Big firms take up wage subsidy as lockdown bites
The Government paid out just over $17 million to 69 companies with more than 100 staff in the first two-week tranche of the August 2021 wage subsidy programme, according to a Herald analysis.
But the payments are likely to rise significantly with Auckland entering its fourth week in level 4 and Air New Zealand having just claimed $8.59m for the second two-week period.
The first batch of large companies to receive the wage subsidy range from recruitment and labour hire firms to retailers such as Postie Plus to a handful of McDonald’s franchisees.
The total payout of $17.17m is tiny compared to the $998m paid out to 242,600 businesses in total, as revealed by Finance Minister Grant Robertson on Friday.
Robertson noted that a smaller portion of large companies had claimed the wage subsidy than during previous Covid-19 lockdowns. But that was before the second two-week application period had opened, which now has seen the likes of Air New Zealand step forward with a $8.6m claim to cover 7218 staff salaries.
Air NZ chief executive Greg Foran last month told the Herald the airline needed to cover about $5m a week in wage costs. In the year to June 30, it was paid $56m in wage subsidies, part of $450m in government support, mainly payments under its freight scheme for airlines.
“It’s [the wage subsidy] absolutely critical for us. It doesn’t solve everything but it certainly helps so that is well under way already,” Foran said.
On Friday Robertson said 2.5 per cent of the initial payments had been made to businesses with more than 100 employees while 59 per cent of payments had been made to businesses with fewer than 20 employees.
The largest recipient from the first round of payments was recruitment agency One Staff, which claimed $1.29m between its offices in Auckland, Hamilton, Bay of Plenty, Palmerston North and Christchurch.
Metropolitan Glass and Glazing, a subsidiary of NZX-listed Metro Performance Glass, received $1.08m for 902 staff.
Wellington Hospitality, which operates numerous pubs in the lower North Island, was the third biggest recipient, claiming $905,470 for the two-week period.
Several McDonald’s franchisees also claimed the subsidy in the first round, including some now operating under level 3 restrictions that allow drive-through takeaways.
They include Wellington’s Cinos Holdings, 5X Limited of Hamilton, Dunedin-based CLNS Investments and Stonelake Corporation, which has outlets in Dunedin and Southland.
McDonald’s spokesman Simon Kenny said all the franchisees are small- to medium-sized businesses in their own right, employ their own staff and make their own decisions regarding the wage subsidy.
“If a franchisee qualifies for and uses the subsidy for the purposes stated then we support them. These payments are used to pay staff and keep them employed. Each franchisee has a very different business, including number of restaurants and staff, impact of alert levels on those restaurants, tenure, and levels of debt and equity.”
He noted that all McDonald’s restaurants were closed during level 4, and will operate with significant restrictions and business impact under level 3 and 2.
“Our franchisees collectively employ over 8000 people, and we are proud that they have been able to retain their people as they have worked through the various alert level changes over the last 18 months.
“While our Drive-Thru may appear busy in media coverage on the first day of reopening, in reality it takes more than 60 seconds more to serve each car due to alert level 3 safety measures. After the initial excitement of alert level 3, sales drop to well below typical volumes. This is further impacted by operating without a dine-in and front counter, which would typically account for 40 per cent of trade.”
Last year, the wage subsidy initially covered a 12-week period and then a subsequent eight weeks for the 2020 August Auckland lockdown, paying out $14 billion.
A number of large companies, including The Warehouse, Briscoe Group and several retirement villages, repaid part or all of the subsidy after reporting bumper profits.
Others, like family-owned infrastructure giant Fulton Hogan and retailer Harvey Norman, declined to repay theirs.
Businesses can also access the resurgent payment support scheme from the Inland Revenue, which is a one-off pay-out based on a 30 per cent revenue drop over a seven-day period, which can be used for business expenses.
Businesses can claim $1500 plus $400 per full-time equivalent employee up to a maximum of 50 fulltime employees. Sole traders can receive a payment of up to $1900.
Robertson said more than $454 million worth of these payments have been paid out since the start of the outbreak to more than 147,000 businesses.