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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.

This subsidy functions in a similar way as Accident Compensation Corporation (ACC) payments. 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 code for the subsidy payment.

For more information, see the NZ Government’s Employer COVID-19 wage subsidy and leave payment information sheet.

Example:

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.

Create a new pay code
  1. Go to the Maintenance command centre and click Maintain Pay Codes.
  2. Click New. The New Pay Code window appears.
  3. In the Pay Code Type field, choose Gross Earnings.
  4. Enter COVID-19 in the Pay Code and Description fields.
  5. If you're applying the COVID 19 subsidy to all employees, select Add this Pay Code to all current employees.
    Here's the pay code example:
  6. Click OK.
  7. In the Maintenance command centre, click Maintain Employees.
  8. Click Select Employee.
  9. Select an employee who'll receive the subsidy and click OK.
  10. Click the Pay Defaults/Totals tab.
  11. Click New.
  12. Select the COVID-19 pay code and click OK.
  13. Work out the Quantity (hours) to enter against the COVID-19 pay code. To do this, divide the employee's subsidy payment amount by their normal hourly rate.
    Let's use the example of the employee who normally earns $1000 for a 38-hour week. In this example, the subsidy is $585.80 which is divided by their hourly pay rate of $26.31579 to give a Quantity of 22.2604.

  14. Work out the employee's remaining hours to bring their pay up 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 $26.31579 per hour for 38 hours per week:
    • $26.31579 X 38 = $1000
    • 80% of $1000 = $800
    • $800 - $585.80 = $214.20
  15. Work out how many hours this amount represents, for example $214.20 divided by the hourly rate (214.20/26.31579 = 8.1396)
  16. In the Quantity field, enter these hours against the applicable pay code. This will be based on the employee's circumstances, so might be entered against ordinary time or annual leave (for example).
    Here's our example:
  17. Repeat from step 8 for all employees eligible for the COVID 19 subsidy.
  18. Click Close.
Process the pay
  1. Go to the Prepare Pays command centre and click Enter Pays.

  2. Select the employee.

  3. Check that the hours you've calculated and the rate for the COVID-19 pay code appear. See the previous procedure if you need to add or change these figures.

  4. Process the rest of the pay as normal.

 

 

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