The Shout Magazine (New Zealand)

End of wage subsidy will “drastically affect” NZ hospitality industry

Bar owners and industry experts are concerned that the end of the wage subsidy scheme will have a severe impact on the New Zealand hospitality industry in the coming months.

Prime Minister Jacinda Ardern announced on June 5 that the scheme will end in September, three weeks before the election.

“We have clearly signalled the wage subsidy is not something can go on for the never-never,” she told the Labour Party congress.

Ardern said that continuing the wage subsidy beyond the current cut-off date of September 1 would risk delaying “the critical work that businesses may need to do to pivot into the new COVID environment.”

She told journalists that businesses themselves have said that continuing for too long could “run the risk of being harmful for the long-term resilience of some of those businesses”.

The wage subsidy has reportedly cost just over $12 billion and covered 1.7 million employees, according to the Ministry of Social Development’s latest update.

Bridget MacDonald, Executive Director of the New Zealand Alcohol Beverages Council says wage subsidies have assisted with keeping more Kiwis employed because wages are the number one cost for most hospitality businesses.

Bridget MacDonald

“Subsidies have provided a buffer while they work on how to operate in our ‘new normal,” MacDonald told The Shout NZ.

“We’ve seen restaurants, bars and cafes working hard to adapt to challenging circumstances. They have pivoted by focusing on increasing productivity through technology, but for some, it’s meant operating with fewer staff or reducing opening hours.

“The reality is we are a people-led industry, and customer service is at our core, we need people in our businesses to be able to keep our doors open.”

MacDonald says the hospitality sector has been hit harder, earlier and longer than other sectors and the NZABC would like to see assistance in the form of a working capital grant.

“What we do not need is for businesses to accrue more debt – that seems to be only other option provided by Government,” she says.

“While some businesses are thriving, especially over holiday periods, we know that level is not likely to be sustained on regular weekdays, and others will struggle over the quieter winter months particularly those who previously relied on international tourism.

“We need targeted sector support because we know the road to recovery will go well beyond the end of September when the wage subsidy ends.”

Callum O’Brien, founder of Auckland bar Saint Alice, says the end of the wage subsidy will drastically affect the hospitality industry.

“Whilst the last few months have been the toughest most operators would have experienced in their careers, the wage subsidy has helped operators like us push through the worst of it,” O’Brien told The Shout NZ.

Callum O’Brien

“The reality is that the subsidy was never going to continue forever, and operators are going to need to find ways to be smarter and run their businesses leaner, the ones that don’t will be the ones who struggle to come out the other side.

“We’ve made significant changes at Saint Alice over the last few months to maximise revenue and minimise costs. This has all been done with the thinking things are going to be extremely tough in the 6-18 months ahead – especially so once the subsidy ends.”

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