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Alert Level 4: What do I do with my staff

 

Government Announcement 

As of Wednesday 11:59pm, all of New Zealand will move to Alert Level 4 in the Government's COVID-19 Alert System. 

Alert Level 4: What do I do with my staff? How do I pay them? 

If you operate an essential service then you may be able to continue to operate. The current list of essential services can be viewed at: https://covid19.govt.nz/government-actions/covid-19-alert-level/.

If you are not an essential service, then the first step is to try to mobilise as many of your team as possible to work from home. The health and safety of you and your team is clearly the number one priority at the moment, but productive work to generate cashflow for the business has got to be your second priority wherever possible. If staff can, and do, work from home then you are required to pay them normally.

For employers who have staff that cannot work from home, there are some options around how to pay them during the quarantine period. We note the following:

  1. You can ask employees to use their outstanding annual leave entitlements. If employees do not agree then you can direct them to take annual leave upon 14 days written notice.

  2. You could also ask employees to use their accrued annual leave and/or any long service leave, although you cannot force employees to take these types of leave.

  3. You could consider paying staff special leave (which is a leave payment over and above an employee’s usual entitlements). However, for many SME New Zealand businesses, this may not be possible without the help of the Wage Subsidy from the Government (see below).

  4. Wage Subsidy: The Government has put in place a Wage Subsidy to help support businesses impacted by COVID-19 (and which therefore face terminating workers or reducing their hours). The subsidy is payable on a per employee basis and is capped at $585.80 for people working 20 hours or more per week and $350 for people working less than 20 hours per week. Some further details are below:

    • To qualify for the Wage Subsidy you must show a minimum 30% drop in actual or predicted revenue over the period of any month between January 2020 and 9 June 2020 due to COVID-19, compared with the same month in the previous year.

    • The Wage Subsidy is paid as a lump sum, covering a 12 week period.

    • When applying, you will need to provide the Ministry of Social Development with the names and other details of the employees who you wish to be covered by the application. For those employees, a privacy fact sheet should be provided to ensure you do not breach any Privacy Laws, please see fact sheet:https://workandincome.govt.nz/documents/eligibility/emergencies/covid-19/employee-privacy-statement.pdf.

    • You will need to show you have taken active steps to mitigate the financial impact of COVID-19 on the business (e.g., working with a legal advisor / having a Business Continuity Plan / liaising with the bank and/or landlord).

    • Importantly, you will need to have used “best efforts” to retain the employees who you named in the subsidy application and to pay those employees at least 80% of their normal wage or salary during the 12 week period. 

      Example: an employer has 50 full-time employees and is committed to use its best efforts to retain all employees and pay them no less than 80% of their income for the subsidised period.The employer applies for the payment, meets all criteria, and receives $351,480 from the Government.This Subsidy is to be used for wages only.

For the full requirements and criteria around this Subsidy please see https://www.employment.govt.nz/leave-and-holidays/other-types-of-leave/coronavirus-workplace/wage-subsidy/.

  1. There has been uncertainty as to whether employers could put employees on unpaid leave as from 11.59pm Wednesday night. The situation we are in is unprecedented. There is an untested argument that you may not be required to pay your employees during the shut-down because it is the Government, and not the business, who has enforced the shut-down. However, this argument is untested and therefore carries risk - particularly in New Zealand’s climate where the Government’s 12.1 billion dollar package is primarily focused on businesses retaining and paying their staff. There is also potential reputational damage to you and your business if you put staff on unpaid leave, in spite of the Government’s clear request and support for New Zealand businesses to continue to pay employees during this period. Again, we are in untested waters.

  2. It may be that some employment agreements contain a specific and appropriately worded “force majeure” clause. Such a clause may enable you not to pay the employee during the shut-down period which is the result of the pandemic/situation being outside of your control. However, once again this may carry reputational risks, given the Government’s support package to help cover staff costs. It is also untested as far as we are aware within the context of a pandemic.


 

We understand there is a lot to consider and what works for one business may not work for another.

In terms of initial steps, we recommend that you liaise with your bank to ensure you have necessary stop-gap facilities available. Further, although the Government on Monday put a freeze on rental increases, there may be scope to negotiate a reduction on rent during the quarantine period. These steps will help assist the business to be able to respond during these uncertain times but will also count as being “active steps” should you apply for a Wage Subsidy.

In terms of the decisions around staff levels, the structure (and possible restructure) of the team as well as how we pay staff during this period (e.g., paying at 100% of normal wage vrs 80%), once again we wish to stress that we are in unchartered waters and recommend where possible doing a financial analysis first and getting advice to consider what option is right for you and your business. We strongly recommend these discussions are had prior to applying for any Wage Subsidy or taking any action with regards to redundancies or pay cuts.

Please get in touch to talk through your options and work out what plan will best suit your business needs. The Employment Team at Davenports Harbour are here and available to help.