Important: Please note the wage subsidy was available at intervals throughout 2020 and 2021, but has now been replaced by other government support schemes. See this article for more information: COVID-19 Frequently Asked Questions
The New Zealand Government has announced a Wage Subsidy for employers and employees affected by COVID-19. Please see the MBIE and Work and Income websites for official information and guidance regarding these subsidies:
Businesses accessing the Wage Subsidy scheme must -
- use your best endeavours to pay at least 80 per cent of each named employee’s ordinary wages or salary; and
- pay at least the full amount of the subsidy to the employee; but
- where the ordinary wages or salary of an employee named in your application was lawfully below the amount of the subsidy before the impact of COVID-19, pay the employee that amount.
Paying only the Wage Subsidy
If you are only paying your employees the Wage Subsidy we have created new pay items in PayHero for COVID19 Wage Subsidy (Part Time) and COVID 19 Wage Subsidy (Full Time). These pay items are set up as Taxable Allowances and can be added to employees' pay to replace other earnings.
The new pay items are a fixed weekly amount of $600 for a full time worker and $359 for a part time worker. If your pay period isn't weekly, then increase the quantity of the subsidy pay line to reflect the number of weeks being paid.
Payment of Normal Earnings or Subsidy Top Ups
If you are receiving the Wage Subsidy and;
- Topping up payment to the employee's normal earnings, or
- Paying a reduced percentage of normal earnings (e.g. 80%), or
- If the wage subsidy is more than the employee's normal earnings
We recommend continuing to pay the employee as you normally would without detailing the Wage Subsidy on the employee payslip.
There is no requirement to detail the Wage Subsidy on the payslip, if necessary you could add a payslip note explaining that the pay has financial assistance included.
In this case the earnings would be the employee's regular earnings e.g. Salary or Ordinary Time. If your normal earnings is derived from timesheets please see below for how to set default hours for the employee as opposed to using timesheets.
Tax & Deductions
Tax, KiwiSaver and Student Loan deductions will continue to be calculated and applied as they would usually whilst receiving the Wage Subsidy.
See the Work & Income website for official guidance regarding Tax under the 'GST and Tax' section here: Paying your staff the COVID-19 Wage Subsidy August 2021.
'Work Days' for employees with no Work Pattern
Days per week, like the 'normal weekly pay' amount itself, needs to be agreed upon between the employer and employee. We suggest looking at the Holiday Leave Available pop-up from the employee's Leave tab to see how many days per week there are in the current review period as a guide.
If you choose to set the Days Worked to less than this amount, it will increase the employee's average daily rate, but will decrease the employee's annual leave balance of leave due in days. For this reason we recommend setting the days worked to what would normally be worked by the employee.
While your employees aren't working there's no need to record timesheets for them. If you have come to an agreement on a fixed number of hours you will pay them each pay period, you can instead add the relevant earnings pay item to their Default Pay tab, for example Ordinary Time.
This will mean employees will automatically have the specified number of hours in the default pay tab added into each pay and you won't need to record any timesheets during this lockdown period.
Please see our support article: Default Pay for more details.
Annual Leave Balances & Rates
Employees will continue to become entitled to Annual Leave whilst receiving the government wage subsidy. This means if they cross their employment anniversary, 4 weeks will be added to their Current Leave Due balance. For more details on Annual Leave in PayHero, please see: How Annual Leave and Holiday Pay Work.
If the employee has agreed to some form of paid leave with the employer, the schemes can be used to cover some or all of that cost. Employers must still meet all of their obligations under employment law in agreeing, and gaining agreement from the employee, to use that leave.
COVID-19 Wage Subsidy & Public Holidays
Working from Home or Essential Services.
If your staff are continuing to work from home or are continuing to work as an essential service, Public Holidays should be processed in the same way they would usually. For more details on Public Holiday processing in PayHero, please see our following support articles:
Unable to Work - Receiving Normal Weekly Wages
If staff are unable to work but are continuing to receive their normal weekly wages you can process any public holidays as you would normally.
Please note, if PayHero is unable to determine the employee’s Relevant Daily Pay from their work pattern, the Average Daily Rate will be used instead which could change the payment amount. It’s important to ensure the overall earnings in the pay do continue to reflect the employee’s normal weekly wages. These rates can be adjusted on the Public Holiday pay line if required.
Accounting for Wage Subsidy
The Wage Subsidy is paid as the employee's normal wages. All deductions (such as PAYE, KiwiSaver and child support) should be made as normal.
The Wage Subsidy income into the business is excluded income and is GST exempt so you don't have to pay tax on the subsidy itself.
Payment of the Wage Subsidy to employees is non-deductible, this means that the portion of wages that is funded from the Wage Subsidy should not be included as a Salary and Wages expense in your accounting system.
If you are using the new pay items for COVID19 Wages Subsidy you could set the Account Code associated with these pay items to be a non-deductible expense account.
If you are topping up the Wages Subsidy and not showing it on payslips then we recommend you ask your accountant to make an adjustment of the non-deductible portion of Salary and Wages.
Determining Normal Wage or Salary
You may need to identify each employee's normal wage or salary when applying for the wage subsidy. While this may be obvious for salaried or very regular employees, there isn't a clear definition of exactly how to calculate 'normal income' for more variable employees.
The Leave Liability Report in PayHero is a quick and easy way find averages for your employees. This report contains the following two rates:
- Average Weekly Rate - The employee's average weekly rate, calculated over the 52 weeks prior.
- Ordinary Weekly Rate - The employee's ordinary weekly rate, calculated over the 4 weeks prior.
In many cases, the Ordinary Weekly Rate is more likely to give an accurate representation of how much your employees are currently earning, rather than taking historical work patterns that may no longer be relevant into account. Alternatively, some employers like to use the higher of the two, which is what would happen when paying employees Annual Leave.
In either case, make sure you're following guidance from MBIE when choosing which figure to use. The 'Normal income' or 'normal wage or salary' section of this article from MBIE contains a lot of great tips for ensuring you follow best practices in determining this figure for your employees.