80% pay for 7 months under proposed unemployment insurance scheme

New details have been released about the Government's proposed income insurance scheme - which could potentially see people receive 80 per cent of their salary for up to seven months, alongside a year of support for re-training.

It would apply to workers who were made redundant, laid off, or who had to stop working because of a health condition or disability.

The proposed scheme would require a four-week notice period and four-week payment at 80 per cent of their salary from employers, then a further six months of support that would come from the scheme, which could include support for training at 80 per cent of wages or a salary.

It would be administered by ACC and funded through an estimated 1.39 per cent levy on wages and salaries, with both workers and employers paying. Workers would be eligible after six months of contribution in the previous 18 months. The Government would also be looking at the levies low-paid workers would have pay.

People could take on casual or part-time work, allowing them to earn up to 20 per cent of their previous income before the insurance payments were impacted. The scheme would be capped at salaries of $130,911 a year.

The Government has launched consultation on the scheme, which was designed by the Government, Business New Zealand and the New Zealand Council of Trade Unions (NZCTU).

Finance Minister Grant Robertson said they thought it was time for an "enduring solution" to situations such as the economic impact caused by Covid-19, where the wage subsidy was used with the intention to keep staff employed by businesses.

"Our proposed scheme provides economic security to individuals directly, and supports them to transition into a good, new job, as opposed to economic support packages which keep people in their existing job even if that role is no longer viable," Robertson said.

NZCTU president Richard Wagstaff said the scheme "would give people the time and financial security to find a good, new job that matches their skills or to rehabilitate or retrain".

"A job loss often results in a significant income shock that can affect wellbeing and earnings, even when a person finds new work. That’s because finding a good job takes time. Many people accept lower-paid jobs that don’t match their skillset because of the financial pressure to get back to work quickly."

Business New Zealand chief executive Kirk Hope said it could "cushion workers and communities from such abrupt income losses, allowing more time for regions and businesses to adapt".

National's Christopher Luxon called it 'Labour's job tax".

"National has big concerns that Grant Robertson’s new unemployment insurance will make the cost of living crisis even worse. It’s a new tax, reducing incomes at a time when with high inflation businesses and workers can’t afford it.

"Calling this new tax a ‘levy’ or a ‘contribution’ doesn’t disguise the fact that this will be yet more money flowing from hard-working New Zealanders and businesses to this big-spending Labour Government."

Green Party's Ricardo Menéndez March said the scheme risked embedding a two-tier system.

"Under the Government’s current proposals support will be available to people based on their current income and work history," he said.

"This means lower levels of support for those who have been earning less, including those in casual or seasonal work, and/or those with caring responsibilities. Because of who predominantly does this type of work, we know that it will be young, female, and Māori and Pacific people who will get the lowest payments from this long-awaited new scheme."

The discussion document stated it intended to cover a broad range of work.

"By designing a scheme that covers as many people as possible, we’re helping to establish a scheme that is fair and equitable," it said.

The Government revealed in 2021 it was proposing an ACC-style unemployment insurance scheme, along with a 2020 election promise.

It looked to provide about 80 per cent cover for a limited time after a person loses their job, and was linked to training opportunities.

Robertson said at the time the scheme “would cushion the impact of a job loss”.

“It would give workers the financial stability to find the right job for their skills, or to retrain for a new, fulfilling career path,” he said. “Covid-19 has exposed how vulnerable employment can be, and the risk to dramatic income loss from employment to unemployment.”

Robertson told media it was a “work in progress”, with a target of implementation in 2023.