Wage subsidy loss 'major blow' to Auckland, business leader calls for extension

Tuesday, 7 July 2020

The Government has paid out $11 billion in wage subsidies to businesses that have suffered a loss of income as a result of the coronavirus crisis. (File video, first published in August 2020)

The Covid-19 wage subsidy scheme should be kept available for businesses that can make a case for it, a business leader says.

Prime Minister Jacinda Ardern announced on Sunday the $11.9 billion scheme supporting 1.7 million workers will not continue after September.

But Business Mentors NZ chief executive Sarah Trotman says there needs to be incentives for business owners to be employing people, as central Auckland prepares for a “major blow”.

Business Mentors NZ chief executive Sarah Trotman says businesses that can make a select case should be able to access the wage subsidy after it ends in September.

“I would like to see the subsidy still being available where businesses can make a select business case,” Trotman said.

* Covid-19: Understanding the extension of the Government's wage subsidy scheme

Prime Minister Jacinda Ardern announced the $11.9 billion wage subsidy supporting 1.7 million jobs will come to an end on September 1.

* Coronavirus: Prime Minister does not appear keen to extend wage subsidy past September

Heart of the City chief executive Viv Beck says removing the wage subsidy will be a “major blow” to some businesses in Auckland’s city centre.

“The issue of business failure hasn’t been talked about enough. A lot of businesses will fail, and they are failing.”

The scheme pays businesses $585.50 per week for each full-time employee, which is passed on to the worker, if the business has suffered a loss of revenue of 40 per cent within a month due to Covid-19. Before the scheme was extended in June, businesses had to prove a loss of 30 per cent of revenue to be eligible for the scheme.

The Government's wage subsidy bill has now topped $12b, with Wilson Parking among the companies to receive more money through the latest round of payments. (First published July 3, 2020)

The scheme will end on September 1, three weeks out from the general election. That could mean job losses as the subsidy ends, with businesses deciding they cannot resume paying full wages to their staff.

Heart of the City, a group representing businesses in Auckland city, chief executive Viv Beck said removing the wage subsidy will be a ‘major blow’ and extending it for select business cases could be an option.

“For businesses that are very reliant on the subsidy and not able to adapt, there may well be a case for it, though there would need to be a proper analysis done,” she said.

“We’re aware the wage subsidy has been very helpful for city centre businesses, but in the end we have to be realistic that it can’t go on forever.'

Trotman said it is very difficult for the government to provide one solution to suit everyone.

“It’s not as simple as saying businesses need the wage subsidy or businesses need an interest free loan,” she said.

“But there needs to be some incentives for business owners to have the confidence to take on staff again,” she said.

Small firms struggling with the coronavirus pandemic are able to get interest-free and low-interest loans of up to $100,000, under a government scheme announced in May.

Ardern confirmed on Sunday the wage subsidy scheme, already extended to September, would not continue.

“We've clearly signalled that a wage subsidy is not something that can continue on in the never-never,” she said.

“It would delay the critical work that businesses may need to do to pivot in the new Covid environment, and businesses themselves have said that they think that continuing for too long, could run the risk of being harmful for the long term resilience of some of those businesses.”

Ardern said workers would have to move onto the Government’s “income relief” payments, and there was other support for businesses that were struggling.

The income relief scheme, which is expected to cost the Government $1.2b, pays workers who have been turfed out of a job due to Covid-19 income support of $490 each week. The 12-week payments will be available until November.