Income Insurance Scheme

by: Amanda Douglas & Rachel Irwin

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The information in these articles is general information only, is provided free of charge and does not constitute legal or other professional advice. We try to keep the information up to date. However, to the fullest extent permitted by law, we disclaim all warranties, express or implied, in relation to this article - including (without limitation) warranties as to accuracy, completeness and fitness for any particular purpose. Please seek independent advice before acting on any information in this article.

Is the government proposing to pay employees if they lose their job?

The Government is proposing to create an Income Insurance Scheme (Scheme) for employees in New Zealand. The proposal states that employees who lose their job through no fault of their own (i.e. their role is disestablished on the ground of redundancy) may be paid 80% of their income for up to 7 months. This would be made up of a 4-week notice period and 4-week payment, at 80% of the employee’s salary, from their employer, plus a further 6 months of financial support from the Scheme at 80% of their salary.

Employees would be eligible after 6 months of contributions towards the Scheme within the previous 18 months. Fixed term and seasonal work would be covered up until the original end date of employment. Casual workers who could illustrate a reasonable expectation of future income would be treated like permanent workers.

The proposed scheme would be funded by levies on wages and salaries similar to how ACC works for accidents. Employees and employers would both contribute, which will be an increase cost to businesses. It is estimated that employees and employers would each pay a levy of approximately 1.39%.

If the scheme goes ahead it will represent a major shift in how an employee is supported when they lose their job in a no-fault situation. It would also see employers funding a 4-week notice period plus a 4-week payment in addition to levies.

Employers (including employers in the transport industry) can also have their say. Employers may wish to submit their comments to the Ministry of Business, Innovation and Employment. The proposed scheme is open for comment, with submissions closing on 26 April 2022. You can email submissions to incomeinsurance@mbie.govt.nz or complete a short survey using the following website link, which is estimated to take a maximum of 15 minutes: https://www.mbie.govt.nz/have-your-say/income-insurance. This website provides a discussion document with further details on the scheme, a summary booklet of the proposals, and a submission template.

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Disclaimer
The information in these articles is general information only, is provided free of charge and does not constitute legal or other professional advice. We try to keep the information up to date. However, to the fullest extent permitted by law, we disclaim all warranties, express or implied, in relation to this article - including (without limitation) warranties as to accuracy, completeness and fitness for any particular purpose. Please seek independent advice before acting on any information in this article.