Good Friday, Easter Monday and Anzac Day
We are still in lockdown for this coming Easter public holidays – although the situation for Anzac Day is unclear at the date of writing (9 April). Here are some pointers for paying your staff when statutory holidays fall during the lockdown:
- Normal employment law continues to apply during the lockdown – including holiday pay entitlements. Employees are entitled to a paid day off on a public holiday if they otherwise would have worked that day.
- If your employee works (say, from home) on Good Friday, Easter Monday or Anzac Day, they must be paid at least time-and-a-half. If the public holiday falls on a day they would normally work, they are also entitled to an alternative paid holiday. This is a normal entitlement – and neither the lock down nor the wage subsidy changes this.
- If your employee is contracted to work variable hours and days, just apply the same rules you would have used for paying public holidays prior to the lockdown.
- Typically, any change in agreed hours during the lockdown is temporary. If there has been no permanent change to the employment agreement, holiday entitlements will be based on the normal hours in the employment agreement. If the employment agreement has been formally amended, you can pay public holiday entitlements based on the new agreed hours.
- If you have agreed to pay your employee 80% of their wages by specifically reducing their work days from five to four – and that means either Good Friday or Easter Monday would no longer be a work days for them, they would not be entitled to be paid for that day.
Increase in Minimum Wage
On 1 April, the adult minimum wage increased to $18.90 per hour. During the subsidy period, if an employee is not actually working, employers can choose to pay a minimum of 80% of an employee’s pre-COVID-19 income despite the increase in the minimum wage. You must of course pay your employee at the new minimum wage when they do start working again.
Wage Subsidy
By now most businesses have applied for the wage subsidy available to employers affected by COVID-19. The subsidy is $7,029.60 for a full time employee and $4,200 for a part time employee. If you haven’t already done so, this is easy and the links are right here – Employers apply using this form >>> and self employed (no employees) apply using this form >>>
- The business must experience a 30% decline in revenue or predicted revenue related to COVID-19 on a month to month basis between January and 9 June compared with last year. The business must also take active steps to mitigate the financial impact of COVID-19.
- The business must make best efforts to retain the employees the subsidy was paid for – and use best endeavours to pay them a minimum of 80% of their normal wage or salary.
- The subsidies are being paid quickly under a high trust model – but audits will almost certainly follow later once the dust settles.
- Details of subsidies paid will be made public – and will be searchable online by company or entity name disclosing the number of employees for whom a subsidy has been paid and the total amount of subsidy payment received.
- Any subsidy received in relation to a particular employee must be passed on to that employee as part of their salary or wages.
- Employers and employees can agree to use annual leave to cover this period of isolation.
Tax Treatment of Wage Subsidy
- The wage subsidy is not subject to income tax or GST in the hands of the employer. There was some confusion around this in the first week the wage subsidy was announced, as subsidies are generally subject to GST – but this was clarified in a law change on 23 March. So don’t include the wage subsidy ‘income’ in your GST return. We will deal with it appropriately in your financial statements and tax returns.
- When you pass the wage subsidy on to your employees, this payment is not tax deductible to the employer. So from a tax deduction point of view, it is not part of your wage and salary cost.
- From the employee’s point of view, any wage subsidy passed on to them is part of their normal taxable income – so the usual deductions must be made such as PAYE, ACC Levies, KiwiSaver, student loan repayments and child support.
- If your team are not working during the lockdown – and usually work on hourly rates and you’re struggling to make this work in your payroll system, just treat the payment as a taxable allowance and your payroll system should calculate the deductions correctly without you having to manufacture some false ‘hours worked’ to make the payment fit.
- Smart Payroll have put together a useful page here >>> to help manage wage subsidies if you’re using their service.