Wage subsidy for employees creates a cost to business.
While the wage subsidy is a much-appreciated lifeline to help retain employment for staff, employers must still top up the amount and there are still fixed costs that have to be covered by businesses locked down, unable to operate and generate revenue under Level 4.
The resurgence payment is in place to help offset fixed costs, but to be truly useful and achieve its ambitions to keep business in business it should be paid weekly.
Assumptions – the average weekly wage in NZ is $1,587/week, overheads are 50% of wages, and a business has a team of 20.
This would mean that the weekly wage is $31,731 and overheads are $15,865. These costs occur every week. The Resurgence package payment would be $9,500 which is 60% of one week’s costs, but is a ONE OFF payment.
The wage subsidy would be $12,000 paid to employees but to get the subsidy, business must pay 80% of a standard weekly pay which is $25,400 meaning the cost of not being able to operate but maintaining staff is a cost to the business of $13,400 per week.