Paying your staff the COVID-19 Wage Subsidy March 2021

How to pay the COVID-19 Wage Subsidy March 2021 to your employees, and manage GST and tax around this.

Paying your staff

The COVID-19 Wage Subsidy March 2021 is to support you to pay 2-weeks of wages for your employees from 8 March 2021 or the date you submitted your application, whichever is later.

If you are receiving the COVID-19 Wage Subsidy March 2021, you must try your hardest to pay the employee named in your application at least 80% of their usual wages while you’re receiving the subsidy for them. If that isn't possible, you need to pay at least the subsidy rate (ie, full-time or part-time).

If your employee's usual wages are less than the subsidy, you must pay them their usual wages. Any difference should be used for the wages of other affected staff - the wage subsidy is designed to keep your employees connected to you.

You can get the subsidy for your casual employees for their usual hours, and you must continue to employ them for the subsidy period.

Visit the Employment NZ website for information about employment law.

  • GST and tax

    Businesses

    Information about GST, PAYE and income tax if you're a business.

    GST

    You don't have to pay GST on the wage subsidy.

    PAYE

    Your employee will need to pay tax on their wage subsidy payment as it’s paid to them as part of their normal wages. This means it's subject to the usual employer deductions, eg, PAYE, Student Loan, KiwiSaver, Child Support etc.

    When calculating PAYE deductions, do not gross up the COVID-19 Wage Subsidy March 2021 component. PAYE is deducted from the subsidy (i.e. $585.80 less PAYE, etc).

    You can agree with your employee the frequency at which the subsidy is paid. However, if the subsidy is being paid outside of their usual pay cycle this might have adverse tax implications for your employees such as:

    • they may be taxed at the wrong rate
    • it may impact Working for Families entitlements.

    Income tax

    • For most businesses, the COVID-19 Wage Subsidy March 2021 is classified as "excluded income" for income tax purposes. This means that as a business you don't pay income tax on the COVID-19 Wage Subsidy March 2021 you receive from us. You don't get an income tax deduction for the wages you pay using the COVID-19 Wage Subsidy March 2021. You still need to make the usual PAYE deductions when you pass it onto your employee.

    Self-employed

    If you're self-employed, you need to pay income tax on the COVID-19 Wage Subsidy March 2021 Subsidy you receive, as it's a payment to replace a loss of earnings.

    More information

    • For further information on tax queries, visit the Inland Revenue website.
  • Obligations

    The COVID-19 Wage Subsidy March 2021 obligations are in the declaration you agreed to when you applied.