Paying your employees during COVID-19: Is your business entitled to JobKeeper?
On 30 March 2020, Prime Minister Scott Morrison announced that the Commonwealth Government will roll out a $130 billion wage subsidy program, called the JobKeeper Payment. The temporary subsidy is aimed to assist businesses and employees who have been significantly impacted by COVID-19.
This update provides some preliminary comments on the JobKeeper scheme – however, current legislation should be consulted to confirm eligibility.
The Rules were released on 9 April 2020 and updated on 1 May 2020, so employers are encouraged to review the ATO website, Treasury website
and the Fair Work Ombudsman website for up-to-date information.
What is the JobKeeper Payment?
In summary, the Government will provide eligible businesses a flat payment of $1,500 (before tax) per fortnight for each eligible employee. The subsidy will start on 30 March 2020 and will last for a period up to six months.
The payment is designed to help businesses that have suffered reduced turnover to cover the costs of their employees’ wages, keep people in their jobs, and to maintain employer-employee connections so that businesses can reactivate operations quickly without having to rehire staff once the pandemic is over.
Which employers are eligible?
An employer is eligible if:
- the turnover of the business has reduced by more than 30% relative to a comparable period (of at least one month) a year ago
- if the business had a turnover of $1 billion or more, it can demonstrate a reduction in revenue of 50% or more
- it is not subject to the Major Bank Levy (that is, it is not a bank).
Not-for-profit entities (including charities) and self-employed individuals that meet the turnover tests are also eligible. The amendments to the Rules made on 1 May 2020 expand the JobKeeper scheme to more charities and also modify the treatment of certain payments for the purposes of the decline in turnover test.
Which employees are eligible?
The JobKeeper Payment applies to full-time, part-time employees and long-term casuals employed on 1 March 2020. Casuals will only be eligible if they have been employed on a ‘regular basis’ for a minimum of 12 months at 1 March 2020. Casuals employed for less than 12 months will be ineligible and should be advised to apply for the alternative JobSeeker Payment.
Eligible employers must give notice, in writing, to each individual who is a relevant employee of the employer that the employer elected to participate in the JobKeeper scheme (the ‘one in, all in’ principle). An individual is a ‘relevant employee’ if the individual is an employee of the employer (unless the employer reasonably believes they are not eligible).
Recipients must be an Australian citizen, the holder of a permanent visa, a Protected Special Category Visa Holder, a non-protected Special Category Visa Holder who has been residing continually in Australia for 10 years or more, or a Special Category (Subclass 444) Visa Holder. Employees must be aged at least 16 or above to receive the payment and if aged 16 or 17 years on 1 March 2020 must either be ‘independent’ (under the Social Security Act 1991) or not undertaking full-time study.
The JobKeeper Payment is also available for employees that have already been stood down, or who have been terminated from their employment (for example, by way of redundancy or eligible casuals who were advised they had no further shifts) since 1 March 2020. For former employees to be eligible to receive the JobKeeper Payment, the employer will need to ‘re-hire’ such employees. There is no obligation for the employer to provide shifts to stood down workers - so long as they are kept ‘on the books’, they will be entitled to the payment.
Self-employed individuals are also eligible to receive the JobKeeper Payment.
Employers must notify employees that they are being paid JobKeeper Payments.
How are payments made?
An employer will be paid $1,500 per fortnight per eligible employee. These payments will be made by the Australia Taxation Office (ATO) in the first week of May 2020 and will then be made monthly in arrears.
Payments will be made as follows:
If an employee ordinarily receives $1,500 or more in income per fortnight (before tax) and is still working: The employee will continue to receive their regular income according to their prevailing workplace arrangements. The JobKeeper Payment subsidy will assist the employer to continue operating by subsidising all or part of the income of the employee.
For example, Anne is a full-time employee who ordinarily earns $3,000 per fortnight before tax. As a result of JobKeeper Payment, her employer continues to pay her $3,000 in wages, but will be reimbursed $1,500 from the government. This means the employer will only pay Anne $1,500 of the $3,000 salary from its own pocket.
If an employee ordinarily receives less than $1,500 in income per fortnight (before tax): The employer must pay their employee, at a minimum, $1,500 per fortnight before tax.
For example, Nick is a permanent part-time employee who earns $1,000 per fortnight before tax. His employer continues to pay him $1,000 per fortnight before tax, plus an additional $500 per fortnight before tax, totalling $1,500 per fortnight before tax. The employer will then receive $1,500 per fortnight before tax from JobKeeper Payment which, in effect, subsidises Nick’s entire salary. Nick is $500 better off under this scheme than otherwise.
If an employee has been stood down: The employer must pay the employee $1,500 per fortnight before tax. The employer can, but is not required to, top up the employee’s income.
For example, Eugene was stood down due to the impact of COVID-19 and the employer is not able to provide him any shifts for the short term. The employer would simply pass on the JobKeeper Payment in its entirety to Eugene each fortnight.
Is superannuation payable on JobKeeper Payments?
Whether superannuation is payable depends on an employee’s salary.
Superannuation is payable according to ordinary rules for payments to employees for ordinary time earnings (even if the funds for those payments are received through the JobKeeper Payment scheme). Therefore, superannuation is still payable for payments made to cover an employee’s usual wages.
Using the example of Anne above, because she ordinarily receives a fortnightly payment of $3,000, superannuation will be payable on her entire salary (even though $1,500 of her salary comes from JobKeeper Payment).
However based on the information to date, superannuation is not payable for payments to employees which are in excess of an employee’s usual wages. The Government has said that ‘it will be up to the employer if they want to pay superannuation on any additional wage paid because of the JobKeeper Payment’.
Using the example of Nick above, the employer will be required to pay the superannuation guarantee on the $1,000 per fortnight of wages he is earning. However it has the discretion whether to pay superannuation on the additional $500 (before tax) paid under the JobKeeper Payment.
For employees who have been stood down without pay, superannuation is not payable on the JobKeeper Payment.
How to apply for JobKeeper Payment
Employers must register through the Australian Taxation Office portal, which can be accessed here.
Frequently asked questions
Q: What do I do if I can’t afford to pay staff until May?
A: We recommend you speak to your bank as soon as possible about your arrangements.
Q: Will employers be reimbursed for salaries paid to employees throughout April?
A: Based on the information available, eligible businesses can begin distributing the JobKeeper Payment immediately and will be reimbursed by the government from the first week of May.
Q: Are local councils entitled to JobKeeper Payment?
A: Based on information to date, local government employers are not eligible for the payment, however eligibility may be extended to cover such employers/employees and we will monitor any developments.
Q: What if I have made my employees redundant? Can the JobKeeper Payment assist me?
A: If you have already made an employee redundant, you can choose to re-employ them and stand them down as an alternative. If entitlements were already paid out, employees will likely be entitled to retain severance payments which they received on termination, though employers may seek to negotiate terms upon which they may be able to re-hire retrenched employees, taking care to always comply with applicable industrial instruments. This situation is likely to be treated in the same manner as though they have been re-employed. Specific advice should be sought in these circumstances as some entitlements may be treated as if service was continuous.
Q: What if an employee has more than one employer?
A: Where an employee has more than one employer, they can only receive the JobKeeper Payment from their primary employer. If the employee has claimed the tax free threshold from one employer, this is treated as nomination of the primary employer and no further action is required. Where the tax free threshold is not claimed, employees will need to notify an employer to claim the JobKeeper Payment on their behalf.
Q: What if my employee has already claimed JobSeeker Payment benefits?
A: The employee needs to contact Centrelink and advise them that they will now receive JobKeeper benefits.
Maddocks has produced guides on legal issues raised by the coronavirus which may be of interest, and we encourage you to share these with colleagues who may also find them useful.
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