Holiday Pay and the Wage Subsidy

29 April 2020

The wage subsidy is effectively income/revenue for an employer which, subject to the declaration made, can be used to pay holiday pay as well as ordinary wages.  There is nothing in general employment law which precludes such a use of the wage subsidy.  That view is supported by s86 of the Holidays Act 2003, which provides that holiday pay is to treated as salary or wages earned by the employee; however, that doesn’t mean that holiday is salary or wages – just that it’s to be “treated as” salary or wages. There is nothing in the pre-27 March declaration that requires the wage subsidy to be used in a particular way, and there is nothing in that declaration which prohibits an employer using the subsidy to part pay holiday pay. 

However, the position is different if you made your declaration after 4pm on 27 March because the declaration included two provisions which were not in the earlier declaration:

1. “You will only use the subsidy for the purposes of meeting your named employees’ ordinary wages and salary…”, and 
2. “The ordinary wages or salary of an employee are as specified in the employee’s employment agreement as at 26 March 2020…”

Holiday pay does not come within that definition of “ordinary wages or salary…as specified in the employee’s employment agreement.”  Holiday pay would not normally be considered to be part of an employee’s “ordinary” wages or salary, and is an additional payment which an employer makes to an employee.

Call us for advice on your situation.