Wage Subsidy and your rights
The government has announced a wage subsidy for businesses in a downturn due to Covid-19. Since the move to level 4 practically all non-essential business will qualify.
The subsidy is to help businesses pay ordinary wages. The employer remains responsible for paying ordinary wages.
The employer’s obligations are outlined on this page:
Our view is that an employer must pay 100% of wages unless they genuinely cannot afford to. If this is the case, they either need to go through a restructure process to reduce hours (proposal and consultation) or seek a variation of your contract (which requires your agreement). The key thing is that it must be genuine and has to backed up by evidence. We have seen many employers just jump straight to paying 80% with no process and no evidence that it was necessary. Our view is that is unlawful.
The wage subsidy
There are two subsidy levels:
Part-time (less than 20 hours per week) = $350 contribution from the government
Full-time (20 or more hours per week) = $585.80 contribution from the government
If a worker works variable hours and is not sure if they are part-time or full-time, employers should use some kind of average (the MSD website suggests using the average weekly hours over the last 12 months). It is not based off the minimum guaranteed hours in your contract if you usually work more than those hours.
Does the worker get paid the full subsidy?
There are three different scenarios depending on the amount of pay you normally get and whether your employer is paying 80% of wages or 100%:
Examples using the full-time subsidy of $585 where the employer has said they will pay at least 80% of ordinary wages:
If 80% of the ordinary pay is more than $585 then they will be paid 80% of ordinary pay.
If 80% of the ordinary pay is less than $585 but 100% of the ordinary pay is more than $585 then they will be paid $585.
If 100% of the ordinary pay is less than $585 then they will be paid 100%.
The subsidy is taxed as it is paid as part of your ordinary wages and you should be paid at the same time you are normally paid each week.
Can the employer pay only 80% of wages?
Employers can receive the subsidy if they guarantee they will make “best endeavours” to pay their workers at least 80% of their wages. Best endeavours mean it must be paid unless there is a genuine reason that prevents it being paid.
To receive the subsidy the employer must also guarantee:
They will not make any changes to rates of pay, hours of work, leave entitlements or anything else in the workers contract.
Require the worker to take leave unlawfully (which it will be in most cases unless by agreement).
Paying someone only 80% of their wages will generally be a breach of contract unless there is a genuine reason why they can’t pay 100% (or if the employment agreement allows for a reduction in wages – which is unlikely).
The 80% figure quoted by the government is just to recognise that there will be some employers that may still not be able to pay 100% even with the subsidy. It is not a direction that employers only have to pay 80%. This is why it says at least 80%.
Reducing hours to less than 100%
There are two ways an employer could lawfully reduce hours to less than 100%: restructure or variation of employment agreement.
Employers may try to restructure down to 80% of hours (for example), but this would require a legitimate restructure proposal and consultation period. If an employer hasn’t gone through a legitimate restructure process then they should be paying 100%. A restructure proposal for financial reasons requires the employer to provide the worker with evidence of finances and the opportunity to comment on the proposal and suggest other alternatives.
An employer and worker can agree to a variation of the employment agreement. This could be a variation of anything including hours of work. The key thing here is that it must be by genuine agreement. If there is any sort of implied threat or ‘take it or leave it’ demand from the employer, then it would be an unlawful variation. There will be some instances where an employer is genuinely struggling and it is reasonable to agree to a variation of hours in order for the business to keep running.
Again, the official government information is very clear that workers should be paid their normal wages:
Generally, if an employment agreement has the worker's hours of work, then an employer can’t change them without the worker's agreement. If the employment agreement says that an employer can change the hours of work, the employer still has to act fairly and reasonably before they do.
Employers must be able to show that any proposals that could affect jobs must be for genuine business reasons. Employers should be able to produce evidence of the need for change, or the identified and stated benefit, if this is required in the process.
Employers and workers must discuss in good faith the implications of COVID-19 on their working arrangements.
Where changes to current working arrangements are proposed by an employer, there are specific good faith requirements that must be followed.
Employers and workers may be considering changes that involve workplaces closing temporarily or reductions in hours. These changes require additional good faith or other process arrangements.