Wage Subsidy Scheme

Be prepared for an audit!

The Wage Subsidy Scheme has been developed to help businesses and affected workers in the short-term, as they adjust to the initial impact of COVID-19.

The criteria for applying for the subsidy was:

  • Be an eligible employer
  • Your business must be in New Zealand
  • Your employees must be legally working in New Zealand
  • You must have a minimum 30% decline in revenue:
    • 30% decline in actual revenue over the period of a month compared with the same month or 30 days, last year
    • Predicted revenue (e.g. for businesses who have seen a reduction in bookings such as accommodation providers), and
    • That decline is related to COVID-19
  • You must mitigate the financial impact
  • You must retain the employees your applying for and make best endeavours to pay staff at least 80% of their usual wages.
    If that is not possible, pay at least the rate of the subsidy that applies to that employee.

The Wage Subsidy is based on the hours worked in the business;
20 hours or more, or less than 20 hours.

It would be hard to prove a shareholder who does the books would work more than 20 hours a week. Being a Shareholder does not mean you can automatically apply either, you must work in the business to be eligible to claim the Wage Subsidy.

The Wage Subsidy obligations are in the declaration you agreed to when you applied. You can find these obligations in the following link: https://www.workandincome.govt.nz/covid-19/wage-subsidy/making-payments.html#null

On 6 April 2020 the Ministry of Social Development (MSD) released details of the employers that have claimed the subsidy and how much they claimed. MSD and the Government made it clear from the beginning they will be doing audits on the Wage Subsidy; they have already started this process and investigations have begun.

If you have incorrectly applied for the subsidy, you no longer meet the eligibility criteria or you provided false or misleading information in your application you will be required to repay a portion or all of the subsidy.

Be prepared to be audited and be prepared to repay it if you no longer meet the requirements.

Is your business ready for an audit?

It is important to consider how you can prove your eligibility for the Wage Subsidy including:

  • Can you demonstrate at least a 30% decline in revenue when you applied
  • Can you show you have taken steps to mitigate the impact of COVID-19
  • Have you made your best endeavours to pay at least 80% of the employee’s ordinary wage.

At the time of the claim a business should have prepared the relevant documentation and have it in place as evidence to support their claim.

If this has not been prepared, we strongly recommend preparing this information now, so you are audit ready.

Management reports and a three-month cashflow forecast are among some of the ways you can show your eligibility if you are audited.

Moving Alert Levels

As New Zealand moves down the Alert Levels, some businesses and employees may be able to return to work.

This does not change your obligations to your employees under employment law and your employment agreement with them.

Employees should be paid for all the hours they work, as per their employment agreement with you, and must be paid the minimum wage for the hours they physically work.

You can use the Wage Subsidy to help you do this.

Should you have any questions regarding the information you should hold to support your Wage Subsidy application or paying your employees during this time please do not hesitate to contact us.