UPDATE 27/03/2020 - The Government has made modifications to the wage subsidy scheme to ensure people don’t lose their jobs during the national lockdown.
For more information please see - Further steps to protect New Zealanders' jobs
This article has been updated to reflect the option of only paying employees the Wage Subsidy. Note the Leave Payment is now no longer available and has been folded into the Wage Subsidy scheme.
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.
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.
If the employee has agreed to use another paid leave type e.g. Annual Leave to top the pay up to the normal earnings, you cannot use the Wages Subsidy to pay the leave amount. In this case we recommend showing the Wage Subsidy payment on the payslip as described above using the new pay items and adding any leave payment as a separate earnings line on the pay.
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.
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.
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.