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New Zealand only
This topic is based on information provided by Work and Income, so check their website to keep up to date, find frequently asked questions and other information.
If the steps below don't suit your business needs, check with your accounting advisor.
The New Zealand Government has announced a wage subsidy if you face laying off staff or reducing their hours because of COVID-19. To see if your business qualifies for the subsidy, check the Work and Income website.
Employers are expected to make their best efforts to retain employees and pay them a minimum of 80% of their normal income for the subsidised period.
Your employees 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 deductions, like PAYE, Student Loan, KiwiSaver and ACC.
The government will pay the wage subsidy as a lump sum covering 12 weeks per employee.
The amounts of the subsidy are:
- $585.80 (for employees who work 20+ hours), or
- $350.00 (for employees who work less than 20 hours)
This is a Gross amount and supplemented with the employee’s wages up to 80% of what they would normally earn.
To keep it clear for your employee’s and yourselves, we recommend setting up a new pay item for the subsidy payment.
An employee normally earns $1000 for a 38-hour week.
Under the COVID-19 wage subsidy, the employer will now be required to pay their employee $800 per week, which is 80% of their normal wage.
Of the $800 payment, $585.80 will consist of the government subsidy.
To track this in MYOB Essentials, set up a COVID-19 pay item and assign it to your employees.
OK, let's step you through it.
To create a COIVD-19 pay item
- Go to the Payroll menu and choose Pay items. The Pay items page appears.
Click Create earning. The Create new earning window appears.
For the earning Type, choose Standard earning.
For the Name, enter "COVID-19".
If you'd like a different, more personalised, name to show on payslips for this earning, enter a Name for payslip, such as "Self Isolation".
For the Rate, choose Per hour.
Leave the Amount as 0.00.
Choose Taxable for the Tax.
Here's our example:
- When you're done, you can assign pay items to your employees.
- From the Payroll menu, choose Employees.
- Click the employee's name.
- Click the Pay items - earnings & deductions tab. The top section of the page is for Earnings.
- Click the dropdown arrow next to the Add earning... field.
Choose the COVID-19 pay item. The pay item is assigned to the employee.
- Repeat from step 2 to assign the pay item to another employee.
When you record an employee's pay, you can enter the subsidy amount against the COVID-19 pay item. You might also need to pay a top up to ensure they receive 80% of their normal wage.
- From the Payroll menu, choose Enter pay.
- Choose the pay dates, select the employees you're paying, then click Start pay run.
- For each employee:
- Enter the employee's normal hourly rate against the Rate $ for the COVID-19 pay item.
- Work out the Quantity (hours) to enter against the COVID-19 pay item. To do this, divide the employee's subsidy payment amount by their normal hourly rate.
In this example, the subsidy is $585.80 which is divided by $35 to give a Quantity of 16.7371
- If required, work out the employee's remaining hours to top up their pay to 80% of their normal earnings. To do this, work out what 80% of the employee's normal gross pay is, and subtract the COVID-19 subsidy amount.
For example, if the employee normally earns $35 per hour for 40 hours per week:
- $35 X 40 = $1400
- 80% of $1400 = $1120
- $1120 - $585.80 = $534.20
- Work out how many hours this amount represents, for example $534.20 divided by the hourly rate (534.20/35 = 15.2628)
- Enter these top up hours against the applicable pay or leave item. Based on your business needs, this might be entered against normal hours or annual leave (for example). If you wanted to track the top up amounts separately, you could also set up a pay item for the top up amount following the steps above you used to create the subsidy pay item.
- Repeat for each employee and finalise the pays as normal.
When you're no longer paying an employee the subsidy, you can unlink the COVID-19 pay item from them. This will stop it showing on the employee's pay. Learn how to unlink a pay item from an employee.
Recording the government subsidy payments
To record the subsidy lump sum amount you receive from the government, set up an account to track it and allocate the amount to that account by recording a receive money transaction. Talk to your accounting advisor about the best way to handle these payments for your business.
How do I calculate 80% of the wage of an employee who works variable hours?
If an employee works varying hours, you can estimate the 80% figure.
For example, if they worked:
- varied hours all the time or are casuals, average their last 52 weeks of earnings, then take 80% of this amount
- regular overtime, look at their last 4 weeks’ pay and calculate 80% of that.
If an employee worked only part of the year, average the hours worked during their total employment period. This will determine whether they are eligible for the greater than 20 hours or less than 20 hours subsidy rate.
Note that employees are only eligible for the subsidy if they are employed at the time the employer applies for it and would have been expected to work during the time the employer will receive the wage subsidy. See the Work and Income website for more information.