JobKeeper Payment initiative: Aimed at supporting employers to retain their workforce while managing through the commercial disruption of COVID-19.
The latest announcement about jobkeeper payment initiative revealed that, commencing 30 March 2020, the government will underwrite/reimburse businesses $1500 each fortnight per employee the business retains through the period. Businesses will be eligible if their turnover has or will be reduced by 30 per cent or more relative to a comparable period (of at least one month) a year ago.
The JobKeeper payments will be welcomed by the middle market, supporting the decision that many employers have already made to retain their people while the situation abates so businesses can recommence without the need to rehire their workforce. For employers for which it was not commercially responsible to retain employees, there is now an opportunity to reassess those decisions and re-engage with those that stood down or re-hire those made redundant since 1 March.
For businesses that have, or are facing, stand down of employees, the program provides a mechanism to retain connection with employees. There is no need for an immediate return to work for the impacted employees. Simply re- engage with those stood down, advise them that as an employer you wish to support them through the JobKeeper program and ensure the payments ($1500/fortnight) are made to them (provided the person was engaged as an employee as at 1 March 2020).
Pleasingly, the program also supports the many self-employed traders bearing the impact of lost commercial activity, with sole traders being able to register for the program.
Summary of support
The program will reimburse eligible businesses for $1,500 (gross) per fortnight for each employee. There is no uplift for employees earning more than $1,500 per fortnight, and no reduction for employees earning less than the threshold amount. The program allows for those employees previously earning less than the threshold to be provided a pay increase up to the threshold amount and then the employer can access the subsidy for that individual as well. The guidance states there should be no obligation on the employer to pay superannuation on the uplift in the latter case.
It is critical that businesses are aware of the short-term cash flow burden that the program will create. The reimbursements are in arrears and accordingly will only begin to be made by the government from 1 May 2020. Consequently, each business will need to fund a month of the payments to employees before there is an offsetting inflow from the program. The cash flow impact should be considered carefully and included within the weekly cash flow forecasts that most middle market businesses have developed and are scrutinising regularly. For some businesses this funding gap may not be viable.
Further, there are integrity measures that businesses should watch for when applying for the program. A key challenge is ensuring that the employees registered under the scheme are not linked to more than one business – a commonality in many sectors with a casual workforce. While the ATO will support the assessment of employees through data collected through single touch payroll, there is a risk of multiple claims for an employee with numerous jobs, and it is unclear which employer may carry the subsequent ATO recovery risk.
The government has stated that the program may operate for up to six months, further reinforcing the horizon that business should be considering when planning how to navigate these uncertain times.
For employers: assessing eligibility
Employers are eligible if:
- Their business has a turnover of less than $1 billion and their turnover will be reduced by more than 30 per cent relative to a comparable period a year ago (of at least a month); or
- Their business has a turnover of $1 billion or more and their turnover will be reduced by more than 50 per cent relative to a comparable period a year ago (of at least a month); and
- The business is not subject to the Major Bank Levy.
Eligible employers include businesses structured through companies, partnerships, trusts and sole traders. Not-for-profit entities, including charities, will also be eligible. Eligible employers who have stood down their employees before the commencement of this scheme will be able to participate, providing they re-engage those employees who were on their books at 1 March.
The employers (including not-for-profit entities) must have been in an employment relationship with eligible employees as at 1 March 2020 and confirm that each eligible employee is currently engaged in order to receive JobKeeper payments.
Self-employed individuals (businesses without employees) that meet the turnover tests that apply for businesses are eligible to apply for JobKeeper payments. They will need to provide an ABN, nominate an individual to receive the payment, provide that individual’s Tax File Number and provide a declaration as to recent business activity.
For employees: assessing eligibility
Eligible employees are those who:
- Are currently employed by the eligible employer (including those stood down or re-hired);
- Were employed (an existing employee) by the employer at 1 March 2020;
- Are full-time, part-time, or long-term casuals (a casual employed on a regular basis for longer than 12 months as at 1 March 2020);
- Are at least 16 years of age;
- Are an Australian citizen, the holder of a permanent visa, a Protected Special Category Visa Holder, a non-protected Special Category Visa Holder who has been residing continually in Australia for 10 years or more, or a Special Category (Subclass 444) Visa Holder; and
- Are not in receipt of a JobKeeper payment from another employer
Employers must elect to participate in the scheme. They will need to make an application using the following link and provide supporting information demonstrating a downturn in their business. In addition, employers must report the number of eligible employees employed by the business on a monthly basis.
Interaction with other payments/changes to partner income test
The JobSeeker Payment will be subject to a partner income test. The Government also announced that it is temporarily relaxing the partner income test to ensure that an eligible person can receive the JobSeeker Payment, and associated Coronavirus Supplement, providing their partner earns less than $3,068 per fortnight (ie around $79,762 per annum). The Coronavirus Supplement was introduced as part of the Government’s second wave response to the COVID-19 crisis.
The personal income test for individuals on JobSeeker Payment will still apply.
Treasury advises that the scheme is designed to operate as follows:
- If an 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).
- If an employee ordinarily receives less than $1,500 in income per fortnight before tax, their employer must pay their employee, at a minimum, $1,500 per fortnight, before tax.
- If an employee has been stood down, their employer must pay their employee, at a minimum, $1,500 per fortnight, before tax.
- If an employee was employed on 1 March 2020, subsequently ceased employment with their employer, and then has been re-engaged by the same eligible employer, the employee will receive, at a minimum, $1,500 per fortnight, before tax.
It will be up to the employer if they want to pay superannuation on any additional wage paid because of the JobKeeper Payment.
Payments will be made to the employer monthly in arrears by the ATO.
- The program is not yet legislated. It is the government’s intention to recall Parliament to legislate the program. Accordingly, the progress and form of the confirming legislation should be monitored.
- Further guidance on the measurement of the prerequisite turnover decline is expected.
- The $1500 per fortnight remuneration threshold is the gross payment (before tax) due to the employee, it does not include superannuation.
- Government has stated superannuation is not required to be paid on the pay increment made by an employer for employees requiring a remuneration uplift to qualify for the program. However, it is not yet clear how other on-costs (such as payroll tax and work cover) will apply.
- Employees must be advised they are in receipt of the Job Keeper payment by the employer.
Do you or your business need help?
If you or your business need help with your financial arrangements during this difficult time, we can help you to work out which of the many coronavirus (COVID-19) related payments, concessions and arrangements apply to you, and how you can best make use of them.