By: Anthony Drake, Rosie Judd
 
Government wage subsidy

This is becoming an increasingly common issue for employers.  The point of the Government wage subsidy is, of course, to prevent wholesale redundancies throughout the New Zealand workforce and it is slightly cynical to apply for the wage subsidy while undergoing a restructure.  There is an interesting argument that if an employer has failed to apply for the wage subsidy, and was eligible, then that is reason for questioning the genuineness of the redundancy.

There are two COVID-19 August 2021 payments.  The previous two-week subsidy which opened on 20 August 2021 has closed.  Application for the second wage subsidy, known as Wage Subsidy August 2021 #2, is open for two weeks between 3 September 2021 and 16 September 2021.  The criteria for eligibility for the wage subsidy is the same as the 2020 subsidies. 

Employers are required to use the subsidy to support paying the ordinary wages and salary of named employees, in accordance with their employment agreements and statutory obligations, for the period of receiving the subsidy.  Employers must use their best endeavours to pay at least 80% of each named employee’s ordinary wages or salary and pay at least the full amount of the subsidy to each named employee.

Wage or salary reduction

The principle of sanctity of contract is one of the cornerstones of the law, and therefore it is not surprising that the courts have made it clear that one party cannot unilaterally change or override the express terms of an employment agreement.  It is fundamental that any variation to the employment agreement requires the genuine consent of the parties, whether in the form of an alteration to existing terms or conditions, or the imposition of new contractual terms.  The principle that one party cannot unilaterally alter an employment agreement without the consent of the other party is well established.  

The Employment Relations Act 2000 also requires that any variation to an employment agreement must be recorded in writing and signed by the parties.  There is an overarching requirement of good faith and the duty to consult.  It is important that employers properly consult with affected employees and afforded the opportunity to participate in the decision before the decision is taken.  If employers fail to properly consult with employees prior to reducing their wages or salary, then the employee will have a claim for a personal grievance.
 
If you are wanting to make changes to your workplace or to employment agreements, then contact your Wynn Williams employment team.
 
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