The government’s $130 billion stimulus package is aimed at keeping workers with their current employers. HRM breaks down who is eligible, and highlights criticisms of the scheme.
Update: The Government has announced that JobKeeper payments will be extended until March 2021, however JobKeeper 2.0 will look different to the initial scheme. Read HRM’s article from 21 July 2020 for up-to-date information.
Eloise Alcock works in the hospitality industry. For the last eight months, she’s been balancing three different jobs in order to save for a big three month trip to Central and South America. Like many other Australians, her travel plans have been thwarted. What’s worse is that she will not be eligible for the new $130 billion wage subsidy, JobKeeper.
Casual workers who have worked with their employer for less than 12 months are among those who will not receive JobKeeper money.
“It was disheartening. It’s really common for people in hospo jobs to jump from job to job; everyone moves really quickly because they want a change of scenery,” says Alcock.
“I get that there need to be rules in place, but I think the rule should apply to anyone who has been working in the industry for over 12 months, not just with the same employer.”
Alcock’s situation is far from unique. Approximately one million workers are in the same boat. These casual workers aren’t the only critics of the scheme. Business leaders have concerns about the proposal’s ability to mitigate enough of the downturn caused by COVID-19. And academic experts have flagged that it could be viewed as inequitable. Perhaps most worryingly, there are those who foresee unintended consequences flowing from JobKeeper that might slow down an economic recovery.
Before we delve into potential issues, this is a massive $130 billion dollar package that could do a tremendous amount to help employers and employees all over Australia. So let’s first talk about how it works, who is eligible and how to apply.
The basics of JobKeeper
The government will pay organisations $1,500 a fortnight per eligible worker. The payments can have a start date of 30 March and continue for a maximum of six months, and flow from the ATO to the employer. Employees will be paid as normal, and will receive the full amount of the subsidy, pre-tax.
The subsidy can be given to staff earning more than $1,500 per fortnight.
JobKeeper also interacts with superannuation payments. According to a Treasury fact sheet: “where an employee is paid more than $1,500 per fortnight, the employer’s superannuation obligations will not change. Where an employee is having their wages topped up to $1,500 per fortnight by the JobKeeper Payment, it will be up to the employer if they want to pay superannuation on any additional wages paid by the JobKeeper Payment”.
If you employ staff who usually make less than $1,500 per fortnight, and you want to utilise this scheme to continue paying their wages, you are obligated to pass on the full $1,500.
According to the ABS, the average wage for full-time Australian workers as of November 2019 was $1,659 per week. By providing employers with $750 per employee each week, the government is planning to subsidise a sizable chunk of Australia’s wages.
Around six million Australians are eligible under the scheme – that’s nearly half the workforce.
On the 7:30 Report this week, presenter Leigh Sales said to treasurer Josh Frydenberg,”This is a staggering amount of money that you’ve announced to spend”. The treasurer replied, with an element of disbelief, “It sure is”.
For a government that’s historically held onto its cash and consistently lauded the fact that it has delivered the first balanced budget in eleven years, this is big news. And it’s a sign of the strangeness of this era we find ourselves in.
Payments are expected to start flowing into employers accounts come May.
Which businesses are eligible?
Eligibility for the subsidy is based on turnover and the size of your organisation. Organisations making less than $1 billion in annual turnover have to experience (or be likely to experience) a 30 per cent loss. Those with a turnover of over $1 billion need to experience a 50 per cent revenue loss to be eligible.
Not-for-profits, charities and self-employed people are eligible. A treasury fact sheet states: “For charities registered with the Australian Charities and Not-For-Profit Commission (ACNC), they will be eligible for the subsidy if they estimate their turnover has or will likely fall by 15 per cent or more relative to a comparable period.”
The major banks are excluded from JobKeeper, as any business subject to the major bank levy is not eligible.
To prove a loss, or that you will likely make a loss, you will usually have to present evidence to the ATO that the organisation’s turnover has fallen as compared to the same months in 2019 – the government suggests it will be looking at the natural activity statement reporting period of each business (which is usually one or three months).
Appropriate records of all evidence provided to prove you are eligible for JobKeeper must be kept. From the legislation, it seems they must be kept for five years after the payments have been made.
For organisations that didn’t exist last year, the Tax Commissioner will have discretion to assess other information that proves the organisation has been similarly impacted by COVID-19. Such discretion will also be applied to businesses that:
- Had unusual turnover in 2019 that is not representative of ordinary turnover
- Businesses that present other information (business.gov.au gives the example of a company that can show it has ceased or dramatically curtailed operations)
Perhaps most importantly, there will be some tolerance for organisations that estimate the relevant turnover loss (so 30 or 50 per cent) but fall slightly short.
The ATO will be the guardians of the scheme and will be given legal powers to ensure employers are using these funds correctly, and to ensure compliance, single touch payroll is likely to be used to track the money.
Eligible employers can visit the ATO website for further details on how to apply, including what information you’ll need to prepare in advance. Enrolments will remain open until the end of May, however the ATO suggests you apply by the end fo April in order to receive payments as soon as possible.
The rules are changing and it can feel hard to keep up. The Australian HR Institute’s is offering help to HR professionals. Specific resources and events are free for AHRI members.
Which staff are eligible?
There are a few moving parts to worker eligibility; business.gov.au has a useful checklist:
- staff who are currently employed, including those who are stood down or re-hired, and are full-time or part-time, or casuals who’ve been with the business for more than 12 months
- staff who were officially employed as of 1 March 2020
- staff who are over 16 years old
- staff who are Australian citizens, permanent visa holders, non-protected Special Category Visa holders or someone who has been living in Australia for more than 10 years, or Special Category (Subclass 444) visa holders
- staff who aren’t already receiving JobKeeper payments from another employer
Pay attention to the 1 March date. This was specifically chosen by the government so that businesses could hire back employees who they let go after that date.
Workers who have been stood down, (see HRM’s guide on how that works) are also eligible for the subsidy.
If an organisation’s application is successful, you will be obliged to inform employees that their wages are being subsidised as part of the scheme and submit monthly information to the ATO in order to continue receiving the payments.
Employees who are already receiving JobSeeker payments, and are also eligible for JobKeeper payments, will likely have to forgo the former if their employer chooses to reinstate them off the back of this announcement.
If this is all a bit confusing, a fact sheet from the Treasury provides further guidance and an example scenario about paying staff who have been stood down.
Changes to the Fair Work Act – dispute resolution and new employer powers
In the legislation passed 8 April 2020 there have been changes to the Fair Work Act that will give employers more flexibility when dealing with the workforce affected by JobKeeper. According to the bill, employers who receive JobKeeper for a particular employee will have the authorisation “despite any limitations in a designated employment provision” to:
- “give a JobKeeper enabling stand down direction” – they can tell relevant employees to work fewer hours or days when they cannot be usefully employed for their normal hours due to business changes caused by the pandemic or government initiatives.
- direct employees to undertake different duties, so long as they are reasonable, safe and within the employees’ ability.
- direct employees to work in a different area, such as their homes.
Employees and employers under JobKeeper will also be able, “despite any limitations in a designated employment provision”, to come to an agreement about:
- Working different days and times outside of ordinary hours.
- Taking paid annual leave at half pay.
After the government consulted with the ACTU, it was decided that the Fair Work Commission will be given the power to settle disputes arising from the above changes.
While these new employer powers are considerable, there are a few things employers must remember:
- Employees must be consulted before the powers are used.
- These powers only apply to employees who are receiving JobKeeper payments.
- These powers only exist as long as JobKeeper does.
- While a relevant salaried worker can be directed to take fewer hours so that their pay matches the JobKeeper wage, they cannot have their base rate of pay reduced. You can not unilaterally decide to cut someone’s pay.
- These changes will not affect the accrual of entitlements. For example, an employee who is stood down will have both their redundancy pay and ‘pay in lieu of notice of termination’ entitlements operate as if they had not been asked to stand down.
- Severe penalties apply if JobKeeper provisions are “knowingly misused”.
Another part of the legislation deals with a situation that might come up quite a bit in the next months. An employee under JobKeeper can ask their employer if they can engage in secondary employment, training or professional development. If the employee has been stood down, such requests need to be considered and employers cannot refuse them if they are reasonable.
Organisations and businesses should seek individual legal advice before they make workforce changes.
Potential changes to JobKeeper
The legislation around JobKeeper gives the Federal treasurer some power to direct the ATO to adjust eligibility requirements without parliament meeting again. For example, he could potentially make other parts of Australia’s workforce – including casuals who have worked for an employer for less than 12 months – eligible for the subsidy.
HRM will update this page if any such changes are implemented.
Concerns and criticisms
This is a very big stimulus, and sweeping changes, that will help a lot of people and organisations. But nothing is perfect. Beyond the fact that it leaves out a category of vulnerable workers, there have been a few criticisms and words of warning about the subsidy.
The first has to do with fairness.
The subsidy is a blunt instrument. Every eligible worker is getting the same amount, regardless of circumstances. This means that some people will be getting a pay rise during an economic crisis. The Australian Financial Review talked to a Newcastle party supplier who has stood down all staff due to the restrictions on gatherings. She points out that, because she can’t afford to add any extra pay, part-time university student workers will be getting the same wage as her full-time staff who would usually earn almost four times more.
In the same AFR article, the CEO of the NSW Business Chamber said it would be good if businesses had a bit more discretion as to how they paid money to staff to address this inequity. But the government is firm that keeping the stimulus as simple as possible is the best way to make sure it works.
And, in so far as the purpose of any stimulus is to give oxygen to a guttering economy, the inequity in payment outcomes is not necessarily a bad thing. That extra money going to people who usually earn less will no doubt be spent by workers and not saved – meaning it ultimately flows back into the economy.
Another criticism focuses on the 30 and 50 per cent cutoffs. Given the huge windfall the subsidy offers, organisations that are approaching a deep loss in revenue are incentivised to make it a little worse. Imagine you had an annual turnover of less than $1 billion and were looking at a 25 per cent loss in revenue in a three month period. Might you not consider intentionally slowing down your business – refusing contracts, turning down extra work, etc – so that you hit the 30 per cent threshold?
Steven Hamilton, visiting scholar at the Tax and Transfer Policy Institute, Crawford School of Public Policy, Australian National University, welcomes the subsidy, but raises that exact red flag in an article for The Conversation.
“It [the subsidy] could have several unintended consequences. It might encourage firms to limit sales to push revenue down below the turnover threshold.
“For example, for Qantas the subsidy would be almost $600 million, but to receive it, its revenue will need to fall to 50 per cent below where it was this time last year. That might discourage it from reopening routes, which would slow the recovery.”
Another criticism has emerged regarding a loophole. As explained Federal Labor manager of opposition business, Tony Burke, it concerns the ability for employers to simultaneously collect the subsidy while compelling staff to draw down on their leave entitlements.
As reported in the Guardian, he says, “If you’re stood down, it’s already the case that employers can say you’ve got to use up your leave first, and they start running down your leave.
“So effectively, instead of the government subsidising someone’s wage, they’re subsidising the balance sheet for an employer while the employer simply runs down all the leave entitlements of their employees.”
Something else that worries people, but isn’t exactly a criticism, is that the subsidy won’t be enough. Wesfarmer’s leader Rob Scott told the Sydney Morning Herald that for businesses that have shut down, it still means huge chunks of their staff will see drastic pay cuts and that it doesn’t address other issues caused by COVID-19.
“We should all be mindful while the JobKeeper subsidy certainly helps workers for businesses that are essentially shut down, we all need to brace ourselves for what is likely to be a more significant downturn in GDP and the economy,” he says.
If COVID-19 is going to hurt the economy as much as many fear, it’s likely JobKeeper is going to be followed up with something that helps workers get by beyond its six month cut off.
This article was up to date as of 20th April, 2020.