The Wage Subsidy Extension went live yesterday morning.  The full criteria were published at the same time.  As we saw with the original scheme, we expect that the information WINZ published will change over time.

The turnover drop threshold and how that turnover drop is measured has changed from the original wage subsidy, but broadly speaking the other criteria seems to be the same as the Wage Subsidy was in recent times (although not necessarily the original scheme).

As we highlighted in a prior article – the one change other that we have noticed is the specific guidance around what happens where the employee’s usual wages are less than the subsidy amount.  Earlier iterations of the scheme simply said that the employer only needs to pay the normal wages.  As below, WINZ now state what needs to happen with the balance:

If your employee’s usual wages are less than the Wage Subsidy Extension, you must pay them their usual wages.

Any difference should be used for the wages of other affected staff – the Wage Subsidy Extension is designed to keep your employees connected to you.

If there are no other employees to use the subsidy for, then the remaining Wage Subsidy Extension should be paid back.

Turnover drop

Per the WINZ website the turnover decline needs to be measured as follows:

Determining a decline in revenue

To determine a decline in revenue, you must compare a 30 day continuous period in the 40 days before you apply (but no earlier than 10 May 2020) against the closest period last year. For example, if you apply on 20 June 2020, you can compare a continuous 30 day period in the 40 days before 20 June (but no earlier than 10 May), to the closest period in 2019.

The revenue in the affected period must be at least 40% less than it was in the period it was compared against.

Businesses operating for less than a year or have high growth

New businesses which have been operating less than a year, or high growth businesses (e.g. that have had a significant increase in revenue), can apply for the Wage Subsidy Extension.

To determine whether these businesses meet the 40% decline in revenue assessment, they must compare their revenue against a previous month, or 30 days, that gives the best estimation of the revenue decline related to COVID-19.

For example, 40% loss of revenue attributable to COVID-19 comparing the 30 days before you apply to the closest period in 2019.

New/high-growth businesses

One question we have been fielding a fair bit is around testing the 40% turnover drop for a new business or a business that has expanded in the past 12 months.  We set out the present WINZ guidance above.  This information has already changed since the information went live yesterday morning.  Yesterday morning the guidance said that the turnover had to be measured against the most comparable month in 2019.  The reference to 2019 was dropped, although you will see it remains in the example above.  The declaration simply states: …or a reasonably equivalent period for a business operating less than a year or a high growth business that has experienced a significant increase in revenue…

The intention must be that the turnover drop is measured against the most comparable period, and that may be January to March 2020 for new businesses.

Application process

The application form and process are virtually identical to the original scheme. Here is a link to the declaration.  If you plan on applying it is important that you understand what you are agreeing to.

When a business can apply

A business can apply after 12 weeks from the application (for a particular employee) of the original scheme.  This gives a major advantage to the businesses who applied early as the revenue test period will be for Level 2 trading.  Those who have to wait will be measuring Level 1 revenue.

We note that in the early days of the Wage Subsidy scheme, the subsidy period was defined as being 17 March to 9 June regardless of when the application was made.  At some point the scheme was changed so that the subsidy period was 12 weeks from the date of the application.

WINZ/MSD are sending reminder emails as it nears 12 weeks from the original application date.  That email will go to the email address in the original application.

New employees/new applications

A business doesn’t have to applied for the old Wage Subsidy scheme to qualify.  Likewise, an employee who wasn’t included in an original application is still eligible.

Business.Govt calculator

A client pointed us to a Revenue Calculator tool available on the website.  That tool (which hasn’t been updated for the extension yet) that states you can use “your business bank account” to estimate revenue.  The same client talked to MSD yesterday and they confirmed that a cash basis was appropriate.   That is not necessarily consistent with the published guidance, but as this is fundamentally a cashflow scheme, that is an entirely sensible approach.