Treatment of the subsidy for granting benefits

If an employer or a self-employed person is getting a main benefit or extra help from the Ministry of Social Development, they can also apply for the COVID-19 Wage Subsidy Scheme Extension for themselves or their employees.

As the subsidy is paid to replace a loss of earnings, any employee or self-employed person receiving the COVID-19 Wage Subsidy Scheme Extension as well as other support from the Ministry must declare the subsidy as income and their benefit may be abated accordingly.

The COVID-19 Wage Subsidy Scheme Extension should be counted as income over an 8-week period from the date of application for both employees and self-employed people and should not be counted as a cash asset. Any additional income drawn from the business or any other source must also be included in their total income.

An employee or self-employed person should be paid the COVID-19 Wage Subsidy Scheme Extension in the same way their wage or salary is normally paid, eg weekly wages for 8 weeks. However, some employers receiving the subsidy may pass it on to their employees as a lump sum payment.

If the employee applies for assistance from the Ministry of Social Development, it is important to determine whether it is a lump sum payment of the COVID-19 Wage Subsidy Scheme Extension (on top of their regular wages during the subsidy period), or whether it represents a payment for other forms of leave owed to the client.

For example, an employer may pay out 4 weeks of the subsidy to a client to cover their redundancy notice period. This would not be considered a lump sum payment of the subsidy but would instead be pay in lieu of notice, which is a type of termination payment.

If the employee is made redundant or the employer has surplus funds remaining at the end of the subsidy period, the employer is required to return any remaining amount of the subsidy to the Ministry of Social Development. However, some employers may pass on the remaining funds directly to the employee. If the employer pays out the remainder of the subsidy (eg once the employee's notice period has ended and they are no longer employed), this would be considered a lump sum payment of the COVID-19 Wage Subsidy Scheme Extension.

If the payment is a lump sum payment of the subsidy, it may affect their eligibility for different types of assistance.

As the COVID-19 Wage Subsidy Scheme Extension is paid to replace a loss of earnings it should be charged as income for the benefit or extra help, this includes when the subsidy is paid out to the client as a lump sum payment.

When a client has received the subsidy as a lump sum payment, the Ministry of Social Development will consider the appropriate period that the payment is intended to represent and will charge it as income for that period.

For example, the lump sum payment can be divided by the client's average earnings (using the last 4 weeks if appropriate) to determine how many weeks of income the payment is intended to represent.

If the amount of the payment is less than the relevant income cut-out point, the client would qualify for assistance for the period the lump sum payment is charged for. If the amount is higher than the income cut out point, the client would not qualify until the period the payment represents has finished.

Note generally, a lump sum payment of the COVID-19 Wage Subsidy Scheme Extension (and the previous COVID-19 Wage Subsidy (modified) Scheme) is not considered a termination payment, so does not need to be considered when calculating what date their employment ceased. The lump sum would only be considered a termination payment when it is paid in lieu of notice.

Example 1

Nate's employer got the COVID-19 Wage Subsidy Scheme Extension on 10 June 2020, but 2 weeks later, decides to close the business and gives his employees notice that they will be made redundant. The business is closed on 10 July 2020, and Nate was paid for the redundancy notice period until that point. The employer decides to pay the balance of the subsidy of 4 weeks out to Nate as a lump sum.

Nate decides to apply for Jobseeker Support and approaches the Ministry of Social Development for assistance on 10 July 2020. Nate's employment ceased date is 10 July and his commencement date is 11 July. The initial stand-down period has been waived due to COVID-19.

As he has received a lump sum payment representing 4 weeks of income, Nate's first 4 weeks of assistance are abated accordingly. If the lump sum payment is higher than the income cut out point, Nate will not qualify for assistance until the period the payment represents has passed.

A person is not eligible to get the COVID-19 Income Relief Payment if they are currently receiving the COVID-19 Wage Subsidy Scheme Extension.

If an employee got the COVID-19 Wage Subsidy Scheme Extension as a lump sum payment from their employer, they would not be eligible to apply for the COVID-19 Income Relief Payment until the appropriate period that the lump sum payment applies to has passed.

Example 2

Pania's employer got the Wage Subsidy Scheme Extension for her on 15 June 2020, but soon gives her notice of redundancy as their business has been badly affected by COVID-19. Pania receives a lump sum payment from her employer in lieu of working out her 4 week notice period. She gets this payment on 22 June 2020.

Pania meets the other qualification criteria for the COVID-19 Income Relief Payment but is not eligible to apply for the scheme until the 4 week period that the lump sum Wage Subsidy payment represents has passed.

If an employer applied for the COVID-19 Wage Subsidy Scheme Extension, and then they have a change in circumstance within the 8-week period, they may not be entitled to keep the subsidy they got for an employee.