CORONAVIRUS (COVID-19) - HOW THE JOBKEEPER PAYMENTS WILL HELP EMPLOYERS
The JobKeeper Payments of $1,500 per fortnight (before tax) for each eligible employee will be in place from 30 March 2020 until 27 September 2020. Payments will start to be made in the first week of May 2020 and will be made in arrears, although in April we understand the ATO can make payments in advance. We set out below how these payments will now help Eligible Employers and we answer some of the commonly asked questions.
Full details of the JobKeeper Payments eligibility and requirements can be found here.
Remember that employees (full-time, part-time and long term casual employees - being casuals employed on a regular and systematic basis for longer than 12 months as at 1 March 2020) must have been employed as at 1 March 2020, even if they had been stood down without pay, or have since been re-employed.
Is the JobKeeper scheme compulsory?
No. Participation in the scheme is not compulsory and it will be a decision for each Employer to make as to whether to register and participate or not. It would appear though that Eligible Employers cannot then exclude eligible employees from the scheme, although this should be clarified once the ATO application/assessment forms have been released.
Which employees are excluded from the JobKeeper Payments?
Our earlier update sets out which employees are included/excluded, however, further clarification has been provided to confirm employees excluded will also include those absent from work:
on Parental Leave Pay or Dad and Partner Pay from Services Australia for any period of a relevant JobKeeper fortnight (however, employees on parental leave from their Employer will be eligible); and
due to a total incapacitation, who are not working and are receiving Workers’ Compensation payments (however, if the employee is working, e.g. on reduced hours on a return to work plan, they may be eligible).
Do Employers have to tell employees about the JobKeeper Payments?
Yes. Eligible Employers will be required to inform eligible employees that their wages will be subsidised as part of the JobKeeper scheme and there will be ongoing reporting requirements each month to the ATO in order for the JobKeeper Payments to continue. Further, Eligible Employer must notify an eligible employee within 7 days of providing the employee’s details to the ATO. The JobKeeper Employee Nomination Notice can be found here.
Do Employers have to pass the JobKeeper Payments onto employees?
Yes. Eligible Employers must pass these on and pay employees the JobKeeper Payments in advance of payment of the subsidy from the ATO. The wages condition in the Rules requires this.
What payments must be made to employees under the JobKeeper scheme?
Employers must ensure that each eligible employee they have nominated is paid at least $1,500 per fortnight (before tax) and the payment is made to the employee before the Employer receives the JobKeeper Payments.
What if an employee is earning less than the JobKeeper Payments?
Employers should be aware that there is a Minimum Payment Guarantee under the Fair Work Act 2009 (Cth) (FW Act) that will apply, even if an eligible employee would ordinarily otherwise earn less than the JobKeeper Payment. If this is breached, it may result in a civil penalty being imposed on a business. This means that some part-time and long term casual employees will receive more than they would have otherwise earnt, as will employees on unpaid or employer paid parental leave, as they will receive $1,500 per fortnight (before tax), even if they normally earn less than that.
What if an employee is earning more than the JobKeeper Payments?
An employee’s employment terms are not changed as a result of the scheme, so if they are paid more than $1,500 a fortnight (before tax) under an Employment Contract or industrial instrument such as a Modern Award or Enterprise Agreement, the Employer is still liable to pay that amount whilst the employee continues to work their ordinary hours. The JobKeeper scheme does not permit an Employer to unilaterally reduce salaries or base rates of pay, other than in accordance with the terms of the FW Act (by way of reductions in hours - not the base rate of pay - if the new provisions can be used).
Therefore, if an employee’s wages for the work they are performing exceeds the JobKeeper Payment, the excess of their wage must still continue to be paid by the Employer and this includes their base rate of pay, and other payments they would ordinarily be entitled to be paid. Only in circumstances where there has been a reduction in the hours of work of such employees, in accordance with the new JobKeeper Enabling Directions, that there can be a lesser amount paid to those employees, but remember it still must be at least $1,500 per fortnight (before tax).
Can we reduce an employee’s rate of pay to match the JobKeeper Payments?
No. Under the temporary FW Act provisions, there will be an Hourly Rate of Pay Guarantee. This means that Employers must ensure that an employee’s base rate of pay (worked out on an hourly basis) is not less than the base rate of pay (worked out on an hourly basis) that would have been payable to the employee if a JobKeeper Enabling Direction had not been given. This is a civil remedy provision and penalties can be imposed for contraventions.
Is superannuation payable on the JobKeeper Payments?
No, superannuation guarantee payments are not required to be paid on any additional payment made because of the JobKeeper Payments. It will be up to each Employer to decide if they want to pay superannuation on any additional amount paid because of the JobKeeper Payments.
However, Employers are still required to continue to pay superannuation in accordance with their legal obligations under the relevant superannuation guarantee legislation on the usual/ordinary wages of eligible employees, but they just have the discretion to decide whether they want to pay any superannuation on the additional wage paid because of the JobKeeper Payments.
What if the employee has been stood down - do we have to pay superannuation on the JobKeeper Payments?
If an employee is stood down without pay and is not working any hours, the Employer will not be required to make any superannuation guarantee contributions on the JobKeeper Payments made to the employee during the stand down period. However, if there is a JobKeeper Enabling Stand Down Direction in place for reduced hours, the employee will still be receiving a portion of their wages for those hours work, so superannuation will still be payable on that portion of their wages still payable.
When will the JobKeeper Payments commence?
Payments will be made monthly in arrears by the ATO to Employers, to be passed onto the employees from May 2020 onwards. For the month of April though, we understand the ATO can make advance payments.
Given the wage condition, Employers must first pay their eligible employees at least $1,500 (before tax) if they were employed at any time in a JobKeeper fortnight. However, it is still unclear if Employers need to make such payments to employees that have been stood down without pay whilst they await processing of their application with the ATO. As this is clarified we will provide a further update.
What if my business is re-hiring employees?
We recommend you obtain legal advice in relation to such re-employment of employees terminated since 1 March 2020, given employees will have been paid out severance payments and the termination will have impacted on their continuity of service for some, but possibly not all entitlements. Further, the terms of the re-hiring should be set out clearly in writing and your business should be assessing whether the employee can be re-hired on a long term or for a shorter term and the engagement should be appropriate to these needs.
Can my business still terminate employees whilst receiving the JobKeeper Payments?
There does not appear to be any restrictions preventing an Employer from terminating employees whilst in receipt of the JobKeeper Payments. Therefore the usual requirements will apply and Employers must still comply with their legal obligations in that regard, including in any relevant industrial instrument and the FW Act if terminating employees during that time, for example; due to poor performance, disciplinary reasons or redundancy. Remember that the risks still remain with regards to potential unfair dismissal or general protections claims as these provisions of the FW Act will still continue to operate.
If you terminate any employees receiving the JobKeeper Payments remember that you will have an obligation to promptly notify the ATO of these changes. Failure to disclose such changes could result in a recovery of any overpayments made to your business, as well as interest and potential penalties if it cannot be shown that it was an honest mistake.
If you need urgent advice or assistance in understanding the JobKeeper Payments and how to best manage your workforce and employment costs at this time, please contact IR Legal Solutions to discuss. We have a range of tailored COVID-19 response and revival packages for our clients, which are specifically tailored to your business, and will include a customised risk management strategy. Please contact IR Legal Solutions to discuss.
This content is not be a substitute for legal advice and is for information only. Employers should obtain advice that is specific to their circumstances and business operations, and not rely on this publication as legal advice.