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What you need to know about the Covid-19 Essential Workers Leave Support Scheme

Contributed by:

Kathryn McKinney
Partner

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Kathryn McKinney


On 6 April 2020, the New Zealand Government announced a new leave support scheme for employees of essential businesses.

The Essential Workers Leave Support Scheme is part of the wider relief package proposed by the Government to address the economic damage caused by Covid-19.

The new Scheme fills the gap in financial support left open when the original leave support scheme was closed to new applications on 27 March 2020. However, various adjustments have been made. Leave support payments are now only available to essential businesses, and these are businesses essential to the provision of life in New Zealand. The purpose is to enable essential businesses to pay their employees that cannot come to work because Ministry of Health Guidelines recommend that they stay at home, and those employees cannot work from home.

Who can employers apply for?

  • Essential businesses can claim the Scheme for employees who:Are classified as ‘higher risk’ by the Ministry of Health (i.e. those over 70 years of age, people with medical conditions (Chronic Obstructive Pulmonary Disease, heart conditions, high blood pressure, kidney problems and diabetes), people undergoing treatment for cancer and blood conditions, pregnant women, and people without easy access to healthcare);
  • Have come into contact with someone who has Covid-19, and are required to self-isolate for a minimum of fourteen days;
  • Have tested positive for Covid-19, or have been declared a ‘probable’ Covid-19 case;
  • Have household members who are at a higher risk if they contract Covid-19 and have therefore been directed to remain isolated.

Are all essential businesses eligible?

To qualify for the new Scheme, essential businesses will need to be able to show that they are not able to financially support their eligible employees. At a minimum, this means that an essential business has either:

  • Experienced a 30% decline in actual or projected revenue over the period of one month in 2020, when compared with any month in the twelve months preceding January 2020; or
  • Had its ability to support the employees negatively impacted by the Ministry of Health Guidelines on Covid-19.

Please note that employers are not able apply for both the wage subsidy and leave support for the same employee at the same time, with respect to the same work.

Financial support available

Once an application has been approved by the Ministry of Social Development, the employer will be entitled to receive the relevant financial support. The amount offered under this Scheme mirrors the financial support available for employers under the Wage Subsidy Scheme. The rate of pay is $585.80 for people who were working 20 hours or more per week (full-time rate) or $350.00 for people who were working less than 20 hours per week (part-time rate).

The Essential Workers Leave Support Scheme will be paid as a lump sum to cover four weeks of employment for the specific employee. Employers may reapply in the fourth week of the previous entitlement period, and there is currently no limit on the amount of times that an employer is able to reapply.

If the situation changes

If an employer is receiving leave support, they must also make their best effort to pay their employee at least 0.8 of their FTE but no less than the support payment amount. An employer must also attempt to retain their employee for the period of time that the leave support payment applies to.

We know that in the current circumstances a business cannot always be certain on its future. If anything should happen that impinges on the eligibility of an essential business to receive the leave support scheme, then the business has five working days to notify the Ministry of Social Development. In the instance of redundancy, please see our redundancy article and how it relates to the leave support scheme, here

Other key points

  1. If an employee’s hours fluctuate, their rate of pay is to be determined by calculating the average hours worked each week over the last twelve months (or, the period of time that the employee has been employed if it is less than twelve months).
  2. GST does not need to be paid on the support payment but it will be subject to the usual deductions (e.g. PAYE, KiwiSaver, Student Loan, Child Support, etc).

If you, or your organisation, have concerns or questions regarding the Essential Workers Leave Support Scheme, please contact one of our employment experts.

Disclaimer: The material contained in this document is provided only as an information source, and is correct at the time of writing. The material is a generalised summary of the key issues and is not intended as a substitute for specific professional advice and should not be relied on for such a purpose. Independent professional advice should be obtained before relying on any aspect of this material and we would be happy to assist in this regard.

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