New Zealand: Income insurance scheme proposed

Consultation on social insurance program for New Zealanders

Consultation on social insurance program for New Zealanders

The government is consulting on an “income insurance scheme”—a type of social insurance—for New Zealanders.

Comments are requested by 26 April 2022. If a decision is made to proceed, the government is proposing to introduce legislation in 2022, for the scheme to commence operating in 2023.

Key features

  • The scheme would provide employees (and those in other working arrangements) with up to 80% of their previous income (capped at $130,911*) for up to six months following loss of employment due to redundancy or loss of capacity to work due to a health condition or disability.
  • When an employee is made redundant, their employer would need to give four weeks’ notice and make a “bridging payment” of 80% of the employee’s wages during the notice period. Payments under the scheme would begin after the end of the notice period.
  • Employees would be able to earn up to 20% of their previous income, without abatement of payments made under the scheme.
  • The costs of the scheme would be funded by a 2.77% levy split equally between the employee and the employer (approximately 1.39% each).
  • The levy would apply on income up to $130,911 and, for employees would be collected through the PAYE system and for employers would be collected by Accident Compensation Corporation (ACC) which would also manage the scheme. The scheme would operate two funds to meets claims: one for loss of employment claims and the other for health and disability claims. 
  • To be eligible, employees would need to contribute for at least six months in the previous 18 months preceding a claim.
  • Claimants under the scheme would need to seek new employment, re-train or undertake rehabilitation and remain in New Zealand. 
  • Payments made under the scheme would not be subject to asset testing or reduced because of partner income. Payments however would be treated as a taxable income and may affect calculation of government support that is income-tested.

*$=New Zealand dollar

Read a February 2022 report prepared by the KPMG member firm in New Zealand

 

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