The pending NZ Income Insurance Scheme Blog 2 of 4
Blog 2 - Impact on Individuals
In our first blog, we gave an introduction into the New Zealand Income Insurance Scheme (NZIIS) click here.
Today, in our second blog, we look at the impact on the individual, the employee.
The NZIIS is designed to provide cover should an employee be made redundant or become incapacitated due to health issues or disabilities.
Who is eligible: people who are laid off, made redundant, get a health condition or a disability.
Redundancy: employers will be required to provide four (4) weeks redundancy pay. This will precede any NZIIS payment you get.
Criteria 1: employees must be actively looking for work or take part in training or vocational rehabilitation.
Criteria 2: employees must have worked for 6 months in the last 18 months.
Fixed Term / Seasonal Contracts: only covered up to the fixed term date.
Casual Contracts: if the worker can show a regular pattern with an employer, they will get full support.
Multiple Jobs: if employees lose more that 20% of their income, they can be topped up to the 80% cap.
Self-Employed: no idea!! This space requires ongoing work as it is going to be difficult to determine what is just standard business with jobs finishing versus losing work. The self-employed will need to show similarity to being laid off or made redundant.
Means Tested: no, this does not apply.
Is there a Cap: yes, just like ACC, there is a maximum cap that is just over $130,000 of income. At this stage there is no minimum cap like ACC although the minimum wage will have an impact on this.
Health Impact: the benchmark is a minimum 50% reduction in the capacity to work for at least 4 weeks or more.
Health / Disability Controls: at this stage, we presume that this is going to be managed via the Medical Certificate – no different to an ACC claim.
The Impact on employees is that they will receive 1.39% less in their pay packet. This is on top of the 1.41% that is already paid directly to ACC. To put the additional cost into dollar terms:
Ok, so its going to cost and we get that there has to be some kind of tax to pay for it. That said, given private insurance can and do already cover similar things (i.e. income protection insurance, surely the scheme will align with other insurances?
Private Insurance: if employees have private insurance (i.e. income protection, redundancy cover as part of their house insurance) then this is treated as income and will offset what they can get from the NZIIS.
Don’t Want It: at this stage, it does not appear individuals can ‘opt’ out.
Level of Cover: at this point it does not look like people can lock in a set amount and pay accordingly (like with CoverPlus Extra). For instance, if you earn $100,000 but you only want $50,000 of cover you should be able to pay for only the $50,000 of cover.
Shareholder Salary: this is technically an allocation of profit not a recognition of work done. With ACC, this is treated differently where you must proof loss of income. It is unclear if this applies.