Insurance plan

The government’s unemployment insurance scheme would cover 80% of wages


*This story first appeared on RNZ and is republished with permission*

Workers who lose their jobs would be paid up to 80% of their wages for up to seven months under the income insurance scheme offered by the state.

Designed by the government, Business New Zealand and the Council of Trade Unions (NZCTU), the scheme would cover those made redundant, made redundant or where a medical condition or disability significantly affects their working hours.

It would be administered by the ACC and paid for by levies on wages and salaries, with workers and employers each paying around 1.39%.

Finance Minister Grant Robertson announced proposal details, on which the government is seeking comments, this morning. He said there were important lessons to be learned from the impacts of Covid-19 and the value of wage subsidy and resurgence support programs.

“Our proposed program provides economic security to individuals directly and helps them transition into a good new job, as opposed to economic support programs that keep people in their current job even if that role is no longer viable,” Robertson said.

Permanent employers would be required to give four weeks’ notice and pay four weeks’ pay at 80% after termination of employment, after which the scheme would operate for up to six months.

Applicants would be required to seek work or participate in training and rehabilitation.


  • Workers would be eligible after paying six months of contributions in the previous 18 months.
  • Parental leave is covered
  • Fixed-term and seasonal work is covered until the initial date of termination
  • Casual workers who can demonstrate a reasonable expectation of future earnings will be treated as permanent workers
  • People with multiple jobs are eligible if they lose a job that provides more than 20% of their income
  • Comments are requested on the coverage of contractors and self-employed persons. “We want to protect people who genuinely lose their jobs for reasons beyond their control, while not covering people who may choose to close their jobs in order to access the program.”
  • Health and disability related job losses will also be covered, helping to reduce the disparity between accident support and other health conditions or disabilities

NZCTU chairman Richard Wagstaff said such a scheme would act as a financial cushion for the estimated 100,000 New Zealand workers who lose their jobs every year, often through no fault of their own.

“The Covid-19 outbreak is a stark example of this, but widespread job losses have happened too frequently over the past 40 years,” he said.

“Finding a good job takes time. Many people accept lower paying jobs that don’t match their skills due to financial pressure to get back to work quickly.”

Business New Zealand chief executive Kirk Hope said this meant sectors facing critical skills shortages could miss out simply because a vacancy was not available within the few weeks a worker was looking for.

He said the loss of work could also mean people had less to spend, which meant other businesses could suffer.

“A revenue insurance scheme could protect workers and communities from these brutal income losses, giving regions and companies more time to adapt,” he said.

A summary brochure said New Zealand was “almost alone in the developed world” in not having such a system in place.

“Around 200,000 people lost their jobs and found themselves out of work, some for several years, during the global financial crisis of the late 2000s. The Canterbury earthquakes saw successful businesses close almost overnight after their facilities were damaged. The Covid-19 pandemic brought our then largest source of export revenue, tourism, to a screeching halt. At the local level, many examples can be found, such as the closure of the Kawerau Lumber Mill or the Whakatū and Tomoana Freezer Mills in Hawke’s Bay,” he said.

He highlighted changing technology, the shift to a low-emissions economy, changing consumer demands, an aging population and globalization as causes likely to make job disruptions more likely. in the future.

“The proposed income insurance scheme would help make New Zealand a higher productivity economy where businesses generate more value and better returns. The proposal will also create a clearer process for redundancies, with costs more predictable,” he said.

The program was a commitment made in the 2021 Budget. Robertson announced the release of the discussion paper yesterday during a media briefing after a Cabinet meeting.

The consultation ends on April 26.