Date posted: 14/05/2020

Targeted Wage Subsidy just what businesses needs in “Extraordinary Budget”

Charlotte Evett CA says the targeted nature of the $3.2 billion extended Wage Subsidy Scheme announced in the 2020 Rebuilding Together Budget will be welcomed by struggling sectors such as tourism and hospitality where a move to level 2 will be far from ‘business as usual’.

In Brief

  • $50 billion COVID response and recovery fund established
  • Includes additional $3.2 billion targeted extension to the Wage Subsidy Scheme
  • Extended scheme should protect about 685,000 full-time jobs for an additional 8 weeks

The Government's Rebuilding Together budget was unapologetic in its focus on supporting New Zealand businesses to respond to, recover from and rebuild after COVID-19. The headline was the establishment of a $50billion COVID Response and Recovery Fund.

The Fund provides for a $3.2 billion targeted extension to the successful Wage Subsidy Scheme rolled out in the first wave of the COVID-19 economic response. The scheme is intended to support employers, including sole traders, who are still significantly impacted by COVID-19 after the Wage Subsidy ends in June.

The targeted scheme will be welcomed by struggling sectors such as tourism and hospitality where the transition to level 2 is far from a return to business as usual. In his speech, Robertson described these businesses as "really doing it tough".

The subsidy provides about 685,000 employees (FTEs) and their employers with additional time and space to plan for a future where operating alongside COVID-19 is the new normal. To qualify:

  • Businesses must have had, or expect to have, a revenue loss of at least 50% for the 30 days before they apply, compared to the nearest comparable period last year.
  • The scheme covers 8 weeks per employee from the date the application is submitted.
  • It will be paid as a lump sum at the same weekly rate as the Wage Subsidy.
  • Applicants must agree to meet certain obligations, including to:
    • pass the subsidy on to your employees
    • retain your employees for the duration of the subsidy
    • do their best to pay their employees at least 80% of their normal pay
    • take active steps to mitigate the impact of COVID-19 on their business.

The targeted nature of the scheme ensures that support is only received by businesses in need. This was not always the case with the original Wage Subsidy Scheme.

$20.2 billion of the Recovery Fund remains for future investment, and the Government is not ruling out further extensions to the Wage Subsidy Scheme if required in the future.

The extended scheme supports the Government's narrative that the focus will continue to be on investment and not austerity.

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