COVID-19: JobKeeper Payment

By David Catanese, Anthony Bradica and Oliver Jankowsky

On 30 March 2020, the Prime Minister announced a new economic subsidy that would assist businesses who have been significantly impacted by COVID-19 – the JobKeeper Payment.

What is the JobKeeper Payment?

Under the JobKeeper Payment, eligible businesses that have suffered significantly reduced turnover because of COVID-19 will be able to access a subsidy from the Government to continue paying their employees. The Commonwealth will provide $1500 per fortnight (before tax), per employee, for up to six months to eligible businesses.

This is a temporary measure that provides government funding to employers to retain their employees even if they have been stood down pending improved economic activity. It is hoped that by sustaining the employment relationship during a downturn, these connections will reactivate businesses quickly and also support workers whose incomes are disrupted. The payments will commence from 1 May 2020, but be backdated to 30 March 2020.

Which businesses are eligible?

Employers must meet these conditions:

• The turnover of the business has reduced (or will reduce) by more than 30% relative to a comparable period (of at least one month) last year.
• If the business has a turnover of $1 billion or more, the reduction in turnover must be more than 50%.
• The business must not be subject to the Major Bank Levy.

Eligible employers will be able to apply for the JobKeeper Payment through the ATO.

Which employees are covered?

In short, JobKeeper payments will be available for all employees that are employed by an eligible employer and who were employed on 1 March 2020. This includes full-time, part-time and long-standing casual employees.

To be covered, employees must meet the following criteria:

• Employees must currently be employed by the eligible employer (this includes employees that have been stood-down and employees that were terminated but have been re-hired by the employer).
• Employees must have been employed by the employer on 1 March 2020.
• Employees must be employed full-time, part-time or as a ‘long-term’ casual (being a casual employee that had been employed on a regular basis for longer than 12 months as at 1 March 2020).
• Employees must be at least 16 years old.
• Employees must be an Australian citizen, Australian permanent resident or a New Zealand citizen, or hold a permanent visa, be a Protected Special Category Visa Holder, a non-protected Special Category Visa Holder (who has been residing in Australia for 10 years or more concurrently) or hold a Special Category (Subclass 444) Visa (Subclass 457 and 482 visa holders will not have access to these payments).
• An employee can only have one employer receive JobKeeper Payments with respect to them (ie multiple employers cannot receive JobKeeker payments in respect of one individual, even if the individual is employed by multiple employers).

Example

A business employs 25 people on a mix of full-time and part-time arrangements. The full-time employees receive wages of $3500 per fortnight before tax. The part-time employees receive wages of $1300 per fortnight before tax. It is expected that turnover of the business will very quickly decline by more than 30%.

The JobKeeper Payment will fund the business to make payments to all of its employees of $1500 per fortnight, provided that they remain employed. Full-time employees must be paid $1500 per fortnight funded by the JobKeeper Payment, plus the balance of their wages of $2000 per fortnight funded by the business (unless this can be reduced or offset by other lawful mechanisms, such as stand down).  The part-time employees will be paid $1500 per fortnight funded by the JobKeeper Payment, meaning that they receive a windfall of $200 per fortnight.

If the business is required and able to use other mechanisms to reduce payments to employees (eg agree to reduced hours, stand down employees, etc), it must still pay those employees $1500 per fortnight funded by the JobKeeper Payment.

Common issues / FAQs

Are part time and casual employees covered?

Yes, full-time, part-time and casual employees are covered, provided that casual employees had been employed on a regular basis for longer than 12 months as at 1 March 2020.

What if I’m a sole trader?

Sole traders and the self-employed are eligible to claim the Payment. The business will need to provide their ABN and nominate an individual to receive the payment.

Does the JobKeeper Payment include high income employees?

Yes. The JobKeeper Payment is payable to all employees, but the amount is set at $1500 per fortnight per employee. Effectively, the JobKeeper Payment will cover the first $1500 of a high income employee’s wages.

It is up to employers whether they top up the payment to cover all or a proportion of an employee’s usual wage, subject to the existing employment obligations that apply (ie employers need to continue to comply with their obligations to employees under contracts, enterprise agreements, modern awards, etc, subject to the implementation of lawful measures such as stand down, etc).

If an employee usually earns less than $1500 per fortnight they may receive a windfall from the JobKeeper Payment.

Do I have to pay the JobKeeper Payment to employees who have been stood down?

Yes. Even though stood down employees would not ordinarily to be entitled to be paid, JobKeeper payments should be passed on to them.

Is superannuation payable on the payments?

For payments made to cover an employee’s usual wages, yes. Superannuation is payable according to ordinary rules for payments to employees for ordinary time earnings (even if the funds for those payments are received by employers through the JobKeeper Payment scheme). The Government expects employers to maintain the level of superannuation guarantee that was in place prior to the JobKeeper payments.

For payments (or parts of payments) to employees in excess of an employee’s usual wages, based on the information available to date, superannuation would not be payable. While we have not yet seen the legislation giving effect to the JobKeeper Payments, 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’. This situation may arise in the following circumstances:

• For employees’ whose usual wages are less than $1500 per fortnight (ie superannuation would be payable on the part of the $1500 payment necessary to cover the employee’s wages, but not on any windfall balance).
• For employees who have been stood down without pay (ie superannuation will not be payable on the $1500 JobKeeper Payment paid to employees as it is not paid as ordinary time earnings for work that has been undertaken).

What if an employee was first employed after 1 March 2020?

Information currently provided by the Government states that only employees employed as at 1 March 2020 are covered. Whether this will be expanded to include employees first employed after this date is not known.

If I have terminated employees during March, can I still claim the subsidy?

Yes, you can receive the payments for employees provided that you rehire those employees and they otherwise meet the criteria for coverage (eg employed as at 1 March 2020).

If eligible terminated employees are rehired, what happens with entitlements that were already paid out (eg redundancy pay, annual leave, long service leave, etc)?

Based on the information available to date, employees will be entitled to retain severance payments they have received on termination, even if they are rehired. This will likely be treated in the same way as an ordinary re-employment scenario.

For most employees, their service with the employer will be deemed to be continuous if they are rehired (though the gap in service will probably not count as service). However, employees will not be entitled to ‘double dip’ on service related entitlements that they have been paid out (eg employees paid redundancy payments will not be entitled to another redundancy payment with respect to that period of service).

The rules that apply will vary depending on the specific circumstances of each employee. We recommend that you seek specific legal advice if employee entitlements for rehired employees are not clear.

How do I demonstrate that the turnover of my business has reduced by 30% (or 50%) relative to a comparable period (of at least one month) last year?

No definition of ‘turnover’ has been offered, but what is clear is that a business owner can self-assess that turnover has or will reduce by the necessary 30% (or 50% for large businesses) and that reduction needs to be assessed by reference to a comparable period from a year ago of at least a month. The business owner will need to demonstrate in due course that the reduction in turnover has occurred.

The JobKeeper Payment is yet to be legislated, so the final details of the arrangements are subject to change. The comments are based on the Government’s announcements and Fact Sheets issued on 30 March 2020.