out the proposal, discussing it (phone or text is fine) then making a decision. You could take it week by week as events unfold or you could propose a plan for the four weeks of the lockdown.
Louise Foley is happy to discuss any questions you may have. Call her on 021 245 1048 or email lfoley@lepine.co.nz.
View more articles