Coronavirus: Why fewer businesses are applying for the wage subsidy this time around

Fewer employers are expected to apply for the wage subsidy this lockdown compared to last year's, an expert says, confident they'll make it through relatively unscathed. 

The wage subsidy is paid to employers who have, or expect to have, at least a 40 percent decline in revenue attributable to the lockdown, to enable them to keep employees on.

Despite being put together in a hurry as the pandemic arrived on New Zealand's shores in March last year, it was a resounding success - unemployment never reached the double-digit levels many predicted, topping out at 5.3 percent. It's since returned to the pre-pandemic level of 4 percent, buoyed by months without any known spread of the deadly virus.

Three-quarters of all companies in New Zealand received financial support from the Government in 2020, Statistics NZ said, supporting more than half of all employees. 

"Last time around remember a lot of companies took the wage subsidy then actually paid it back when we were released from lockdown and consumption came roaring back - those companies did okay and didn't actually need that subsidy," Milford Asset  Management portfolio manager Mark Riggall told The AM Show on Thursday. 

The virus reappeared earlier this month, this time in the form of the highly infectious Delta variant. Rather than gradually moving into lockdown over a few days, like what happened  in March 2020, the country was plunged overnight into level 4. 

The wage subsidy scheme was quickly reinstated, but anecdotally many businesses who took it last time haven't applied yet. Newshub has been contacted by a number of employees saying they had been asked to come into work rather than stay home like they did last year, and Finance Minister Grant Robertson on Wednesday said only one application had been received by a firm with more than 500 employees. 

"Level 4 is very strict and the ability for the economy to continue in this circumstance is quite difficult, nonetheless the momentum we had going into it was very strong," said Riggall. 

"Retail sales were announced earlier this week for the second quarter - they increased 3.3 percent from the previous quarter, so accelerating. All the companies that we talk to are saying similar things - Briscoes accelerating sales growth, up 20 percent from 2019; Freightways seeing accelerating revenues from express deliveries in the six weeks prior to lockdown; Michael Hill, double-digit sales growth. 

"So across the board, we're seeing some very strong momentum in the economy, and that leaves us in a really good place and a really good starting point to weather this lockdown."

A FIRST Union representative told RNZ many big companies "have not liked the scrutiny on the massive profits that they made off the back of COVID", so aren't keen to bother again. Jared Abbott told the broadcaster many companies were also getting away with loose definitions of what constituted essential work, the Government letting them get away with it because it meant less taxpayer money going on the wage subsidy. 

Others are telling employees to use annual or sick leave instead, or not get paid, rather than take the wage subsidy, Abbott said. 

"A lot of these companies use it as an opportunity to get down on the annual leave balances by forcing people to take annual leave or sick leave, now there's increased sick leave provisions."