If you receive the COVID-19 Wage Subsidy August 2021, you must use your best endeavours to pay the employee named in your application at least 80% of their usual wages.
If that isn't possible, you need to pay at least the subsidy rate (ie, full-time or part-time).
You cannot 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.
If your employee's usual wages are less than the subsidy, you must pay them their usual wages. Any difference should be used for the wages of other affected staff - the wage subsidy is designed to keep your employees connected to you.
You can get the subsidy for your casual employees for their usual hours, and you must continue to employ them for the subsidy period.
The COVID-19 Wage Subsidy August 2021 is to support you to pay two-weeks of wages for your employees from 20 August 2021.
GST:
You don't have to pay GST on the wage subsidy.
PAYE:
Your employee will need to pay tax on their wage subsidy payment as it’s paid to them as part of their normal wages. This means it's subject to the usual employer deductions, eg, PAYE, Student Loan, KiwiSaver, Child Support etc.
When calculating PAYE deductions, do not gross up the COVID-19 Wage Subsidy March 2021 component. PAYE is deducted from the subsidy (i.e. $585.80 less PAYE, etc).
You can agree with your employee the frequency at which the subsidy is paid. However, if the subsidy is being paid outside of their usual pay cycle this might have adverse tax implications for your employees such as:
- they may be taxed at the wrong rate
- it may impact Working for Families entitlements
Income tax:
For most businesses, the COVID-19 Wage Subsidy August 2021 is classified as "excluded income" for income tax purposes. This means that as a business you don't pay income tax on the COVID-19 Wage Subsidy August 2021 you receive. You don't get an income tax deduction for the wages you pay using the COVID-19 Wage Subsidy August 2021. You still need to make the usual PAYE deductions when you pass it onto your employee.
Self-employed:
If you're self-employed, you need to pay income tax on the COVID-19 Wage Subsidy August 2021 you receive, as it's a payment to replace a loss of earnings.
More information about the Wage Subsidy can be found here.
For advice on Employment Law, visit Employment New Zealand.
