10 Jun 2020

Initial 12-week Covid-19 wage subsidy coming to an end

9:41 am on 10 June 2020

The original Covid-19 wage subsidy - a 12-week, $11 billion scheme - is drawing to a close and businesses can now start applying for an extension.

New Zealand currency held fanned out in someones hand

The initial wage subsidy period is coming to an end, but an extension is available. Photo: 123rf.com

Around half of all the working age adults in the country - 1.6 million people - received the wage subsidy in the past few months.

Firms who applied early have now reached their weekly $585 payments for each full-time employee, with the scheme expiring for each business after their own 12 week period.

From today, applications are open for an eight-week wage subsidy extension. Eligible businesses must have had a revenue loss of more than 40 percent over a recent 30 day period, compared to the same time last year.

One of those was Sunny Kaushal, the manager of the century-old Shakespeare Hotel and Brewery in central Auckland.

"Without the subsidy, it would have been very catastrophic. We wouldn't have many staff left," Kaushal said.

The company managed to keep 16 of its 17 staff.

"Otherwise probably it would have been just the family working, because we could not afford staff."

Without tourists, the Shakespeare - with 13 hotel rooms, a restaurant, a microbrewery and bar - is down two-thirds on its usual income.

Kaushal was confident he would meet the criteria for an extension.

The Minister of Finance, Grant Robertson, provides his weekly Treasury update.

Grant Robertson. Photo: RNZ / Dom Thomas

Finance Minister Grant Robertson expected about 230,000 businesses to be eligible.

"That's a bit under half the number of businesses who've been eligible for the first part of the scheme. So we're really talking about people in the retail, hospitality, tourism sectors who've been very significantly impacted," Robertson said.

A further eight weeks at the government's expected rate of eligibility could mean another $3b-$4b of public cash.

Robertson said there was no plan to extend the scheme again come September, but has suggested sector-specific packages for those especially hard hit.

The Employers and Manufacturers Association said thousands of businesses had been able to avoid making redundancies because of the scheme.

Chief executive Brett O'Riley said without it, the unemployment rate could have tipped over 10 percent.

"The social costs of people becoming unemployed is enormous. Any investment that can avoid those kind of shocks and social impacts is really important," O'Riley said.

"By and large, I think many businesses have survived as a result of it, but it's probably still too early to tell if it's enough, and only the next few months will tell whether we need to invest more money in wage subsidies or other means of propping businesses up and ensuring that they survive."

Council of Trade Unions president Richard Wagstaff said the wage subsidy extension payment may have to continue past eight weeks.

"There's no point building half a bridge to the other side. If things are recovering and there's an equation which allows us to keep people on a bit further to get to the other side, we should absolutely do it. It's well worth spending up to keep people at work or away from being unemployed and on the dole."

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National Party finance spokesperson Paul Goldsmith said it was now time for the government to focus beyond short term assistance.

"I think it's time to focus on growing the economy and not needing subsidies in the future... The real demand is for a comprehensive plan to get back on track as an economy," Goldsmith said.

The government admitted the subsidy scheme would not save everyone.

Social Development Minister Carmel Sepuloni said the payment could feasibly go to companies which never recovered.

"That will be a possibility, but we're putting the supports in place to try keep them in business, and able to continue to employ and pay people. Individual businesses will have to make decisions based on their own circumstances," Sepuloni said.

The number of complaints against the government's wage subsidy scheme reached almost 4000 between early April and late May.

The Ministry of Social Development would not break down how many complaints related to fraudulent applications, but said it hoped to in the future.

Unite Union national director Mike Treen suspects there will be a "tidal wave" of redundancies over the next month or so, as large companies lay off staff rather than seek an extension.

Business New Zealand chief executive Kirk Hope said some businesses - such as SkyCity which depends on the borders reopening - have had to make a genuine call to not use taxpayer money for an extension when there was no real opportunity of keeping on staff beyond the eight weeks.

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