Processing the wage subsidy when you are working

To help clarify a few queries we have been getting around how to pay the wage subsidy when your business is operating, we referenced myHR for their answers to frequently asked questions around covid-19 support.

The main points to consider are:

  • Use the wage subsidy to help top up the usual wages you would pay your staff.
  • The government has stated that: “employers can use the wage subsidy to cover some or all of their employees’ wages, including paying for the upcoming public holidays.”
  • Therefore, you can use the wage subsidy money to cover the normal public holiday costs. 
  • You need to ensure your workers are still accruing holidays as usual.

We’re not HR specialists or employment lawyers, so we don’t have all the answers. Luckily, the Ministry for Business Innovation and Employment (MBIE) has been busy setting out all the information you need.   You can also reference myHR who cover a range of FAQ’s specifically around the wage subsidy:

Other commonly asked questions are:

  1. Can I make employees take annual leave during lockdown?

The short answer here is no. You can talk to your employees and try to come to an agreement about how their annual leave might be applied during lockdown, but you can’t make them take annual leave starting immediately. The only time you can make an employee take annual leave is when an agreement cannot be reached about when the annual leave will be taken – and you must give them at least 14 days’ notice. Get all the details here.

  1. Can I make employees take a pay cut during lockdown?

Again, the short answer is no. You can negotiate for a change in pay, hours or duties, but you need to reach an agreement with the employee. It must be set out in writing and the employee needs time to consider the new arrangement.

  1. Do I have to pay 80% of employees’ normal wages?

The government is encouraging businesses to make best endeavours to pay employees 80% of the normal wage, at least.

If that isn’t possible, you must pay them at least the full subsidy.

If you are proposing paying employees less than their normal wages, you will need to follow the correct consultation process and act in good faith.

A few accounting and tax points on the Wage Subsidy:

  • Keep records of how the wage subsidy has been allocated to staff wages. A good idea is a spreadsheet showing each staff member, how much you’ve received for them and how it has been spent.
  • You may not use all of the part time subsidy to pay a part time staff member if they are a casual or only work a few hours. Use the difference towards paying another staff member.
  • The IRD is auditing the wage subsidy. One area being reviewed is to ensure that shareholder employees, partners or sole traders are returning the subsidy in their income tax return to be taxed. Even if you haven’t drawn the amounts received under the wage subsidy, you must still return the amounts in your income tax return.
  • The IRD has published a guide IR1251 with lots of examples of how to account for the wage subsidy.


Remember, you can apply for the wage subsidy or other financial support if your business revenue is suffering under lockdown.

If you’re concerned about your business’s finances during this time, we can help you identify what help you might be entitled to and apply on your behalf, so give us a call – we’re here to help!


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