- $130 billion has been made available to finance Australia’s JobKeeper program.
- Under the program, qualifying employers will receive $1,500 from the Federal Government per fortnight for each ‘Eligible Employee’ employed for the period of 30 March 2020 to 27 September 2020. Each Eligible Employee must receive at least this $1,500 amount per fortnight from their employer.
- Qualifying employers are also provided greater flexibility in relation to standing down employees and managing employee leave balances, as responses to changing operational and business requirements.
- Note: This article has been updated since the print edition of the May Journal went to press. The passage relating to the GST turnover test has been updated to reflect the clarifications provided in the Treasury Department’s ‘Jobkeeper update’ of 24 April, and additional information has been provided at the end of the section on determining ‘eligible employees’.
In this article, we explore the Federal Government’s response to COVID-19 in the form of the JobKeeper program. Described by Prime Minister Scott Morrison as ‘the biggest economic lifeline in Australia’s history’, it is a program of fiscal stimulus that, at its core, utilises the employment relationship to assist distressed businesses and its employees.
This article is Part 1 of a two-part series focused on the rapidly changing employment landscape arising from responses to COVID-19 that employers need to navigate. Next month, we will explore the evolving changes implemented by the Fair Work Commission to a range of modern awards and industrial agreements. For now, we examine the JobKeeper program.
The JobKeeper program at a glance
The headline act in the JobKeeper program is the payment of $1,500 per fortnight to ‘qualifying employers’ who are required to pay their employees at least $1,500 for that period. The relevant fortnights are prescribed (commencing from Monday 30 March to Sunday 12 April), and the payments that are funded by the JobKeeper program are tied to the payments made during these periods.
Behind this headline, however, lies enabling legislation, including extensive amendments to the Fair Work Act 2009 (Cth) (‘FW Act’) which provide greater flexibility to businesses, and some degree of complexity as the rapidly assembled $130 billion package is rolled out.
These changes are only available when an employer is a ‘qualifying employer’, and they are only temporary arrangements intended to remain in place until their repeal on 28 September 2020.
Which employers are eligible for JobKeeper?
A ‘qualifying employer’ is an employer entity that:
- carried on a business in Australia (or was a non-profit body that pursued its objectives principally in Australia) at 1 March 2020; and
- meets the decline in turnover test contained in the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (‘Rules’).
The ‘turnover test’, as it is known, is based on an employer entity’s projected GST turnover. An employer will be eligible for the program if:
- where the entity has an aggregated turnover of $1 billion or more – the entity estimates its projected GST turnover has, or will likely, fall by 50 per cent or more;
- where the entity is a charity registered with the Australian Charities and Not-for-Profit Commission, excluding non-government schools and universities, the entity estimates its projected GST turnover has, or will likely, fall by 15 per cent or more; and
- in all other cases, the entity estimates its projected GST turnover has or will likely fall by 30 per cent or more. (See: s 8(2) of the Rules).
Whilst ‘aggregated turnover’ is not defined in the Rules, the Treasury has issued guidance stating that, for the purposes of JobKeeper eligibility calculations, aggregated turnover is defined as ‘an entity’s annual turnover from carrying on a business plus the annual turnover from carrying on a business of any business or individual connected with or affiliated with the entity’. However, only Australian-based turnover is relevant, and a decline in overseas operations will not be counted in the turnover test (see: Department of the Treasury – ‘JobKeeper Payment – Information for employers’).
A decline in turnover, however, is measured by a comparison of the employer entity’s GST turnover, as follows:
- projected GST turnover for a calendar month that ends after 30 March 2020 and before 1 October 2020 (turnover test period); and
- current GST turnover for the period in 2019 that corresponds to the turnover test period (relevant comparison period). (See: s 8 of the Rules).
Importantly, the GST turnover is determined on an entity (and not a GST group) basis. Entities that form part of a GST group or consolidated group must determine the projected GST turnover and current GST turnover and apply the fall in turnover test for each entity individually.
The Government has recently announced the GST turnover test is expanded where a business operates a special purpose entity for employing its employees (rather than the employees being directly employed by an operating entity). Where the employing entity provides the services of its employees to one or more related entities, and those related entities carry on a business deriving revenue from unrelated third parties, the GST turnover test will take into account the combined GST turnovers of the related entities using the services of the employing entity (see: Department of the Treasury – ‘JobKeeper Update’ 24 April 2020).
Irrespective of the decline in turnover, however, the following entities are excluded from the JobKeeper program: :
- entities that are subject to the Major Bank Levy for any quarter ending before 1 March 2020, and their subsidiaries;
- Australian government, State and Territory governments,
- local governments, foreign governments (and their agencies or wholly-owned corporations of these bodies);
- sovereign entities;
- companies where a liquidator or provisional liquidator has been appointed; and
- if the entity is an individual, where a trustee in bankruptcy has been appointed to the individual’s property. (See: s 7(2) of the Rules).
An employer must enrol for the JobKeeper program, and notify eligible employees that they have been nominated and that the employer intends to claim the JobKeeper payment for them.
Who is an Eligible Employee?
An individual will be an Eligible Employee if he or she meets all of the following criteria:
- is employed by a qualifying employer at any time in a ‘JobKeeper fortnight’ (including employees who have been stood down or re-hired, and employees on parental leave, so long as they are not receiving Parental Leave Pay or Dad and Partner Pay from Services Australia or receiving workers compensation in respect of their total incapacity for work);
- was employed by a ‘qualifying employer’ as at 1 March 2020;
- is a full-time, part-time, or long-term casual (a casual employed on a regular and systemic basis for longer than 12 months as at 1 March 2020);
- is at least 16 years of age at 1 March 2020;
- is an Australian citizen, the holder of a permanent visa, or a Special Category (Subclass 444) Visa Holder at 1 March 2020;
- was a resident for Australian tax purposes on 1 March 2020; and
- is not in receipt of a JobKeeper payment from another qualifying employer. (See: s 9 of the Rules).
There is no income cap on eligibility for employees. A qualifying employer may receive the subsidy in respect of its highest paid employees, as well as employees whose employment terms and conditions are not in any way impacted by COVID-19.
Section 9.4 of the Rules provide that the following categories of worker are excluded from eligibility for JobKeeper payments:
- employees who have been stood down by a business that is not a qualifying employer;
- employees who have been made redundant but are not rehired; and
- employees where Parental Leave Pay or Dad and Partner Pay is payable from Services Australia for any period of the relevant JobKeeper fortnight.
Employees receiving workers compensation will generally be ineligible if they are not working. However, those working (for instance, on reduced hours) remain eligible. Workers who are ineligible to receive a benefit under the Program may be entitled to receive other benefits (such as the JobSeeker Allowance).
An employee must complete and provide the employer with a notice (the nomination notice) through which the employee agrees to be nominated and agrees that he or she meets the above conditions. The version of this notice at the time of writing is on the ATO website, at: https://www.ato.gov.au/assets/0/104/300/362/004e4999-5aee-480a-a38e-a668d9078aa0.pdf
Once a Qualifying Employer has elected to participate in the JobKeeper scheme and their Eligible Employees have agreed to be nominated, the Qualifying Employer must ensure that all of these Eligible Employees are covered by their participation in the scheme, including all Eligible Employees who are undertaking work for the employer or have been stood down. The Qualifying Employer cannot select which Eligible Employees will participate in the scheme and which will not.
How much should each Eligible Employee receive?
If an Eligible Employee:
- ordinarily receives $1,500 or more in income per fortnight before tax – they will continue to receive their regular income according to their prevailing workplace arrangements. The JobKeeper payment will assist their employer to continue operating by subsidising all or part of the income of their employee(s).
- ordinarily receives less than $1,500 in income per fortnight before tax – their employer must pay a ‘top-up’ payment to employees so that they are eligible. Their employer will then be reimbursed $1,500 per fortnight for each eligible employee.
- has been stood down – their employer must pay them, at a minimum, $1,500 per fortnight, before tax.
- was employed on 1 March 2020, subsequently ceased employment with their employer, and then has been re-engaged by the same qualifying employer – the employee will receive, at a minimum, $1,500 per fortnight, before tax.
Qualifying employers will still be required to pay superannuation guarantee contributions based on the usual wages of any Eligible Employees and have discretion to determine if they want to pay superannuation on any additional wage paid because of the JobKeeper payment. The JobKeeper program does not permit a qualifying employer to renegotiate salaries other than in accordance with the relevant provisions of the FW Act.
Industrial implications of JobKeeper
The Coronavirus Economic Response Package Omnibus (Measures No. 2) Act 2020 amends the FW Act, on a temporary basis, to authorise qualifying employers to issue two forms of ‘JobKeeper enabling directions’ and agree to flexible work arrangements despite any limitation under an applicable modern award or enterprise agreement.
By these amendments, a qualifying employer is authorised to:
- give a direction to work fewer days or hours to an employee who cannot usefully be employed for the employee’s normal days or hours (‘a JobKeeper enabling stand down’) (FW Act, s 789GDC);
- give a direction to an employee about the nature of the employee’s duties, within their skill and competency (FW Act, s 789GE) or to perform duties at a place different from their normal place of work, including the employee’s home (FW Act, s 789GF);
- agree to an employee working different days or at different times compared with the employee’s ordinary days or times of work (FW Act, s 789GG);
- request an employee to take annual leave, which an employee must not unreasonably refuse (FW Act, s 789GJ); and
- agree to an employee taking paid annual leave, including at half pay (FW Act, s 789GJ).
The directions in respect of stand down, duties and location of work, each have an overriding requirement that the direction is reasonable in all the circumstances, which takes into account the impact on any carer’s responsibilities in all the circumstances. The directions also need to follow notice of at least three days’ notice of the intention to implement the direction (subject to a lesser period agreed), and consultation.
A ‘JobKeeper enabling stand down’ can be triggered on one or more occasions where the employee cannot be usefully employed for the employee’s normal days or hours during the JobKeeper enabling stand down period because of changes to business attributable to the COVID-19 pandemic or government initiatives to slow the transmission of COVID-19.If an employer seeks to use the ‘JobKeeper enabling stand down’ provisions, the employer will need to demonstrate a link between the COVID-19 pandemic (or associated government initiatives) and ‘changes to the business’. Critically, qualifying employers will also need to demonstrate that those employees being directed to stand down cannot otherwise be usefully employed. In undertaking this assessment, qualifying employers should carefully consider their ability to direct employees to perform alternative duties and at a different location as part of these amendments.
Employers who are not qualifying employers may only rely on the prescriptive stand down provisions contained in section 524 of the FW Act, or an express provision in an industrial instrument or contract of employment, in order to lawfully stand down employees.
The changes relating to annual leave give increased flexibility to employers in relation to their employees’ paid annual leave entitlements (FW Act, s 786GJ). Qualifying employers may request an employee to take paid annual leave (provided that the employee is not left with a balance of fewer than two weeks leave), and the employee must not unreasonably refuse the request. An employee may also take twice as much annual leave, at half pay, if the period includes or consists of an eligible JobKeeper fortnight and the agreement is in writing. This agreement will stand despite any conflicting fair work instrument or contract of employment.
This article has touched, at a high level, on the key features of the JobKeeper program. Qualifying employers should carefully consider the conditions and requirements associated with the JobKeeper program at the outset and throughout the period of its operation. There are prescriptive nomination requirements, and requirements linked to the ‘JobKeeper fortnights’. Employers must enrol in the JobKeeper program, and must give information to its employees and the ATO. Finally, there are record keeping requirements. In the scheme of things, though, such matters can be worked through and dealt with. They are not issues that ought detract from the support the JobKeeper program provides to distressed businesses, and the ultimate aim to keep more Australians employed throughout this unprecedented crisis.