"Casual" workers getting short-changed over COVID wage subsidy...

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kenkeniff

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#269967 17-Apr-2020 13:55

TL;DR: Casual workers who started off on low hours but finished up working 40hrs having their "normal" wage "averaged" down and only paid for like 5hrs even though employer still claims 20hrs.

I know a few workers who are on "casual" or no-fixed-hours work contracts.

The amount the company can claim in subsidy is simple; either $585.80 per week if the employees weekly hours averaged over 20 hours over the past 12 months (or since starting) or $350.00 if they averaged less.

The employer is then expected to keep paying the employee at least 80% of their "normal" wage.

The problem is how employers are determining the "normal" wage; as applying the same simple 12 month average doesn't account for a lot of scenarios like staff returning from unpaid leave, training periods where staff initially were paid/worked few hours but then were working full 40 weeks immediately prior to the shutdown.

The workers I know fall into this category where they started off on few hours with periods of no work, then finished up recently working 40 hour weeks. So averaged over 12 mths / job start only works out to like 5 hours but the company can still claim at last the 20hr / $350.00 subsidy from the government.

The company is then only passing on 5hrs / $87.50 of the $350 subsidy claiming this is the employees "normal" wage (long term average instead of recent average) and redistributing the remaining $262.50 to the full-time office staff to ensure they keep receiving at least 80% of their full salaries.

According to the vagaries of the subsidy scheme there doesn't appear to be anything specifically preventing this as companies are allowed to redistribute the subsidy amount over the "normal" wage to other workers so the question is are the any challenges that can be made as to how the companies determines normal wage?

I also suspect this company is also claiming subsidies for casual employees who may have worked like 1 day almost a year ago so they can receive a full $350 subsidy and pay out almost nothing to that employee but more to the full-time staff- which also seems technically allowed (as the person has technically averaged over 0 hours in the past 12 months).

The least controversial option would be for the companies to just pass on the full subsidy they receive to each employee - however there are obviously some flaws in this approach.

The most accurate (and complex) may be to calculate a (recent) time weight average; or more simply a 4-6 week average excluding genuine leave (as opposed to regular days not worked).

Has anyone seen any solutions or successful arguments made regarding this?

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#2464246 17-Apr-2020 14:59

IANAL or accountant, but...

Presumably they are only doing 5 hrs work now (or nothing because they can't?) So they are still getting paid more or equal to to the amount of work they're actually doing?

Sorry to say but yes I suspect permanent staff will have it better than those on contract\casual in this scenario.

"The problem is how employers are determining the "normal" wage; as applying the same simple 12 month average doesn't account for a lot of scenarios like staff returning from unpaid leave, training periods where staff initially were paid/worked few hours but then were working full 40 weeks immediately prior to the shutdown."

As long as this approach is consistently applied it sounds fair enough? I think ACC uses similar approach to calculate what they will pay?

"I also suspect this company is also claiming subsidies for casual employees who may have worked like 1 day almost a year ago so they can receive a full $350 subsidy and pay out almost nothing to that employee but more to the full-time staff- which also seems technically allowed (as the person has technically averaged over 0 hours in the past 12 months)."

This does sound dodgy but do you have any proof of it...?

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#2464252 17-Apr-2020 15:16

If you can prove they are claiming as you have said, then you should report it. If they are, I hope the enforcement agency comes down on them like a ton of bricks.

My MIL works at a school in the food area. They only pay her when she works, so she is not working. We are investigating if they have claimed for her. It wouldn't surprise me.

kenkeniff

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#2464257 17-Apr-2020 15:24

sidefx:

Presumably they are only doing 5 hrs work now (or nothing because they can't?) So they are still getting paid more or equal to to the amount of work they're actually doing?

Sorry to say but yes I suspect permanent staff will have it better than those on contract\casual in this scenario.

Correct like most industries the casual employees can't work however this is obviously due to the government shutdown not due to not wanting to planning to work.

I get what you're saying however the purpose of the scheme was to allow most employers to keep paying staff rather than most of them ending up on the dole.

In this case if the company is allowed to pass on only a pittance resulting in employees having to go on the dole anyway then that money would have been better kept in the government coffers for welfare in the first place; instead of now being spent once on the company (with the intention to support that worker) then again actually supporting the worker directly through the dole.

The solution then would be to raise the minimum hour threshold from 0-20 hours to something like 10-20 hours otherwise there's no point subsidising the wage if it's not actually making its way to the employees then the government still has to step in anyway.

sidefx:

As long as this approach is consistently applied it sounds fair enough? I think ACC uses similar approach to calculate what they will pay?

Sure but that's a government department and if that's not enough to live on WINZ will top it up with other benefits (there is no overlap / double spend by the Govt).

As above the problem with this is the government ends up paying twice to try support the same worker. Once through the company which doesn't make it to the worker then again directly through the WINZ.

This does sound dodgy but do you have any proof of it...?

Only going by the number of staff they've claimed for which seems pretty high. But if they've worked 1hr in the past 12 months there doesn't seem like anything specifically prohibiting it just like there's no specific calculation of "normal wage" provided.

tomgeeknz

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#2464271 17-Apr-2020 15:42

https://www.workandincome.govt.nz/products/a-z-benefits/covid19-wage-subsidy.html

Most of this is covered here, the employer is obliged to pay the person named in their application their normal pay if is below the subsidy amount, and the rate they can claim is based on the 12 month average. Using the remaining subsidy for one employee to top up other is mentioned, and is acceptable by MSD's standards.

It's a hard one to justify, but I would expect any decent employer who wants to support their staff to pass on the whole claimed part time amount to a casual worker who was indeed doing 40 hour weeks, if they valued that persons contribution... for some businesses though that won't make sense.

kenkeniff

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#2464272 17-Apr-2020 15:43

networkn:

If you can prove they are claiming as you have said, then you should report it. If they are, I hope the enforcement agency comes down on them like a ton of bricks.

My MIL works at a school in the food area. They only pay her when she works, so she is not working. We are investigating if they have claimed for her. It wouldn't surprise me.

Yes so if MIL is a casual employee the school should be able to claim wage subsidy based on "average hours" and should continue to pay "normal wage".

But image your MIL started the job last week of Term 4 2019, then wasn't rostered on for the 12 week school holiday, then worked regular 20hr weeks for the 6 weeks until shutdown.

"Normal" wage is clearly 20hrs however 12mth average is only 7.36hrs. School gets to claim 20hrs but only pays out 7.36hrs to MIL...

kenkeniff

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#2464282 17-Apr-2020 15:58

tomgeeknz:

It's a hard one to justify, but I would expect any decent employer who wants to support their staff to pass on the whole claimed part time amount to a casual worker who was indeed doing 40 hour weeks, if they valued that persons contribution... for some businesses though that won't make sense.

Sure but imagine you are not a "decent" employer; with a few full-time execs earning $2k+ per week; and an army of low paid "casual" staff.

(i.e. Any labour hire-type company, agency, seasonal work, youth jobs, hospitality, homecare, cleaners etc etc).

Government is only subsidising you (exec) $585.80 per week and your workers $350 per week.

Now you realise you can claim for a bunch of workers who haven't worked in almost a year; pay them out $1 and put another $349 each towards your salary.

Next you can "average" your employees hours across their training periods, off season, leave etc drastically lowering their average weekly hours, call that their "normal" wage passing on only like $50 and pocket another $300 from each of them....

Worker now doesn't have enough to live on, requiring WINZ to front up with another $350 which could have just been paid to them in the first place...

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tomgeeknz

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#2464288 17-Apr-2020 16:10

kenkeniff:

Next you can "average" your employees hours across their training periods, off season, leave etc drastically lowering their average weekly hours, call that their "normal" wage passing on only like $50 and pocket another $300 from each of them....

Worker now doesn't have enough to live on, requiring WINZ to front up with another $350 which could have just been paid to them in the first place...

Yeah, I guess I come from a biased situation, in an industry where we rely on casual workers, but they also often work for multiple companies, all of which usually have limited work over winter anyway, and will likely have none for the foreseeable future. We chose not to apply for these people because it would be more beneficial for them to go straight to a benefit, as this will far outweigh their entitlement based on their work for us (often a week or two of 20+ hours, and then many of none), and be better for them long term as we face an uncertain future.

Lias

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#2464292 17-Apr-2020 16:19

Someone in my household is the opposite. They are a casual, who's hours had dropped significantly lately, but their employer is paying them the 12 month average which is 2-3 times their recent average. That person doesn't begrudge the employer using the rest of the subsidy to top up after staff in the slightest.

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BlinkyBill

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#2464301 17-Apr-2020 16:36

1. If an employee has worked for fewer than 12 months, the average is over the period worked, where hours are variable.

2. The entire amount Of the Covid-19 claim up to 80% of the average is to be passed on to affected employee’s, up to the part-time or full-time amount claimable ($855.80 for > 20 hours/week, and $350 for < 20 hours/week).

3. If there is any money left over, between the paid-to-employee amount and the received-from-taxpayer amount, then that needs to go to other affected employees for which no claim is made.

4. If the employer doesn’t pay out all the claimed money, then it MUST BE REPAID to the government.

5. Claims, payments to employees, and repayments to the government may be audited.

So. Work out your average hours over the past 12 months or actual term if employed less than 12 months. Take your hourly rate and multiply by the number of average weekly hours, then take 80% of that. You should be paid UP TO $585.80 or $350.00 (depending if over or under 20 hours per week, respectively).

It is illegal to claim the subsidy, and keep it or use it for another purpose other than passing on to employees. If you have strong suspicions any employer is rorting the system, it is your duty to report this immediately.

This is not hard to understand, nor to calculate.

If the wage subsidy was your only source of income prior to shutdown, you should be 80% of previous earnings. Otherwise you still have your other sources of income.

This scheme is pretty generous and pretty robustly determined.

kenkeniff

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#2464302 17-Apr-2020 16:36

Lias:

Someone in my household is the opposite. They are a casual, who's hours had dropped significantly lately, but their employer is paying them the 12 month average which is 2-3 times their recent average. That person doesn't begrudge the employer using the rest of the subsidy to top up after staff in the slightest.

I'm sure they don't and if the employer is simply passing on more of the $585.80 or $350 which was claimed for that employee (based on the average) then that could be argued to be reasonable however if other employees who have been working more hours are having their's averaged down below the subsidy and the difference paid to that employee then that would not be objectively fair.

I don't think the subsidy was intended to reward past average hours but to facilitate "business as usual".

In the same token someone who stated a job on the 19th March and worked 8 hours that one day would be averaged to 40hrs per week; but someone who returned from unpaid maternity leave 6 weeks ago and has been working 40hr weeks since may be averaged down to 5hrs...

BlinkyBill

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#2464304 17-Apr-2020 16:42

kenkeniff:

In the same token someone who stated a job on the 19th March and worked 8 hours that one day would be averaged to 40hrs per week; but someone who returned from unpaid maternity leave 6 weeks ago and has been working 40hr weeks since may be averaged down to 5hrs...

It is silly to work through edge cases. If you have a concern, ring Employment NZ. The rules are pretty clear and are reasonable. But clearly not everyone understands the rules and perhaps make errors. That might be your employer in this case, or it might be you.

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#2464318 17-Apr-2020 16:58

networkn:

If you can prove they are claiming as you have said, then you should report it. If they are, I hope the enforcement agency comes down on them like a ton of bricks.

My MIL works at a school in the food area. They only pay her when she works, so she is not working. We are investigating if they have claimed for her. It wouldn't surprise me.

I wouldn't be surprised either. Kids get sent home with all kinds of money demands from schools all the time, I hear

kenkeniff

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#2464339 17-Apr-2020 17:32

BlinkyBill:

It is silly to work through edge cases. If you have a concern, ring Employment NZ. The rules are pretty clear and are reasonable. But clearly not everyone understands the rules and perhaps make errors. That might be your employer in this case, or it might be you.

Yes the basic parameters are of the scheme are pretty simple (and no-one above has contradicted them) however you seem to be missing the basic premise of the thread which is whether the "wage subsidy rate" calculation should be also used for determining "employees ordinary wages" - this is not specified.

https://workandincome.govt.nz/products/a-z-benefits/employer-questions-and-answers.html

How do I assess whether my casual employee(s) qualifies for the full-time or part-time wage subsidy rate?

Casual employees may have variable hours, so to assess their subsidy rate, the employer should average their hours over the last year. If this average is 20 hours or more, they can apply for the full-time rate, and if it’s under 20 hours they can apply for the part-time rate.

If they have worked for less than a year, the employer should average the hours worked during their total employment period.

https://workandincome.govt.nz/online-services/covid-19/declaration-wage-subsidy.html

Your obligations to use the subsidy to retain and pay your employees

You remain responsible for paying your employees ordinary wages and salary for the employees named in your application.

You will for the period you receive the subsidy:
- use your best endeavours to pay at least 80 per cent of each named employee’s ordinary wages or salary; and
- pay at least the full amount of the subsidy to the employee; but
- where the ordinary wages or salary of an employee named in your application was lawfully below the amount of the subsidy before the impact of COVID-19, pay the employee that amount.
The ordinary wages or salary of an employee are:
- as specified in the employee’s employment agreement as at 26 March 2020; or
- if you ended your employment relationship with any employee named in your application as a result of your business being adversely affected by the COVID-19 outbreak and have re-employed that employee on or after 17 March 2020, as specified in the employee’s employment agreement as at the date that employment relationship ended.

Nowhere does it specifically state or imply that the "wage subsidy rate calculation" should also be used for determining "employees ordinary wages".

I'm sure most reasonable people would agree "ordinary wages" means "ordinary wages" and not "12mth average wages".

i.e. If you were working 20hr weeks for the previous 6 weeks (or even 1 week) and expecting to continue working 20hr weeks before the shutdown - and your employer is getting subsidised for 20hr - you expect to get the full 20hr subsidy passed on. Not only 5hrs because of the hours you worked 11 months ago.

I don't think this is an edge case as the trend is for wages to increase; therefore "12mth averages" are going to disadvantage most casual employees. It also creates the obvious incentive for the managers etc to average down the casual employee wages this way to supplement (up to 80% of) their own fixed salaries which they are apparently allowed to do.

This does not directly apply to me as I'm self-employed but does to people I know. So not much I can do as an individual raising the concern to Govt apart from getting it up into the GZ hive-mind and hoping to shed some light on the issue which may set some wheels in motion...

kenkeniff

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#2464346 17-Apr-2020 18:03

The closest official clarification I've found so far is: https://www.beehive.govt.nz/release/clarification-modification-wage-subsidy-scheme

HON GRANT ROBERTSON 28/03/2020:

Minister of Finance Grant Robertson has clarified that the changes to the wage subsidy scheme announced yesterday mean that employers should be passing on the full subsidy to workers, except in the case where the person’s normal income is less than the level of the subsidy.

“We still want employers to use their best endeavours to pay employees 80% of their normal salaries. Where this is not possible, we want the value of the subsidy to be passed on.

“But to be absolutely clear if a person’s income is normally less than the subsidy they can be paid their normal salary.

“This is particularly an issue for part time employees some of whom normally earn less than the $350 per week. We urge employers to use normal hours in the period before COVID-19 to assess the amount to be paid,” Grant Robertson said.

“This scheme is a high trust system in order to ensure that money reaches workers and businesses as soon as possible. We urge employers to use the money provided by the scheme for the purpose it was intended, to support the wages of their employees.

“As stated yesterday we are chasing up examples that have been reported of misuse and we are standing up an audit capacity for the scheme.

“No employer who has applied since the announcement yesterday needs to re-apply. The Ministry of Social Development will be processing those applications in accordance with this clarification,” Grant Robertson said.

This seems pretty clear they expect employers to pay normal hours which were expected over this period and not just apply either the full subsidy or 12 month average which was used ONLY to determine the government subsidy rate.

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#2464347 17-Apr-2020 18:09

Mate, I am not confused. If you were employed for over 12 months, add up the total number of hours you were paid for and divide by 52. It is not relevant whatsoever if you worked 5 here and 25 there. Employers are not permitted to ‘average up’ or ‘average down’. It is a straight-out average.

i have a lot of sympathy for those exploited under zero-hour contracts, but it is not the fault of the subsidy scheme. There has to be a formula, and this is reasonable.

concrete example. My son worked for 4 weeks prior to the lockdown, hours varied between 12 and 25 hours per week, minimum wage. He had some paid training. He is getting $152 per week until the business reopens. It is the correct calculation. Also, I am an employer and have had advice on this (note though, I only have full-time employees, so didn’t really listen carefully to casual workers as it doesn’t apply to me).

FYI working 1 day or returning from maternity leave 6 weeks before the lockdown are both edge cases, if you don’t intend them to be so, don’t make them. There is no point cutting-and-pasting content irrelevant to your concern.

There is a formal Avenue to take if Dodgy Brothers Ltd is rorting the system, and this should be taken if you are worried.

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