Business continuity planning and govt subsidy update

Updated: May 4

With the country now officially in a state of emergency and nationwide lock-down enforced, many businesses have been propelled into unknown and turbulent territory:

  • Business who can are now operating in remote environments

  • Non-essential businesses have been forced to close for the foreseeable future

  • Executive teams have been pushed to make alternative working arrangements and in some cases redundancies

All of which are having a resounding impact on the way that small kiwi businesses are operating. Suddenly, there’s a huge need to figure out what the best course of action is to keep everything afloat and ticking over as it should be.




So how should kiwi businesses be approaching the effects of COVID-19 in New Zealand?

In this blog, we’ll offer as much practical advice and guidance as possible on business continuity planning straight to you from us at Cinch to help your business not only survive, but thrive and bounce back!

If you have any questions at all about what’s in the content or how to approach the next few months, we’re more than happy to help.


PROTECTING YOUR BUSINESS: CHANGE OR COLLAPSE


The big question, is what can you do to make sure your business continues to operate over the next few months, and protect it from feeling the inevitable impact of the global market recession (if you’re not already in the throws of it)?

There are a few ways any business can go about this. Obviously the last thing business owners want to do is let go of valued staff in times that are so challenging, so before you reach that conclusion, consider these steps.


ASSESS HOW LONG YOU CAN OPERATE WITHOUT A SALE OR ANY CURRENT WORK OPPORTUNITIES


Most businesses are in a negative or neutral cash position. Some will be able to operate for a couple of weeks or months without making a single sale or working prospects, whereas others may only be able to last a day or two.

It’s important to get an idea of where you stand in the worst-case scenario before you make any decisions.


TRIM THE FAT


Layout all of your baseline costs that you’re spending right now as a business, and identify what exactly you need to continue operating. We’d then suggest creating a list of top-level costs that you could cut in an instant if/when you need to.

Are there any subscriptions that you don’t immediately need? Are there any supplier costs that can be reduced? Have you considered contracts that you can opt-out of to shave expenses?

Prioritise what your business can remain operational without, and really figure out a game plan of how you can free-up some cash fast, and reactive urgently when you need to.


MAKE OPERATIONAL CHANGES, FAST


By now, if you’re able to, your business will already be working from home.

That’s one of the biggest operational changes that will occur during this time - and it’s somewhat unclear for how long you’ll be expected to operate under these conditions. That means it’s important as a leader to make sure that your team has everything they need to continue working effectively.

Consider the following:

  • Try to change the way you work, rather than work exactly how you used to - just at home. For example, what roles are required in a remote work environment and how do individual roles change. Is your current structure still relevant?

  • Do your employees have all of the communication tools they need? (phones, internet, messaging apps, video conferencing etc.) If there’s anything missing, set it up.

  • As an employer, have you done all you can to make sure that your employees are safe? While you can’t control the working environment of employees who are at home, you are still required to ensure you continue to eliminate or minimise work health and safety risks so far as is reasonably practicable. It is expected that Employers will continue to look after their people, take a pragmatic approach, and act in good faith at all time.

  • Do you have a process to communicate company-wide changes? As an employee, there’s nothing worse than being left in the lurch, so make sure your internal comms are consistent and ready to go. Communicate, communicate, communicate!

TAKE ADVANTAGE OF GOVERNMENT SUBSIDIES


Fortunately, the New Zealand government has put into place a wage subsidy scheme to help to soften the impact of COVID-19 for those who are left without work to do. If you haven’t already done so, we’d highly recommend reading up on how this might help your business to sustain its employees over the next few months. Some of the latest information around key points are as follows:

  • Employers are now required to declare that they will not make any changes to employment agreements, including rates of pay, hours of work and leave entitlements without the written agreement of the relevant employee. Employers who have already reached oral agreements to change employment agreement terms should seek advice about how to respond to this development.

  • Where paying at 80% of pre-COVID income is not possible, in particular, where there is no business activity due to the shutdown and employees are not working any hours, the employer must at least pass on the full amount of the wage subsidy to employees. In other words, you cannot collect or keep the subsidy if the full amount of it is not going towards paying employees’ wages/salary.

  • Where an employee’s pre-COVID income is less than the wage subsidy, they can be paid their normal (lower) rate. There is no guidance on what the employer can do with the surplus, other than the wage subsidy generally must be used to cover the cost of employees’ wages who are named in the wage subsidy application.

  • When assessing whether to claim for the full-time or part-time wage subsidy, where an employee has (or had) variable hours, use an average of hours worked per week over the last 12 months. This also applies to casual employees, provided as at the date of the application, they are expected to work during the subsidy period.

  • The declaration for the wage subsidy still includes a requirement to provide confirmation that the employees named in the declaration have consented to their information being shared with the Ministry of Social Development. However, the Privacy Commissioner has now publicly declared that the wage subsidy can be accessed without obtaining prior employee authorisation.

  • The declaration requires confirmation that the employer has taken active steps to mitigate the impact of COVID-19 on its business. This has been clarified to include engaging with their bank, drawing down on cash reserves (as appropriate), and/or making an insurance claim.

  • Employers agree to continue employing the employees for whom the subsidy has been sought for the period of the subsidy (12 weeks).

  • The wage subsidy does not change any employment law obligations. Employers must comply with their relevant employment agreements and employment law generally (such as the Employment Relations Act 2000, Holidays Act 2003, Wages Protection Act 1993, Minimum Wage Act 1983).

  • Employers must also declare that they “will not unlawfully compel or require any of the employees named in their application to use their leave entitlements” for the period of the subsidy. This does not prevent an employer agreeing with those employees that they will use their leave entitlements, or requiring them to do so in accordance with the rules in the Holidays Act 2003.

All of the key information can be found here.


RETHINK WHAT YOU HAVE TO OFFER


If you’re fortunate enough to be in an industry where you’re still able to operate, this is a good opportunity to reconsider what you have to offer your clients or customers and how you can adapt the skill sets within your company to better serve other businesses who are experiencing the impacts of COVID-19.

That means pivoting your current strategy and offerings to help to solve your client’s problems, and potentially developing new services to suit this new way of working.

The idea is that no matter who you are, there are huge market shifts happening and you’ve got to be as prepared as possible to manage them. Work towards being in a position to take advantage of the opportunities that occur on the other side of a recession (like online services, asset sales and even looking out the other side to awesome workers looking for jobs) now, so that when the time comes, you’re ready to act and have a solid plan in place.


IF YOU HAVE TO LET SOMEONE GO, HERE’S WHAT YOU NEED TO KNOW.


The unfortunate reality of this unprecedented situation is that in some circumstances, the only option is to either place someone on unpaid leave or to further reduce costs by making non-essential staff members redundant.

It’s a really tough thing to do, and it’s important that it’s handled fairly, legally and with that. We strongly recommend consulting with an HR or Legal Adviser to make sure you’re complying with workplace regulations, contractual obligations and acting fairly and with due diligence.

The same goes for general workplace changes during a time of uncertainty - Employers must comply with their relevant employment agreements and employment law generally (such as the Employment Relations Act 2000, Holidays Act 2003, Wages Protection Act 1993, Minimum Wage Act 1983). if you’re not sure how to approach anything, we are a call away and here to help.

Feel free to get in touch.

10 views