COVID-19  Business Disruption

The COVID-19 pandemic has presented significant challenges for employers, with many facing disruptions to their businesses and the need to make difficult decisions about compensation for their employees. One of the key questions that employers have been grappling with is whether or not to pay reduced wages to employees who are unable to work their usual hours.

According to government advice, employees who are able to work their usual hours during the COVID-19 alert system should be paid their full wage as normal. However, if an employee can only work at a reduced capacity, the employer is entitled to ask them to accept a reduced income during the applicable period. In this instance, the employer should work with the employee to determine the appropriate number of reduced hours they will work per week and negotiate a reduced income based on these hours.

Another issue that employers have had to contend with is the question of whether to ask employees to use their annual leave during the lockdown period or at lower alert levels. Employers are entitled to ask employees to use their annual leave, but the usual employment laws apply in this regard. Employers should try to reach an agreement with their employees regarding the use of their annual leave and only require an employee to use their annual leave as a last resort, after giving at least 14 days’ written notice.

One of the most pressing concerns for employers during the pandemic has been the question of how to pay their employees if they are unable to afford to do so. If an employer is unable to continue paying its employees their full income, they should apply for the COVID-19 wage subsidy. This subsidy is available to all New Zealand businesses, including registered charities and incorporated societies, and is paid as a flat rate to businesses that have had, or are predicted to have, a 40% decline in revenue.

The subsidy payments are considered to be normal wage payments, and standard deductions such as PAYE, Kiwisaver, and ACC levies apply. Employers must make all efforts to pay their employees at least 80% of their wage in order to receive the subsidy, and any employer who receives the subsidy and can pay at least 80% but doesn’t can be ordered to repay all, or some, of the subsidy received.

Another important consideration for employers during the pandemic has been the question of how to handle employee redundancies. Employers are expected to apply for the wage subsidy before making employees redundant, and the usual process for redundancy must be followed. The process for making employees redundant is prescriptive, and the nature of each business is different, so the process will require careful consideration and implementation in each case.

In conclusion, the COVID-19 pandemic has presented significant challenges for employers, and decisions about compensation for employees have been particularly difficult. Employers must consider government advice, employment laws, and their duty to act in good faith when making decisions about paying reduced wages, asking employees to use their annual leave, and applying for the COVID-19 wage subsidy. When considering employee redundancies, employers must also comply with their duty to act in good faith by providing employees with access to relevant information and an opportunity to comment on the information before a decision is made.