National Party deems Wage Subsidy changes unfair

National Party deems Wage Subsidy changes unfair

Venkat Raman
Auckland, March 28, 2020

National MP and Finance Spokesperson Paul Goldsmith

National Party Finance Spokesperson Paul Goldsmith has slammed the latest changes to the Wage Subsidy as ‘deeply unfair,’ creating ‘large windfalls to part-time workers.’

He said that the changes set an ‘odd priority’ in a time of crisis.  

“The new rules say that employers must pay workers the full subsidy amount even if it is more than their salary. So, a part-timer such as a student doing four hours a week and earning $75, would now get the full part-time subsidy of $350 a week. Meanwhile someone with three part-time jobs, each worth $100 a week, could get three subsidies of $350 a week,” he said.

The real situation

This Reporter pointed out to him this may not be the case.

“Wage Subsidy is paid to each full-time and part-time worker (defined respectively as 20 hours or more and less than 20 hours a week) and the prescribed amount respectively of $585 and $350 is being paid into the accounts of employers who apply under the scheme. However, every employer must fill in the full name and IRD number of each employee in the application form. IRD will be able to identify double, triple of multiple payments,” we said.

Mr Goldsmith said that he was not aware of the actual procedures of payment but called upon Finance Minister Grant Robertson to clarify this issue.

Correcting the anomaly

There is however valid point in Mr Goldsmith’s criticism.

‘Less than 20 hours’ has not been properly quantified. Should a part-time worker who works for five hours or ten hours a week be entitled for the same pay of $350 per week?’

Mr Goldsmith said, “This surely can’t be the Government’s intent. It is hardly sensible that some people should gain massive pay-rises at a time when many workers are losing their jobs and many small business owners are losing their businesses,” he said.

Mr Goldsmith said that the government should rectify this anomaly by adding a requirement to the wage subsidy scheme that businesses should pay their employees the lower amount of the wage subsidy amount, or their normal wages. 

“It makes more sense to pay part-timers what they have been earning before the crisis, and then leave the surplus with employers so they have a better chance of paying their full-time workers somewhere near 80 per cent of their normal earnings. No system is perfect, but surely we can design a better scheme than this,” he said.

Finance Minister Grant Robertson

Finance Minister’s announcement

Mr Robertson announced the modifications at a joint press conference with Prime Minister Jacinda Ardern at 3 pm yesterday (March 27, 2020) stating that they would take effect in an hour (4 pm).

The wage subsidy is a Government payment to help employers pay wages. It does not change any other employment law obligations, meaning employees must be paid appropriately under their employment agreements for the hours they do if they work during the lockdown.

It will continue to be paid out in a lump sum covering the 12 weeks, meaning a $7,029.60 payment per full time worker.

As at 3 pm on March 27, 2020, Inland Revenue had paid $2.7 billion to 428,768 workers.

He said that employers should be passing on the full subsidy to workers, except in the case where the person’s normal income is less than the level of the subsidy.

Normal hours of pay

“We still want employers to use their best endeavours to pay employees 80% of their normal salaries.  Where this is not possible, we want the value of the subsidy to be passed on. But to be absolutely clear if a person’s income is normally less than the subsidy, they can be paid their normal salary. This is particularly an issue for part-time employees, some of whom normally earn less than the $350 per week. We urge employers to use normal hours in the period before COVID-19 to assess the amount to be paid,” he said.

Mr Robertson described the model as ‘high trust system’ to ensure that money reaches workers and businesses as soon as possible.

“We urge employers to use the money provided by the scheme for the purpose it was intended, to support the wages of their employees,” Mr Robertson said. 

Other highlights of changes

Businesses accessing the scheme must still undertake best endeavours to pay employees 80% of their pre-COVID income. Where that is not possible, in particular where a business has no activity whatsoever due to the shutdown and workers are not working any hours, they must pass on at least the whole value of the wage subsidy to each affected worker.

Businesses must undertake to keep employees in employment for the period of the subsidy.

The previous sick leave scheme has been folded into the new scheme to prevent double-dipping. The original sick leave scheme was designed when few people were in self-isolation, and it is no longer fit for purpose.

The financial cost of the scheme is expected to range between $8 billion and $12 billion depending on uptake by businesses.

Confirmation that the full subsidy amount must be paid to all workers can be found here. Confirmation that the subsidy has to be paid out for multiple part-time jobs can be found here under the ‘multiple applications’ section.

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