Important: Please note this article relates to previous COVID wage subsidy periods. The August 2021 subsidy rates have been updated to $600 for a full-time employee, and $359 for a part-time employee. You will need to update the pay rates on the FlexiTime Wage Subsidy pay codes before you use them for the August 2021 lockdown.
The New Zealand Government has announced wage and leave subsidies for employers and employees affected by COVID-19. Please see the MBIE and Work and Income websites for additional information 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 codes in FlexiTime for COVID19 Wage Subsidy (Part Time) and COVID 19 Wage Subsidy (Full Time). These pay codes are set up as Taxable Allowances and can be added to employees' pay to replace other earnings.
The new pay codes are a fixed weekly amount of $585.80 for a full time worker and $350.00 for a part time worker. If your pay period is more than weekly then you should increase the Quantity in the pay to reflect the number of weeks being paid.
If the ordinary weekly wages for the employee is below the subsidy amount then adjust the Rate to be the ordinary weekly earnings for this employee. Any surplus subsidy can be used to help pay other staff.
If your FlexiTime account is linked to Xero, please go to Setup > Pay Codes and edit those new pay codes and set the Xero Account Code.
If the employee is accruing annual leave based on their Hours Worked, you should change their Leave Accrual method to Normal Hours if you are including a fixed amount in their pay.
Topping up the Wage Subsidy
If you are receiving the Wage Subsidy and topping up to the normal earnings or a reduced percentage of normal earnings (e.g. 80%) 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 time sheets please see below for how to set default hours for the employee as opposed to using time sheets.
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 here: WINZ - COVID-19 FAQs.
Annual Leave Balances & Rates
Employees will continue to accrue Annual Leave whilst receiving the government wage subsidy. We recommend changing their Accrue Leave Based On setting on the Leave tab to Normal Hours per week and entering their weekly hours during the lockdown period.
If the employee has agreed 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.
While your employees aren't working there's no need to record time sheets 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 time sheets during this lockdown period.
Edit each employee record and select their Default Pay tab. Select Ordinary Time from the dropdown list and click Add, then edit the Ordinary Time line and set the Default Quantity to the number of hours that you need to pay them.
Leave the Default Rate set to $0 so that they'll be paid their normal hourly rate.
Make sure that you also update their Days per Week on their Employment tab, so FlexiTime will record the number of days they have been paid. This information is used to calculate their average daily pay for sick leave and public holidays.
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, the Public Holiday should be processed in the same way it would usually. For more details on Public Holiday processing in FlexiTime, 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 the public holiday as you would normally.
Please note, if FlexiTime 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.
You can run both the Pay Summary Report and Pay Leave Report before you finalise the pay to check how the public holiday has been processed.
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 codes for COVID19 Wages Subsidy you could set the Xero account associated with these pay codes 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.
For more information please see the IRD web page here: COVID19 Wage Subsidy.
Additional Guidance and FAQ's - Dundas Street Employment Lawyers
The team at Dundas Street Employment Lawyers have put together some documentation covering FAQs and general guidance on handling various employment situations around the government wage subsidy.
These documents can be downloaded through the links below: