Monday, 6 April 2020

Paying the Minimum Wage during the subsidy period

Paying the Minimum Wage during the subsidy period 
  • Employment NZ’s website states that during the subsidy period, if an employee is not actually working, employers can choose to pay a minimum of 80% of an employee’s pre-COVID-19 income. So, for an employee on the minimum wage who isn’t working, employers could continue to pay them at 80% of last year’s minimum wage. The employee must be paid at the new minimum wage when they do start working again.

Wednesday, 25 March 2020

Minimum wage is going up

Minimum wage is going up  Effective 1 April 2020   
  • The minimum wage  is  set to increase  on  1 April from $17.70 to $18.90  per hour.   
  • Training  wages will also  increase to $15.12  to keep the rate at  80% of minimum wage.  
What do you need to do?
  •  If you have any employees on the current minimum wage, or training wage, you will need to update their rate to the new minimum amount before 1 April.  

Tuesday, 24 March 2020

Covid-19 and Payday Filing

The IRD have advised that it is important for employers to continue to file their payday filing information. Below is the information they have provided:

Filing Employment Information:

We know it’s challenging for you in the current environment to continue to file Employment Information each payday.

However, filing Employment Information ensures information about employees is up to date and accurate and will also help support any application for the Government’s recently announced wage subsidy (if required) given the current context of COVID-19.

This information will also assist as the end of the tax year is closing – and IR will be
identifying refunds (in particular) which can be sent to customers to assist during this
difficult time

GST and Income Tax on Government Covid-19 Subsidies

When you receive a wage subsidy payment from the Government, the coding in Xero will be as follows:

  • The income (amount received) is coded as sundry or other income (with NO GST)
  • The wages payments to staff are done through the payroll as normal wages with PAYE etc and coded accordingly.
Please clearly identify that the income is from the subsidy. Because when we prepare your annual financial statements we will record the wages subsidy income as "non assessable income" so this subsidy is not included in taxable income. We will prepare be the necessary reconciliation and work-paper to support this in your tax return.

Disclaimer: This information has been prepared based on the current information available and is subject to change. 

Lockdown Help - Covid-19 Q&A

Now that we are going into lock-down the EMA have responded to a couple of questions:

Q – Are we still obliged to pay at least 80% of people's income given our business has been forced to close?
A – No, but be prepared to justify this if/when you get audited.

Q – Are we within our rights to say to staff “sorry we can’t afford to pay you during this time but we will apply for the wage subsidy which we will pass onto you”, and you can elect to top this up with your leave entitlements
A – Yes, but you must communicate this to staff and get their approval to use their leave

Further to this last question, some information received from the Bookkeepers Association suggests that employers should put in writing & get each employee to sign a document outlining the following:
• Their information will be shared with Work & Income as part of the wage subsidy application (this is a requirement of the scheme)
• Agree to reducing to 80% of their normal wages for term of close down
• Agree that the subsidy be applied to wages & they agree to top up the wages from annual leave up to 80%
• If required ask that they agree to allowing employer to put leave balances into negative & in the event of leaving after this, that this be recovered from any final pay

Tax Specialists Q&A replies from IRD
Q: The wage subsidy and leave payments are exempt from tax but are the wages still deductible and are they subject to PAYE.
A: The wage subsidy and leave payments are excluded income but only to the extent they offset wages. PAYE is applicable to the wages. This is the tax law as it currently stands.

Q: Are payments to employees subject to PAYE?
A: Yes they are. The easiest thing is to pay the employee as normal with PAYE code the total as wages. Credit the receipt of the subsidies to the wages code.

Q: If self-employed receive a leave payment will that be taxable as there are no wage deductions to offset it against?
A: Yes

Q. Are the wage subsidy/leave payments or payments to self-employed subject to GST?
A: No.

Disclaimer: This information has been carefully prepared, but it has been written in general terms only. 
The publication should not be relied upon to provide specific information without also obtaining appropriate professional advice after detailed examination of your particular situation.