The Government has recently announced a change to the eligibility criteria with regard to the extension of the Wage Subsidy Scheme.
On 14 May 2020 Finance Minister Grant Robertson announced additional funding of up to $3.2 billion for a targeted extension of the Wage Subsidy Scheme (WSSE). The extension provides for a further 8 weeks of payments after the existing scheme ends on 9 June 2020.
Although the WSSE initiative was welcomed, the feedback from the business community was that the required revenue threshold of at least 50 percent revenue loss in the 30 day period immediately prior to the application for the WSSE was set too high.
Subsequently on 5 June, Grant Robertson announced the Government’s decision to drop the required revenue threshold for the WSSE from 50 per cent to 40 per cent for any consecutive 30-day period. This period needs to be in the 40 days immediately before you apply for the wage subsidy extension (but no earlier than 10 May 2020), versus the nearest comparable period for the prior year.
Applications for the extension will be open from 10 June 2020 until 1 September 2020.
Employers are not eligible to apply for the WSSE for an employee until their 12-week wage subsidy under the previous scheme has finished. The 12-week period for the initial scheme begins from the day the employer first applied for the wage subsidy, rather than when the payment of the wage subsidy was made to that employer.
We illustrate this by way of example:
Shelby Limited applied for the wage subsidy scheme on the first day of lockdown, 26 March 2020 and received the subsidy payment on 2 April 2020.
The earliest date Shelby Limited can apply for the wage subsidy extension will be 18 June 2020 (when the 12-week period from the original wage subsidy application ends). In considering their eligibility, Shelby Limited determines that its revenue between Monday 11 May 2020 and Wednesday 10 June 2020 was $25,000 whereas compared to the closes period in the prior year (Monday 13 May 2019 to Wednesday 12 June 2019) revenue was $45,000.
As Shelby Limited suffered a 45% decline in revenue, they will be eligible to apply for the wage subsidy extension on 18 June 2020.
Whilst applying for the WSSE, in addition to the loss in revenue, Shelby Limited will need to agree to the certain obligations as set out below.
The extension will provide an 8-week payment per named employee and the weekly rates will remain the same as under the previous scheme being $585.80 for a full-time worker and $350.00 for a part-time worker. This equates to $4,686.40 and $2,800.00 for a full time and part-time worker respectively.
Similar to the original wage subsidy scheme requirements, in addition to the loss in revenue, the employer will also need to agree to certain obligations:
- Pass the subsidy on to employees;
- Retain employees for the duration of the subsidy;
- Use best endeavours to pay employees 80% of their normal pay; and
- Take active steps to mitigate the impact of COVID-19 on their business which may include talking with the bank, making an insurance claim, or activating a business continuity plan.
This is a welcomed change for many businesses and it is expected that an extra 40,000 businesses will be eligible for the WSSE under the reviewed criteria.
In addition, the Minister of Finance has announced that the Small Business Cashflow Loan Scheme has been extended from June 12 to July 24.
Please contact us if you need further information or require any assistance with applications for the WSSE and/or the Small Business Loan scheme.