Subsidy rort must end, says academic
Large and profitable companies are ‘‘rorting the system’’ by picking up Covid-19 wage subsidies despite being able to sustain themselves financially, an independent researcher says.
To help businesses through the coronavirus pandemic, the Government provided employers the opportunity to apply for a wage subsidy for each staff member, so long as certain criteria were met.
As of Friday, the scheme has paid out $10.4 billion to support the incomes of more than 1.6 million New Zealanders.
However, disquiet is growing over companies that have claimed the subsidy while also asking their workers to bear financial pain without seemingly going back to their shareholders for money first.
The wage subsidy has been used by the likes of SkyCity Entertainment Group, Fletcher Building, Restaurant Brands, Auckland International Airport, Summerset Group Holdings, Nga¯i Tahu,
Kathmandu Holdings, Kmart and Harvey Norman, to name a few, along with exclusive lodges, golf clubs and gentlemen’s clubs.
Michael Gousmett, an independent researcher and adjunct fellow at the University of Canterbury, said many businesses were ‘‘rorting the system’’ by claiming the subsidy despite being able to sustain themselves financially.
While they may be acting legally, it did raise questions around morals, he said.
‘‘Everybody has just jumped on the bandwagon and seen it as a bit of a goldmine,’’ Gousmett said.
SkyCity for example, received nearly $22 million in wage subsidies, yet made $450m off asset sales during the past financial year along with a $144.6m profit. It also paid $135m of dividends to shareholders.
In response to the coronavirus pandemic, SkyCity has laid off 200 staff, cut pay to 900-odd staff and asked its workforce to contribute to a hardship fund to support redundant colleagues.
SkyCity’s reasoning was that it expected to be a much smaller operation when it fully re-emerges.
Asked whether it had explored raising capital, the company said only that it had ‘‘sufficient liquidity’’ at present and would ‘‘evaluate SkyCity’s longer-term funding requirements and a range of options for satisfying these’’.
Gerard Hehir, the national secretary of casino workers’ union Unite, questions whether the company really tried hard enough.
‘‘Last year they were boasting they had $450m in the bank . . . The first place they could look is their own bank accounts.’’
Gousmett said while the horse had already bolted in this crisis, the wage subsidy ‘‘lolly scramble’’ must provide lessons for the future. ‘‘When is it fair for organisations of this size to be benefiting from the taxpayers’ purse?’’
There should be more obligation on large businesses to dip into cash reserves or go to shareholders before applying for wage subsidies or asking staff to take pay cuts, he said.
Many companies have asked workers to take a short-term pay cut, usually in line with directors and managers, to help the company through the lockdown.
But Chloe Ann-King, the founder of workers’ rights group Raise the Bar, said a wave of redundancies suggested that some companies have forgotten to go back to the owners, especially if they are taking the wage subsidy.
‘‘Employment law is very clear – employers must exhaust options such as filing for insurance [or] taking out bank loans.
‘‘I don’t care if they have to liquidate assets and sell their holiday homes to pay their workers 100 per cent of their wages.’’
Steven Moe, a senior associate at Parry Field Lawyers, said things might have changed in the Covid19 era. ‘‘The [wage] subsidy, pre-27 March, 2020, required employers to agree . . . that they would use ‘best endeavours’ to retain staff for the period of the subsidy.
‘‘After March 27, this was strengthened to employers agreeing they wouldn’t make staff redundant at all.’’
Clothing company Kathmandu moved swiftly to recapitalise. With stores here and overseas closed, it asked the Government for wage subsidies of just over $3.6m for its 601 staff. Staff and management took a 20 per cent pay cut across the board.
But the company also asked shareholders to bear some of the pain, raising $207m from them and institutional investors.