The Situation: The Australian Parliament has passed the JobKeeper wage subsidy scheme ("Scheme"), designed to assist employees and employers subjected to work restrictions related to the COVID-19 pandemic. Under the Scheme, the wages of qualifying employers will be subsidized at a flat rate of $1500 per eligible employee per fortnight.
The Implementation: Employers who satisfy the Scheme's criteria for eligibility will need to register with the ATO, maintain certain records and ensure that all eligible employees are paid minimum amounts. In addition, a number of temporary changes have been made to the Fair Work Act, giving employers enhanced flexibility in managing employees receiving the JobKeeper payment.
Looking Ahead: The JobKeeper Scheme remains in effect until 27 September 2020.
On 8 April 2020, the Australian Federal Parliament passed the legislation necessary to implement the recently announced JobKeeper wage subsidy scheme ("Scheme"). Below is a brief overview of the enabling legislation and the eligibility criteria, together with a summary of the important changes to the Fair Work Act 2009 (Cth) ("FW Act") to assist employers in fully taking advantage of the Scheme.
These changes to Australia's industrial relations framework are significant and will likely raise questions on how the Scheme can be best used by employers in responding to the growing health and economic crisis. In particular, ensuring that the eligibility criteria for the JobKeeper payment are satisfied and all conditions to issuing JobKeeper Enabling Directions and Agreements have been met will likely pose novel challenges to even experienced HR and payroll professionals.
JobKeeper Payment—Eligibility Criteria
Under the Scheme, the Federal Government will subsidise the wages of qualifying employers, at a flat rate of $1500 per eligible employee per fortnight. The Scheme will apply retrospectively from 30 March 2020 and remain in place until 27 September 2020.
Pursuant to the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 ("Rules"), an entity will qualify for the wage subsidy if:
- Where the entity had or is likely to have an aggregated turnover of more than AUD $1 billion in an income year, the entity estimates its GST turnover in a month or quarter has fallen or will likely fall by 50% or more compared to the equivalent period in 2019;
- Where the entity is a non-profit body, the entity estimates its GST turnover in a month or quarter has fallen or will likely fall by 15% or more compared to the equivalent period in 2019; or
- In all other cases, the entity estimates its GST turnover in a month or quarter has fallen or will likely fall by 30% or more compared to the equivalent period in 2019.
The Scheme applies only where the turnover has reduced in a month or quarter in the period from 1 April 2020 to 30 September 2020, compared to the equivalent month or quarter in 2019. However, it may be possible to use a different base period if there are reasons why the relevant month or quarter in 2019 should not be considered equivalent.
The above tests use two different measures of "turnover". For determining whether a business has "aggregated turnover" of AUD $1 billion or less in an income year, turnover is calculated according to the ordinary income of the business together with the turnover of its connected entities and affiliates. The income years to be tested are the year in which the relevant month or quarter falls and the previous income year. Whether entities are connected or affiliates is determined using a broad definition which includes not only entities within the same wholly-owned group but any entity with an ownership interest of greater than 40%. Critically, aggregated turnover will include the foreign ordinary income of all members of the group of connected entities and affiliates.
However, for the purposes of determining whether turnover has reduced by the requisite 15%, 30% or 50% in a month or quarter compared to an equivalent period in the previous year, the entity need only consider its own GST turnover, without considering connected entities and affiliates. For this purpose, turnover is the value of all supplies made by the entity for GST purposes and excludes supplies that are not connected with Australia.
If an entity qualifies, it can claim the JobKeeper payment for all of its full-time employees, part-time employees and long-term casual employees (those with more than 12 months' service consisting of regular and systematic shifts) who were employed as at 1 March 2020. This includes any employees who have since been stood down (the Australian equivalent of being furloughed) or terminated and re-engaged.
Notification to Employees and the ATO. If an entity elects to participate in the Scheme, it must provide the following information (among other things) to the Australian Taxation Office ("ATO"):
- Notice of the entity's intention to participate;
- Details about the specific employees the payment is sought in respect of; and
- Details of the entity's eligibility.
In addition, for each eligible employee for whom the payment is sought, the entity must:
- Give written notice to the individual employee alerting them of the decision to claim the payment; and
- Request and receive the employee's written consent to the entity's participation in the Scheme on their behalf and confirmation that they are an eligible employee.
Employers' Payment Obligations. Qualifying employers who register for the JobKeeper payment will be paid $1500 by the ATO per fortnight for each eligible employee, with payments to be made from 1 May 2020.
Under the Scheme, employers must use the payment to subsidise the wages of eligible employees the sum of $1500 before tax. If an employee usually earns less than $1500, he or she must be paid the full $1500 (but superannuation will not be payable on the uplift).
Similarly, if an employee usually earns more than $1500 per fortnight, the employee must continue to be paid his or her usual entitlements in full. However, in certain circumstances (as discussed below), an employee's income may be reduced to the $1500 floor.
Changes to the Fair Work Act 2009
In addition to introducing the Scheme, the Federal Government has also made significant changes to the FW Act. A new Part 6-4C has been inserted, which temporarily provides employers extra flexibility in managing the hours, location and duties of employees receiving the JobKeeper payment.
Employers who register for the Scheme can take advantage of these provisions from today, but any arrangements made pursuant to them will cease at 12:00am on 28 September 2020.
JobKeeper Enabling Directions. Under the amendments to the FW Act, employers receiving the JobKeeper payment are entitled to unilaterally direct employees to do the following ("JobKeeper Enabling Directions"):
- Stand Down Direction: Reduce the hours or days they work (including to nil hours);
- Duties Direction: Undertake alternate duties; and
- Location Direction: Work at alternate locations (including at the employee's home).
There are several conditions that employers must satisfy before issuing a direction. These include:
- Both the employer and the affected employees must be registered with the ATO;
- The employer must consult with affected employees about the direction, including giving three days' written notice (or a shorter period where freely agreed by the employee) of an intention to issue the direction;
- All notices of direction must be provided in writing;
- All directions must be safe, reasonable and, in the case of Duties Directions and Location Directions, must accord with the competency and skills of the employee and fall within the scope of the employer's normal business;
- Although total remuneration may be reduced, an employer can only do so commensurate with a reduction in working days/hours—to be clear, employers cannot unilaterally reduce the employee's rate of pay; and
- In respect of Stand Down Directions, these can only be given if the employee cannot be usefully employed for the employee's usual days/hours because of changes to business operations directly attributable to the COVID-19 pandemic.
JobKeeper Agreements. In addition to the JobKeeper Enabling Directions, the FW Act changes also permit employers to request the following, which employees must consider and may not unreasonably refuse:
- To work alternate days or hours (so long as total hours worked is not reduced); and
- To take annual leave (so long as accrued leave does not fall below two weeks).
Employers and employees can also agree to annual leave being taken at twice the length but half the pay.
As is the case with JobKeeper Enabling Directions, these agreements must be in writing.
Other Entitlements Continue to Apply. Although these changes are significant, they do not prevent employers from relying on other options available under contracts of employment, Modern Awards and Enterprise Agreements. Crucially, these alternative entitlements remain available to those employers who are not entitled to the JobKeeper payment or choose not to register.
Three Key Takeaways
- The Australian Federal Government has passed legislation to implement the recently announced JobKeeper wage subsidy scheme. From 30 March 2020 to 27 September 2020, qualifying employers will receive $1500 per fortnight to subsidise the wages of any eligible employees on the employer's books as at 1 March 2020.
- To qualify for the payment, the employer's turnover must be assessed to have dropped by 50% for businesses with an annual aggregate group turnover of more than AUD $1 billion and by more than 30% in most other cases.
- The Fair Work Act 2009 (Cth) has also been temporarily amended to allow employers receiving the JobKeeper wage subsidy to direct employees to work reduced days/hours (including to nil), perform different duties and work at different locations.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.