COVID-19 Economic Response
Economic Response Package
Finance Minister Grant Robertson today outlined a $12.1 billion package to support New Zealanders and their jobs from the global impact of COVID-19. The global economic impact of COVID-19 on New Zealand’s economy is going to be significant, so we are acting now to soften that impact.
The $12.1 billion package is worth 4% of GDP, a larger plan than that implemented in response to the Global Financial Crisis and comparatively larger than relief packages announced to date in Australia, the UK and the US.
- $500 million boost for health
- $8.7 billion in support for businesses and jobs
- $2.8 billion for income support and boosting consumer spending
Leave and Self Isolation Scheme
Overview: Workers and businesses have responsibilities to prevent the spread of COVID-19. The purpose of the COVID-19 leave and self-isolation scheme is to support workers financially to self-isolate, or while ill with COVID-19, where this is required so that all businesses and workers can do the right thing.
The COVID-19 leave payment scheme will provide support (through employers/to sole traders and the self-employed) for those people unable to work who are in self-isolation, are sick with COVID-19, or caring for others with COVID-19. The payments will be $585.80 per week for full time and $350 per week for part time workers.
Payments able to be applied for and received from: Employers will apply for the leave on behalf of any employee who is self-isolating or sick. Payments can be backdated to 17 March, 2020.
Further details: Affected full time workers (those who work more than 20 hours per week) will receive $585.80 per week, and part time workers (20 hours or less) $350 per week – the same amount as under the wage subsidy scheme.
The payment is made by MSD to employers, who will then be required to pass it on to the affected employee. MSD will pay on a fortnightly basis once it receives an application.
Other key parameters of the scheme are:
- Eligibility is open to all employees legally working in New Zealand (through their employers), the self-employed, and contractors.
- Eligibility will only be for workers who are not able to work from home.
- The entitlement is for:
- Those who self-isolate in accordance with public health guidance and who register with Healthline;
- Those who are ill with COVID-19;
- Those who cannot work because they are caring for a dependent in either of these circumstances.
- Those who leave New Zealand to travel overseas from 16 March, 2020 will not be eligible for this payment for self-isolation on their return.
Workers taking sick leave before 17 March, 2020 can only access the scheme for time spent on sick leave from 17 March, 2020. It will not be accessible for those who have travelled overseas since 16 March, 2020.
John Smith, a full-time plumber working for EasyFlow Pipes Ltd, arrived back from a three-week holiday in Sydney on Tuesday, March 17. Despite feeling well, the Government’s self-isolation restrictions meant John had to self-isolate for 14 days.
John had already used his mandatory sick days earlier this year and his employer was not able to cover his wage for 14 days while he was off work. His employer applied to MSD for the sick leave support for John and received a lump sum payment of $1,171.60 to pass on to John for the two weeks he is in self isolation.
Wage subsidy scheme
Overview: Wage subsidies will be available for all employers that are significantly impacted by COVID-19 and are struggling to retain employees as a result. The scheme will be open to sole traders and the self-employed as well as firms.
Amount of support: $585.80 per week for a full time employee (20 hrs or more) or $350.00 per week for a part time employee (less than 20 hrs). The payment will be made as a lump sum for a period covering 12 weeks. This means employers will receive a payment of $7,029.60 for a full time employee and $4,200 for a part time employee. The maximum amount any one employer can receive is $150,000.
Scale of disruption: Employers must have suffered, or are projected to suffer at least a 30% decline in revenue compared to last year for any month between January 2020 and the end of the scheme in June 2020. Applications can also be made on the basis of forecast revenue loss within the period of the scheme.
Undertakings from the Employer: Some of the key undertakings are:
- Employers will need to declare that, on their best endeavours, they will continue to employ the affected employees at a minimum of 80% of their income for the duration of the subsidy period. This is the equivalent of keeping people working 4 out of 5 days of the week.
- Employers must also have taken active steps to mitigate the impact of COVID-19 (eg. engaged with their bank/financial advisor) and sign a declaration form to that effect.
Employers can apply to MSD for the subsidy: Employers can apply from today. Applications can be made through an online portal on the Work and Income website www.workandincome.govt.nz. MSD will aim to make first payments no later than five working days from when applications are received.
Duration of the scheme: Applications can be made from today (17 March) for the next 12 weeks
Estimated total cost: Approximately $5.1 billion
Example 1: Forestry contracting gang use wage subsidy
A six person forestry contracting gang in Gisborne has been severely affected by the COVID-19 impact on logging exports and their revenue is down 90 per cent. Their Employer applies for the targeted wage subsidy. The Employer receives $42,117 as a lump sum payment and is able to provide just over $7,000 gross (before tax) to each of the employees across the next 12 weeks.
Example 2: Tourism operator
A tourism operator in Queenstown, with 20 permanent part time employees and 40 casuals, is affected by the decrease in international visitors. Their income is down 50% from the same period last year, forward bookings over the next two months are down 30%, and the casual workforce has already been released.
The Employer receives $84,000 as a lump sum, and uses the subsidy to keep paying all part time staff their existing (current) income over the next 12 weeks.