Updated 29 April 2020
With the crushing economic impact of COVID-19 on businesses around the country, many have been eagerly waiting for implementation of the government’s “Jobkeeper” payment scheme. With it, employers hope to maintain their staff, and by it the government hopes to both sustain business through the turbulent next few months and stimulate the economy in the process.
But how does the Jobkeeper scheme work, who qualifies for it, and how do you get it?
JobKeeper Scheme In a Nutshell
The Coronavirus Economic Response legislation:
- finalises the qualification rules for the $1,500 per fortnight JobKeeper payments; and
- permits qualifying employers to make JobKeeper enabling directions, including reducing employees’ hours because of COVID-19 without triggering a right to redundancy pay.
On 24 April 2020 the ATO published 7 alternative qualification tests for employers.
On 28 April 2020 the ATO extended the deadline for enrolment for employers to receive reimbursements from the commencement of the scheme (30 March 2020) to 31 May 2020.
Employers should now:
- finalise their assessment of whether they qualify for the scheme under the default turnover decline test;
- if they have ruled out qualification under the default test, consider whether they qualify for the payments based on one of the alternative tests;
- gather the information identified below for their JobKeeper payment application; and
- consider whether they can make JobKeeper enabling directions as part of their COVID-19 crisis management strategy.
Which employers qualify?
- The default test: Businesses with turnover of less than $1 billion will qualify if their turnover has fallen or will likely fall by 30% or more (50% or more for businesses with higher turnover) when compared with the comparison period of the equivalent month/quarter in 2019.
- The alternative tests allow certain businesses to use a different comparison period (identified by the ATO at this link) to demonstrate the 30% or 50% turnover decline, namely businesses that:
- commenced within the last 12 months;
- had irregular turnover in the last 12 months (where turnover in the best quarter was double the turnover in the worst quarter);
- restructured within the last 12 months, affecting turnover;
- substantially increased their turnover in the last 12 months;
- experienced an acquisition or disposal within the last 12 months, affecting turnover;
- experienced a drought/natural disaster in the last 12 months; or
- are sole traders or small partnerships, where there was an absence in the last 12 months, affecting turnover.
- Qualifying businesses must pay each qualifying employee $1,500 per fortnight (even if that means a pay rise). The business will then be reimbursed the JobKeeper payment.
- The reimbursable period is 30 March 2020 to 27 September 2020.
Turnover is calculated as it is for GST purposes and as reported on Business Activity Statements. GST turnover may be projected based on a bona fide business plan, accounting budget or some other reasonable estimate.
Employers do not need to make superannuation contributions in respect of JobKeeper payments.
The Treasury’s updated FAQ document is a useful resource for further guidance.
Which employees qualify?
Employers who believe they will qualify for the JobKeeper payments are responsible for identifying the qualifying employees.
Qualifying employees are those who:
- were employed as at 1 March 2020 and are currently employed (including those stood down or re-hired in the interim);
- are permanent (full-time or part-time) or long-term casuals (see below);
- are at least 16 years of age at 1 March 2020;
- are an Australian citizen, the holder of a permanent visa, or a Special Category (Subclass 444) Visa Holder at 1 March 2020;
- were a resident for Australian tax purposes on 1 March 2020; and
- are not receiving a JobKeeper payment from another employer.
Long term casuals for the purposes of the legislation:
- are those employed on a regular and systemic basis for at least 12 months as at 1 March 2020; and
- will only qualify if they are not a permanent employee of another employer.
Evidence of “regular and systematic” employment may include payslips or rosters demonstrating a pattern of employment sufficient to establish a reasonable expectation of continued engagement.
Employers who are unsure whether an employee will qualify for a JobKeeper payment (particularly a casual employee) should carefully assess the employee’s eligibility before paying them the $1,500 per fortnight “JobKeeper wage”, to avoid being out of pocket. This is because the ATO will only reimburse the amount once paid to a qualifying employee.
What are the JobKeeper enabling directions?
An employer who qualifies for the JobKeeper payments unlocks the “JobKeeper enabling directions” for the qualifying period. These are new and additional powers given to employers who qualify for the JobKeeper payments.
Stand down and reduced hours
A qualifying employer may direct an employee who receives the JobKeeper wage not to work, or to reduce their ordinary hours or days, if they cannot be usefully employed for those hours/days because of:
- the COVID-19 pandemic; or
- government initiatives to slow the transmission of COVID-19.
Crucially, provided the stand down meets the required conditions set out below, it will not trigger an entitlement to redundancy pay.
Alternative duties & location of work
A qualifying employer may direct an employee who receives the JobKeeper wage to perform any duties that are safe and within the:
- scope of the employer’s business operations; and
- employee’s skill, competency and (where relevant) licenses/ qualifications.
Similarly, a qualifying employer may direct an employee who receives the JobKeeper wage to work from an alternative location that is safe, suitable for those duties and not an unreasonable distance from the employee’s home.
Annual leave
A qualifying employer may direct an employee who receives the JobKeeper wage to take annual leave at their base rate of pay (which cannot be lowered as part of the JobKeeper scheme), or double annual leave at half pay, provided the employee is left with an annual leave balance of at least two weeks.
What conditions must be met?
There are a number of conditions an employer must meet to validate the JobKeeper enabling directions identified above. This means employers should carefully consider each proposed direction on a case-by-case basis.
Significant conditions include:
- Minimum payment guarantee: Under the JobKeeper scheme a qualifying employer must pay a qualifying employee at least $1,500 per fortnight, even if that means a pay rise for the employee.
Further, the employer may not reduce any employee’s rate of pay – only the hours or days they work. This means the relevant employee must receive the greater of:
- the $1,500 per fortnight JobKeeper payment; or
- the amount payable to the employee in relation to the actual work performed during the fortnight.
In other words, if an employee receiving the JobKeeper wage works more than $1,500 worth of hours during a fortnight, their employer must pay the employee for their additional hours at their normal rate (including overtime, loadings, allowances, bonuses etc.).
- Continued employment: The directions to take annual leave or work alternative duties/ from alternative locations will be invalid unless the employer has information that leads it to reasonably believe the direction is necessary to continue the employment of one or more employees.
- Reasonableness: The direction will be invalid if it is unreasonable in all the circumstances. The new legislation specifically notes an employee’s carer’s responsibilities are relevant to whether the direction is unreasonable, but does not provide further guidance. The Fair Work Commission will have a wide discretion to determine the reasonableness of the direction.
- Notice and consultation: The employer must first consult with each relevant employee about the direction, and then give them at least 3 days’ written notice of the direction.
What should employers do now?
JobKeeper payments
Employers should assess whether they qualify for the JobKeeper payments, including under the alternative tests.
If so, employers should take or prepare to take the steps identified by the ATO at this link. Employers should take particular care in:
- gathering the information (BAS, business plans, accounting budgets and other reasonable estimates) for the period they intend to claim the payments, and the information for the comparable period;
- identifying the employees who are entitled to receive the JobKeeper wage; and
- gathering the required information for the relevant employees, to ensure they are comfortable they will qualify – particularly in respect of long-term casuals.
JobKeeper enabling directions
Once an employer is comfortable they qualify for the JobKeeper payments, they should consider using the JobKeeper enabling stand-downs as part of their broader COVID-19 crisis management strategy.
This will require a careful assessment of:
- each proposed JobKeeper direction;
- the employees who may be subject to that direction; and
- the conditions the employer will need to satisfy to validate a JobKeeper enabling direction and manage the risk of a claim.
