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The new short-term absence payment is welcome buy small business owners and will take some strain off business owners doing it tough when staff are on leave awaiting results of Covid-19 test and cannot work from home.

Employers can apply for support to pay their employees. The self-employed or contractors can apply directly.  The payment will be a one-off amount of $350 for each eligible employee.

The Short-Term Absence Payment is available from 9 February 2021 and it’s to help businesses keep paying eligible workers who:

• cannot work from home, and
• need to miss work to stay home while waiting for a COVID-19 test result (in line with public health guidance).

Businesses and self-employed people can apply for the COVID-19 Short-Term Absence Payment using MSD online application form.  By submitting the form, you are making an official declaration – details of which can be found here.

Paying wages to staff

Employers will need to sign a declaration, and can only apply once in a 30-day period for each individual employee, unless otherwise directed by health advice.

Under the scheme, if an employee takes their entitled sick leave to self-isolate, the $350 must go towards paying the worker’s normal salary or wages for those days.

If the employee has used up all of their sick leave, their employer should try to pay their employee as if they had worked that period (using the $350 to assist this), but if that is not possible, they must pay at least the full $350 to the employee. If the employee’s usual wages for this period are less than or equal to the subsidy, the employer must pay the employee their usual wages, and carry over the difference to help pay other affected staff.

Regular employment law applies to all employment relationships – regardless of the circumstances that we find ourselves in. This includes anything that has been agreed to in an employment agreement.

Employment law rights and obligations still apply to all employment relationships – regardless of the circumstances that we find ourselves in. This includes:

• having a written employment agreement for every employee, and doing what that agreement requires
• keeping each written employment agreement up to date, including documenting any changes that affect rates of pay or hours worked
• meeting legislative and any relevant contractual requirements for changing employment arrangements or in potential restructuring or redundancy situations
• complying with all minimum standards legislation and with the Employment Relations Act 2000.

Visit the Employment NZ website for information about employment law.  Modifying employment agreements during COVID-19 – Employment NZ website

GST and tax

GST

Employers do not have to pay GST on the Short-Term Absence Payment.

Income tax

Businesses receiving the Short-Term Absence Payment must use this to assist the payment of wages to employees and make the usual PAYE deductions when passed on .  Where it is passed on in full, the payment is “excluded income” for income tax purposes for the employer/business, meaning you don’t pay income tax on the Short-Term Absence Payment you receive from us. Note you also don’t get an income tax deduction for the portion of wages paid using the Short-Term Absence Payment. By passing on through wages, the Short-Term Absence Payment is subject to income tax in the employees personal income tax return.

When the full payment is not passed on any excess amounts will be taxable income to the business.  Your accountant will sort this all out as part of your income tax returns, so have a chat with your advisor or us if you are not sure what to do with it.

If you’re self-employed, you need to pay income tax on the Short-Term Absence Payment in your IR3 (income tax return), as it’s a payment to replace a loss of earnings. Include this amount in the “Government Subsidies” field.

When you need to repay the Short-term Absence Payment

You need to repay the COVID-19 Short-Term Absence Payment if:

• you made an incorrect application
• you no longer meet the criteria for the COVID-19 Short-Term Absence Payment as at the time of your application
• you provided false or misleading information in your application.

 

If you find this all confusing and need some help, contact the Ontrack team.