Covid-19 – Payroll practicalities and 80% “Best Efforts” clarified
Friday 27 March 2020
Today – some very important advice – please check this out as it applies to you
Are all your staff paid 80% or more?
Do you have staff paid less than 80%?
What does “Best Efforts” mean?
Essential HR here to help – and now safely at our homes. For ongoing help, you can contact Mike on 027 2808546 or mike@essentialhr.co.nz or Beccy on beccy@essentialhr.co.nz or 027 2909070 – but if you phone our landline 03 6590377 you can leave a message that gets delivered to us automatically. Please bear with us if you can’t get straight through – we are getting many calls! I’m happy for you to pass this on to others.
If you need to conference call, we are all set up with Zoom.
Basic Principles
While this is not definitive, if you have a question, these principles may help you check your decision:
- Keep people in employment – the government are clear this is a top priority;
- Pay at least at 80% - while you only have to use “best efforts” (see below), if you accept the subsidy you may have to show why, in good faith, you are not able to pay to this level;
- All other employment law obligations remain in place – you must consult over changes (including any disciplinary or redundancy); you must still obtain agreement to changes in terms unless you are legally freed from doing so; you must maintain full time and wage records; you must deduct taxes etc from wages paid.
- The subsidy is not in lieu of wages – it is a grant to you to help you pay wages
If you pay your staff at 80% of normal or more
- Great! But you need to make sure you still comply:
- Any leave that is being taken to “top up” the subsidy must be agreed by the employee (you cannot make them take leave);
- Any reduction in hours likewise needs approval (e.g. staff agreeing to be paid at 80%)
- Bottom line is, although you are paying at 80%, you should still ensure you have signed agreement (including email or text) from each employee to whatever method has been used to determine how much they are now paid.
- Payroll processing will need to record the leave taken and any reduction in hours – so if you are paying at 80% exactly, you will need to enter hours worked at 80% of normal, or process a day’s leave without pay … whatever was agreed. You need not enter the subsidy in any way – that does not affect payroll.
If you have staff you pay less than 80% of normal
- There are some legal uncertainties here – you may hear different opinions
- Business NZ have published some FAQs, apparently from MBI, that indicate you are committed to pay 80% of employees’ wages if you get the subsidy;
- However, their answers also indicate you can negotiate alternatives. And the overall wording still says you must use “best efforts” to keep this commitment – so don’t get misled by the answers.
- I won’t bother you with the legal ins and outs – I have had discussions with the Employers’ Chamber and some input from other sources, including MSD, and my advice is still:
- If you get the Wage Subsidy you must commit to using your best possible efforts (see below) to pay staff at 80%
- But if this is not possible, then you can agree a lower amount (if it is at least the level of the subsidy) with each employee.
- You cannot impose these changes.
- Agreements needed
- Any leave that is being taken to “top up” the subsidy must be agreed by the employee (you cannot make them take leave); this includes taking leave without pay;
- Any reduction in hours, likewise, needs approval (e.g. staff agreeing to be paid at 60%)
- Most of you will now be locked down – you can still hold these discussions if needed and obtain the necessary agreements. You should ensure you have or get “signed” agreement (including email or text) from each employee to whatever method has been used to determine how much they are now paid.
- For some of you it is a question of ensuring your employees understand that the alternative to some agreement here is that you would have to close and everyone lose jobs.
- Payroll processing will need to record any leave taken and any reduction in hours:
- If you are paying at 60% exactly, you will need to enter hours worked at 60% of normal, or process two days’ leave without pay … whatever was agreed. You need not enter the subsidy in any way – it does not affect payroll.
- If you and your employee agree they will be paid the subsidy only, then check with your payroll provider, but I imagine it will require the employee taking leave without pay and you paying them a taxable allowance (Xero, for example, have some very clear guidance on this).
What does “Best Efforts” mean?
- “best efforts” is now being explained by MBIE as “best endeavours” and meaning the employer and employee can negotiate an alternative approach to simply paying at 80% or more.
- For instance, the employee may accept a 60% wage if that means more of their workforce colleagues can also be paid income.
- Such best endeavours would need to be documented by the employer – which I take to mean that the outcomes would need agreement.
- Any employer accepting the subsidy and this commitment to make best efforts to pay 80% would have to be prepared to demonstrate why they have not paid at 80%, in all good faith.
- At this time, you will need to accept:
- Audits will be carried out after this is over
- One aspect of this will be to seek very good reason for you not paying the 80%
- It should be ok if staff have agreed to the arrangements, but
- If there is a risk that employees agree or lose their job, there will need to be back-up information.
Essential Services
- You may need to give your staff a letter to show to police who will be stopping people on the roads. We have a template for a letter if you need one.
If you still have any queries around essential services you can get in touch with the central government team at 0508 377 388 or email essential@mbie.govt.nz.
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