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Thirty-four businesses expected to re-enter wage subsidy scheme

Monday 11 January 2021 | Written by Rashneel Kumar | Published in Economy, National

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Thirty-four businesses expected to re-enter wage subsidy scheme
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Government is expected to spend about $14 million in wage subsidy in 2021, following a number of rule changes that have resulted in 34 businesses becoming re-eligible to collect the benefit.

Over 200 employees from approximately 34 businesses are expected to re-enter the wage subsidy scheme following adjustments made to the eligibility early last month.

Prime Minister Mark Brown earlier announced businesses will be eligible to re-enter the wage subsidy if they can demonstrate a 30 per cent or more decline in revenue in November, 2020 (year-on-year).

In a further change, Brown said eligibility for the wage subsidy would be assessed on a monthly basis. He also announced the extension of wage subsidy scheme until the end of April, 2021.

Natalie Cooke, director of Economic Planning Division at Ministry of Finance and Economic Management, said 92 businesses have stopped receiving wage subsidy at various times since August, covering just over 400 employees.

Of the 92 businesses, approximately 34 businesses would re-enter the subsidy following the adjustment, representing 213 employees, said Cooke.

“The adjustment is to the reduction in revenue required to become eligible for the wage subsidy, since July businesses have been required to show a 50 per cent reduction in turnover, we are changing this to 30 per cent for those businesses that have been receiving support,” Cooke said.

“In addition, previously businesses would not be able to return to the subsidy if they had breached the eligibility, now, if a business has previously received the wage subsidy and meets the requirement in a month, they will be able to return to the wage subsidy.”

Government paid out $3.7 million to 412 businesses representing 3566 employments in April, $3.6m (399 businesses, 3385 employments) in May, $3.6m (380 businesses, 3431 employments) in June and $3.6m (370 businesses, 2811 employments) in July.

After adjustment to the wage subsidy criteria – 50 per cent reduction in turnover – government paid out $3 million to 297 businesses representing 2308 employments in August, $2.9m (289 businesses, 2315 employments) in September and $3.2m (296 businesses, 2517 employments) in November. The December figure was not available.

Cooke said: “The numbers from July-Sept do not include those on the training subsidy, hence the reduction in employments.”

Chamber of Commerce chief executive officer Eve Hayden welcomed the wage subsidy extension and acknowledged the support it had provided to local businesses.

“When our last white paper was put out there were 396 businesses – employing 3499 workers – receiving a total of $4.9 million per month through the wage subsidy. In order to qualify for this, they all needed to demonstrate at least a 50 per cent downturn in turnover from the same period in the previous year,” Hayden said.

“Given that, I don’t think it’s unreasonable to conclude that if there was no wage subsidy available, employers would be forced to make a large portion - and for some it might be all - of their workforce redundant.”

Hayden said the Chamber’s “white paper” recommended that the threshold for eligibility be reduced to 30 per cent, as there were many businesses struggling to remain open once they breached the 50 per cent threshold.

“We also asked for an extension to the wage subsidy beyond the opening of the border, recognising that it would take some time for businesses to work back to profitability. In addition, we recommended that further grants also be considered, as operating losses are continuing even with businesses in hibernation,” she said.

“The wage subsidy has been a critical part of keeping businesses viable and ready to open when the economy is up and running again. All of the financial aid packages will help slow down the impacts of zero tourism but if we did not have the ERP (Economic Response PLAN) then there would be significant further hardship and permanent closures.”