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Question :
Payroll – tricky question

Hey all
Is anyone here a payroll expert- I’ve got a tricky question. I went through a redundancy process prior to Covid “happening”. People were given their two weeks notice on 19th March, and went on garden leave for 2 weeks… But, on 23rd of March we closed due to Covid. My other employees will be getting the subsidy payment for the week ending 29th March. I didn’t apply for subsidy for the redundant employees, but will they still get their normal pay? or can I pay them the same as the rest of the staff?

Confusing!
Thanks

Question submitted 31/03/20 @ 04:07pm
Industry: Funding & Finance
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  • Hi Sacha

    This is an awkward situation not envisaged by the wage subsidy scheme, which was really introduced to save jobs.

    I suppose one of the key questions to answer was did you make the redundancies in light of the prospective closedown not knowing what the govt. might do to support business. If the answer to that question is yes, then I think there is justification by consent to terminate the redundancy, employee willing, but before doing so, I would suggest approaching WINZ for an answer before discussing with employees.

    In theory, the employees will be entitled to claim income support etc, so their short term financial position might be off-set by welfare / income support – although cashflow might be impaired.

    I presume you paid the 2 week notice you referred to already otherwise you are still clearly obliged to pay.

    Hi Sacha,

    I’m reading your question a little differently, so apologies if I’ve misinterpreted it. You need to continue to treat them as employees until their final day (2 April 2020) at which point their redundancy payments, if any, would be paid in their final pay).
    While conceivably, you could have applied for a subsidy for them covering that period, it doesn’t appear that the subsidy is in fact intended for this situation, as the Work & Income guidance talks about the subsidy being “designed to keep your employees connected to you”. If an employer is making them redundant, the steer I’ve been given is that we don’t believe the subsidy would apply, so I believe they would get their full normal wages for those two weeks.
    The guidance can be found here: https://www.workandincome.govt.nz/products/a-z-benefits/covid-19-support.html#null
    Hope that helps!

    Thanks to both for your replies, I appreciate the information and feedback.
    I think I’ll need to discuss with WINZ, as there’s a few complicating factors in this!

    Thanks

    I would probably take the approach that given the redundancy was initiated prior to the closing of the business due to COVID that the employer in good faith would pay the employee their entitlements when the redundancy was initiated. I wouldn’t apply for the subsidy for those people as they are no longer employees and therefore they shouldn’t have their pay reduced because of events that happened after they were given notice….

    Yes that’s the conclusion I’ve come to, after discussing with Winz also. As the process was already underway, they’re to receive their normal pay.

    Thanks
    Sacha

    Great – good to know you have it resolved

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