Income insurance scheme proposed to protect workers and benefit business

The government is consulting on the proposed New Zealand Income Insurance Scheme.  The scheme would see workers who are made redundant or who have to stop working because of a health condition or disability receive 80 percent of their usual salary for up to seven months, up to the current ACC cap. The proposal also includes up to twelve months of support for re-training.

Items in the proposed scheme include:

1. Broad coverage for different working arrangements
2. Coverage for job losses due to redundancy, layoffs and health conditions and disabilities
3. A four-week notice period and four-week payment, at 80 percent of salary, from employers
4. A further six months of financial support from the scheme, including support for training at 80 percent of wages or a salary
5. The costs of the scheme will be funded by a 2.77% levy split equally between the employee and their employer
6. A case management service to support people’s return to work
7. Administered by ACC, expanding the ACC workload
8. Funded by levies on wages and salaries, with both workers and employers paying an estimated 1.39 percent each
9. Workers eligible after six months of levy contributions in the previous 18 months.

To be eligible, employees will need to contribute for at least six months in the 18 months before a claim.  Claimants under the scheme will need to seek new employment, re-train or undertake rehabilitation and remain in New Zealand. Payments made under the scheme will not be subject to asset testing or reduced because of partner income. Payments will be treated as a taxable income and may affect calculation of Government support that is income tested, such as Working for Families.

If implemented, this would be a significant addition to the employee relations landscape, the largest of its kind since the introduction of accident compensation in the 1970s, as New Zealand currently has limited support for displaced workers and those with health conditions or disabilities.  The intention is that the scheme would “smooth incomes”, so people do not face abrupt falls in income and the associated financial and mental stresses due to loss of work.

Full information and proposals can be viewed at www.mbie.govt.nz/incomeinsurance

You can have your say by completing an anonymous online survey or providing a submission.  Consultation closes on 26 April 2022.