COVID-19: Fletcher Building boss defends taking coronavirus wage subsidy, laying off 1000, then earning $227m revenue

Unions believe Fletcher Building is one of the companies that should be repaying wage subsidy money.
Unions believe Fletcher Building is one of the companies that should be repaying wage subsidy money. Photo credit: Getty

Unions are calling on Fletcher Building to pay back the COVID-19 wage subsidy after the company laid off 1000 workers and earned $227 million before tax over the next four months.

New Zealand businesses have been paid over $10 billion in wage subsidies. Some, including Mainfreight and Briscoes, are among those to have repaid money they received after later posting profits. 

E tū Union negotiation specialist Joe Gallagher told Newshub Fletcher's, which received the first round of wage subsidies but not the second, should be one of those returning the money.

In May, the company laid off 1000 workers in New Zealand and 500 in Australia. 

"They've come through COVID pretty well," Gallagher said.

"They took it [the first wage subsidy] in good faith - then restructured and 1000 people lost their jobs."

Gallagher said the company has a duty to New Zealand to pay it back. He believes Fletcher's only didn't take the second round of wage subsidies - where businesses had to prove either a 50 percent decline or projected decline - because the company didn't want to keep the 1000 staff it laid off employed. 

"I think they saw it as an opportunity, then they tried to make out they were for not taking the second wage subsidy.

"[It's] pretty poor corporate form. They purport to be a New Zealand company but they really need to take a good hard look at themselves. 

"Their soul has gone offshore."

But Fletcher's is defending not paying back the wage subsidies. Chief executive Ross Taylor said the business was massively impacted by COVID-19 alert level 4.

"Our business was massively impacted by the level 4 lockdown and gradual ramp-up... In our FY20 financial year reported in August, despite a number of measures to reduce our costs, we had a $196 million loss," he said.

"Like so many businesses, we were very grateful for the Government wage subsidy scheme and we used it exactly as it was intended - to pay our people.

"The cost measures we took included 30 percent pay cuts for the board and CEO for six months through to the end of September 2020, no bonuses or salary increases across the business and not paying a dividend to shareholders.

"We also had to make some tough decisions to ensure the resilience of our business longer-term in a highly uncertain environment."

But First Union also believes COVID-19 was used by Fletcher's as an "excuse" to lay off staff.

"Fletcher had a moral responsibility as one of New Zealand's largest companies to use the wage subsidy in an exemplary way," union spokesman Jared Abbott told Newsroom.

"And they have done immeasurable damage to New Zealand as a whole by improperly claiming the subsidy, using COVID-19 as an excuse to make redundancies anyway, and then refusing to pay the subsidy back."

Taylor said while the company had started its financial year strong, the second half of the year was "less clear".

"The reality is the subsidy only covered a portion of the lost revenue and EBIT (earnings before interest and taxes) our business incurred as a result of COVID-19 restrictions and we must continue to manage our costs carefully." 

In September, Infometrics senior economist Brad Olsen suggested those businesses which took wage subsidies and went on to post profits could treat them as interest-free loans. 

"Businesses who have not experienced a 30 percent drop in revenue are expected to pay back the subsidy," he added.