An update with Employer FAQs relevant to disruption caused by COVID-19
What does it mean to use my ‘best endeavours’ to pay my employees at least 80% of their ordinary wages or salary?
- You are obliged to try your best to ensure that your employees are receiving at least 80% of their pre-COVID-19 remuneration, and to act in good faith in doing so. We would suggest documenting your ‘best endeavours’, in the event this is questioned at a later date.
Notwithstanding my ‘best endeavours’, I cannot afford to pay my employees’ 80% of their ordinary wages or salary. What kind of agreement should I put in place for my employees to just pay them the subsidy amount?
- Your obligations under employment law haven’t changed, therefore you need to consult in good faith with your employees for whom you are unable to pay their ordinary wages or salary. It should be confirmed in writing, either by a written variation of employment (which may have an end date, especially if you anticipate operations returning to ‘normal’ at the conclusion of the wage subsidy period), a letter or by email, that the employee’s ordinary wages or salary will be reduced (for example, the employee may only receive 65% of their ordinary wages or salary, or even just the amount of the subsidy that you received on their behalf). When consulting with your employees, it may be helpful to explain the reasons behind the decision (for example, it will enable the business to retain all of its employees).
I want to change my employees’ terms of employment, either by reducing their hours and/or their remuneration. How do I go about doing this?
- As mentioned above, your obligations under employment law remain. Therefore you must consult with your employees and explain your reasons for doing so (and providing further information, if requested by employees). Following a good faith consultation process, you may then confirm the decision in writing (either by a written variation to the employee’s terms of employment, or by letter/email). It is important to keep a written record of this. If you applied for the wage subsidy you would have declared that you “will not make any changes to your obligations under any employment agreement, including to rates of pay, hours of work and leave entitlements, without the written agreement of the relevant employee”. It may be worth discussing with your employee, however, that there is possibility that a redundancy situation may arise if the employee does not agree to a change in remuneration if the business is unable to sustain the ordinary remuneration of that employee’s role.
Can I ask my staff to use their annual leave to top up the subsidy to 80% (or 100%) of their usual wage?
- It is important to note the two types of annual leave: entitled, which is earned after each year of service, and accrued, which calculates leave as a year of service progresses, which can be used by agreement before the year of service is completed or if the employment relationship is terminated before the end of that year of service. An employer must consult with an employee in good faith if the employer is considering requiring the employee to use up annual leave and, failing agreement, only then can the employer require an employee to use up their annual leave entitlement, which must be on 14 days’ notice.
What if the wage subsidy is more than what an employee earns in a week do I have to give it all to the employee?
- No you are only obliged to pass onto the employee the portion that equates to their ordinary weekly pay if it is less than the subsidy and the balance can be used for other employee wages.
Does my employee continue to accrue entitlements such as annual leave while on the wage subsidy:
- Yes their employment obligations and entitlements continue as their employment with you is continuous regardless of Level 4 and/or the wage subsidy.
Am I required to pay my employee the new minimum wage of $20.00?
- While New Zealand is at COVID-19 Alert Level 4, businesses must still pay workers at least the minimum wage for each hour worked.
What should I do if my business cannot afford the increase?
- If an employer cannot action the increase to minimum wage immediately due to COVID-19, the payment to the employee should be backdated as soon as possible. If you are in this situation, we suggest discussing this openly and honestly with your employees.
If we don’t require the entire subsidy payment, are we are obliged to pay it back, or could we use the subsidy to top our staff up to 80% of their ordinary remuneration (i.e. pool funding amongst employees)?
- Yes, if the subsidy is not being passed onto employees in its entirety (for example, an employee’s ordinary remuneration is less than the subsidy, or an employee resigns during the subsidy period), then any leftover subsidy can go towards the wages of another employee.
What happens if I have work for the employee to do at home but they refuse to do it but still want to be paid:
- If you have work for an employee to do, and are offering flexible hours (around demands of children and so on) in which they can do the work, and the employee refuses (without valid or good reason) to do that work they cannot expect to be paid. We advise that you speak with your employees about this and explain the situation ask them to reconsider their position before making the decision not to pay them.