COVID-19: Self-employed contractors can claim $2200 a week for six weeks during Omicron outbreak

Self-employed contractors unable to work due to Omicron are able to claim $13,200 of government support over six weeks.
Self-employed contractors unable to work due to Omicron are able to claim $13,200 of government support over six weeks. Photo credit: Getty Images

Thousands of self-employed contractors unable to work due to Omicron are able to claim $13,200 of government support over six weeks.

That's $2200 a week, nearly four times more than the original $600 Covid Wage Subsidy. The finance minister is warning the money has to be used to cover business expenses only, amid expectations some would try to pocket any excess.

One sole-trader recipient described the payment as "generous".

An employment specialist said any wages paid out of this money must to be similar to a normal pay packet, or an auditor might have some questions.

The Covid Support Payment (CSP) is available for businesses which have lost 40 percent or more of their revenue due to the spread of Omicron.

Each fortnight over six weeks, it pays $4000 per eligible business, plus $400 for each employee.

Many businesses would need this money to service fixed costs.

But if you are the only employee in a business and work from home or normally on a worksite, you still get the base payment of $4000 even if you do not have any overheads other than your own wages. It is the equivalent of $55 an hour for six weeks, or nearly three times the minimum wage.

"It's a relief to get something when work is non-existent, but it does feel weird compared to getting the wage subsidy last year," one out of work contractor told RNZ anonymously.

The contractor does not have an office - they either work from home or on site - and has limited business expenses other than wages.

"I'm obviously happy, but yeah - it is generous," he said.

Inland Revenue figures show at least 21,600 individuals have received this payment, at an average of $4100 each, two weeks into the scheme, for a total pay to sole traders of $90 million.

If eligible for the second and third rounds of the scheme, they will have received $13,200 in six weeks.

Small business consultant Max Whitehead said there would be no shortage of businesses right now with a negative bank balance, especially in Auckland after the last two years of on-and-off lockdowns.

"I would think there'd be a lot of debt for them to make up. I think there'll be some people who'll take full advantage of this to try recover from where they've been."

Finance Minister Grant Robertson said this money could only be used for business expenses, which he said was clearly in the terms and conditions in the application process.

Whitehead said some companies would need this money to pay for outgoings and fixed costs. But others might struggle to justify using the full amount on their business unless they paid themselves handsomely.

"Those people that are operating at home on their own and don't actually have significant overheads, I think they could be pushing to boat out a bit far to say they've used all that money. An audit could come in on them and they need to be careful."

Whitehead said if your wages were not normally $2200 a week, and suddenly you were paying yourself that amount out of this money, an auditor might have some questions.

He is advising people to pay themselves genuine wages and other business costs, and the rest should go back to the government.

But the anonymous contractor said paying it back did not actually seem that easy.

"There didn't seem to be any obvious path to do it," he said.

"The application ... doesn't ask you to pay back any excess... And there was no option to choose an amount to receive based on past wages - you get the flat $4400 [if] self-employed."

Finance Minister Grant Robertson said the payments were intended for sole traders and small-to-medium businesses who were less able to deal with financial shocks, and who were down at least 40 percent in revenue.

"The criteria for the CSP is stricter than for earlier payments, and is designed to target businesses most affected by the Omicron outbreak. They must show a 40 percent revenue drop compared to 30 percent for the Resurgence Support Payment," Robertson said.

"It does not include circumstances where firms, which are able to operate under the Red setting, have chosen to close temporarily without taking all reasonably practical steps to minimise losses to their revenue.

"The terms and conditions the business agrees to make it clear the payment must be used to cover business expenses only."