The situation in New Zealand is unprecedented in modern times and the Government initiatives to combat the effects of the lockdown are new and constantly being adapted.

This means there often isn't a clear answer to many of the questions that employers and employees have and the answers are subject to change when the policy changes (or in the future when Courts assess actions taken).

The advice below is generic and should not be relied upon without your adviser understanding all the unique factors in your situation, including any relevant employment agreement.

Many of the questions relate to the impact of employers who are forecasting a 30 per cent decline in revenue in a month period as compared with last year and have obtained the government wage subsidy of $585 for full time staff and $350 for part time staff.


Some of the key questions being asked and the answers are:

Are staff entitled to be paid during the lockdown if they are unable to work?

If an employer has obtained the wage subsidy payment from the Government then there is an obligation to pay staff. It would be very legally risky for an employer to obtain the subsidy and not pay staff at least the level of the subsidy received by the employer (or the employee's usual pay if it is less than the subsidy) for the 12 week period the subsidy is calculated on.

In situations where an employer has not obtained the subsidy and is unable to offer work to staff then it is possible that the employer could rely on the contract being 'frustrated' to avoid making payment to an employee. Again, this would be a high risk option as the threshold for frustration is relatively high.

If a staff member or their household has Covid-19 then the staff member could obtain sick leave and once that runs out they would be on unpaid leave (or annual leave if they requested).

If an employer has obtained the wage subsidy can they reduce pay to 80 per cent or less?

Any changes to pay must be agreed between an employer and employee. If agreement cannot be reached and the viability of the business is in jeopardy then the employer could restructure their business in consultation with the affected employee(s).

The language of the wage subsidy refers to using 'best endeavours' to pay at least 80% of an employee's normal pay, this means that it is possible for an employer to pay less than 80% (with the employee's agreement or having undertaken a restricting process).


However, an employer that pays less than the subsidy amount to an employee would be at significant risk of repercussions from the Government or the employee through the Employment Relations Authority.

If an employee requests it, an employer could use the employee's holiday leave entitlement to 'top-up' any reduction in pay that has been agreed or imposed following a restructuring.

Can an employer make redundancies while receiving the wage subsidy?

If the employer determines there is a need to restructure the business (perhaps to keep it afloat) then they are able to restructure (including making staff redundant) at any time after following a fair process.

If they had obtained a subsidy for workers that were made redundant during the period of the subsidy then it would be necessary to repay the amount of the subsidy — the process for doing this hasn't been announced at this stage.