Stakeholders have a month left to let the government know what they think about the proposed New Zealand Income Insurance Scheme (NZIIS), which Minister of Finance Grant Robertson believes is an enduring solution towards better protecting workers and incomes.
“Schemes like these are common across the developed world,” declared Robertson when the proposal was unveiled in February. “But we need to do what is right for our circumstances. It’s our view that it’s time for an enduring scheme solution for Aotearoa, but we want to know what New Zealanders think of the proposal.”
As announced, the plan is to cover job losses due to redundancy, layoffs, and health conditions and disabilities. Dismissal for poor performance or misconduct, or similarly an employee’s resignation, will not be covered under the proposed scheme.
To be funded by levies on wages and salaries, NZIIS intends to provide enough of a “financial cushion,” giving eligible workers both the time and monetary security to find a good new job, rehabilitate, or retrain for a different career.
Commenting on the proposal, Tyler Wren director and partner Gary Bloxham told Insurance Business: “Agreed [that] in the developed world these schemes are common and do cushion communities and individuals countering job losses.
“However, as a business owner in the current environment where minimum wage increases have come into effect and ACC (Accident Compensation Corporation) charges continue to increase, the added 1.39% will be an additional hit to business, including on wages referencing the current ‘cost of living’ crisis.”
The insurance recruitment specialist was referring to the estimated 1.39% in levies that both workers and employers will have to pay to fund NZIIS.
“These are estimates and will be reviewed after two years,” noted the Ministry of Business, Innovation & Employment (MBIE), which is accepting survey responses and detailed submissions until 5pm on April 26. “They may need to be adjusted from time to time, depending on the number of claims and how long people receive financial support. This is the same way ACC levies work.”
Among the questions being asked by MBIE are the following: “Do you think the levies are good value for the protection and benefits the scheme would introduce for you and for New Zealand? How affordable do you think the levy will be for you? Do you think New Zealand needs the scheme, taking into account what employers and employees will need to pay?”
Earlier this month, Chartered Accountants Australia and New Zealand (CA ANZ) tax team leader John Cuthbertson pointed out that central to NZIIS would be the tax treatment of employee levy payments and insurance payouts.
“Currently premiums paid by employees for private income protection insurance cover are deductible while any insurance payout is taxable on receipt,” noted CA ANZ – the tax team of which wants to engage with Inland Revenue on the matter – on its website.
“This can be contrasted with the tax treatment of ACC earner levy payments and ACC payouts. The earner levy is non-deductible, but ACC payouts are taxable as income in the income tax year received.”
The peak body went on to say: “Another option would be to consider the income tax treatment of grants – think the government’s former wage subsidy scheme. Grants typically replace expenditure (which would otherwise have been deductible or depreciable with the receipt typically being treated as non-taxable).
“In the case of the wage subsidy, the payment was non-taxable to the employer while employees were treated as continuing to derive employment income subject to tax.”
Meanwhile Sharp Tudhope Lawyers partner Shima Grice wrote in a blog post that, if implemented, NZIIS would be a significant addition to the employee relations landscape, describing it as the biggest of its kind since the rollout of accident compensation in the 1970s.
Bloxham, speaking from a recruitment perspective, told Insurance Business: “Salary levels and increases in employee benefits are already under pressure in this upward trajectory when attracting and retaining candidates in critically short markets.
“These changes will factor into hiring decisions by employers; however, correctly administered and managing the knock-on effect for upskilling and training jobseekers into new jobs could be rewarding for those hard-to-fill roles. Time will tell, but business will need to be onside for this major change.”
