Many employers have been considering workforce changes to address the economic downturn and cash flow issues caused by COVID-19. Yesterday's announcement by the Federal Government about wage subsidies (known as 'JobKeeper Payments') has been welcomed by employers and unions, and should be closely considered by employers before implementing any changes.
It has been reported that 8,000 businesses lodged an application for the subsidy in the 50 minutes that followed the announcement.
There will need to be special legislation passed – which should be released in the next week or so. The Opposition has indicated it will support the package.
What does the Government wage subsidy mean for employers?
The 'JobKeeper Payment' is a wage subsidy available to businesses impacted by COVID-19.
The objective of the subsidy is simple – to ensure that more Australians remain employed throughout the COVID-19 pandemic. This will be achieved by businesses being provided with financial support in the form of a wage subsidy.
The subsidy will mean that many employers can retain employees that they would otherwise have made redundant.
Given the significance of the subsidy, business should take steps to immediately investigate their eligibility prior to making any further decisions regarding their workforce planning.
How does it work?
For a business to qualify, it must be an 'eligible employer' and have 'eligible employee/s'.
A business will be a an eligible employer if it:
- Has an annual turnover of less than $1 billion and will have a reduction in turnover of 30% compared to one year ago (for at least one month); or
- Has an annual turnover of $1 billion or more and will have a reduction in turnover of 50% compared to one year ago (for at least one month); and
- Is not one of the four major banks.
Sole traders without employees and not-for-profit entities (including charities) are also eligible for a subsidy if they meet the above turnover tests.
For an employee to be eligible, they must be:
- Over 16 years of age and have been employed as at 1 March 2020, whether in a full time or part time basis. Casual employees will also be eligible if they are 'long term' and have been engaged for at least 12 months;
- Still employed by the employer – including if they have been stood down. An employee who is re-hired having been made redundant after 1 March 2020 is also eligible; and
- An Australian Citizen or hold a valid visa such as a permanent visa, Protected Special Category Visa, non-protected Special Category Visa (who has been residing continually in Australia for 10 years or more), or a Special Category (Subclass 444) Visa.
What are the payments?
The payment is $1,500 per fortnight per eligible employee for up to a 6 month period – paid to the employer. The payment is a flat amount, regardless of the employee's earnings and must be passed on in full to the employee.
To see how the payment works with different employees and earnings, see examples provided by Treasury.
In short, it means that the employer is:
- Receiving a partial wage subsidy for persons who earn more than $1,500 per fortnight - which means that the employer is being assisted to pay the wages; and
- Receiving a full wage subsidy for persons earning $1,500 or less per fortnight – which means the employee will receive more than their usual wages.
Although not specifically dealt with in the Treasury announcement, it seems likely that the subsidy will apply if employers have agreed other arrangements with employees - such as reduced pay or hours - or where employees are using their leave entitlements. However, this will only be confirmed once the legislation is passed.
It also seems that the payment is a flat amount – including for part time employees – but again, this will only be confirmed once the legislation is passed.
An employee cannot receive the JobKeeper Payment from another employer.
Are the payments subject to tax or superannuation?
An employer will need to make a gross payment of $1,500 to be eligible for the subsidy – which will be subject to tax at normal PAYG rates.
The amount paid to an employee that is above their usual wage will not automatically attract superannuation contributions. That is, it will be up to the employer whether it makes an employer superannuation contribution on any additional amount paid to an employee as a consequence of the subsidy.
Businesses will need to provide monthly reports to the ATO.
What if an employee has already received other Government benefits since they were stood down?
An employee will not be able to 'double dip' and will not be able to receive JobSeeker payments as well as the JobKeeper subsidy. Employees who have been receiving the JobSeeker Payment should advise Services Australia if their employer secures the JobKeeper payment.
How does a business register?
All businesses can register interest with the ATO to receive this subsidy.
After registration, a business will be able to make an online application and nominate its eligible employees – the business is also required to advise these employees that they have been nominated as eligible employees to receive a JobKeeper Payment.
Employers will receive their first payment in the first week of May 2020, backdated to 1 March 2020. Ongoing payments will be made on a monthly basis paid in arrears.