Practical Application of the JobKeeper Payment

JobKeeper is designed to keep employees connected to businesses (ie still employed) and reduce the burden on the Centrelink JobSeeker system. In effect, small business is helping the government support the population through this crisis.

If your business experiences a reduction in turnover by 30% since 1 March the government will pay you $1,500 per fortnight per employee you continue to pay. Eligibility to be reassessed each month for the next 6 months. If you need assistance in determining your revenue decline (and eligibility for JobKeeper) reach out to us ASAP.

Refer to our original JobKeeper summary for more details: https://www.linkadvisors.com.au/blog/covid-19/1500-per-fortnight-jobkeeper-payment-for-employers-to-keep-their-employees

Refer to our FAQ on JobKeeper here: https://www.linkadvisors.com.au/blog/covid-19/jobkeeper-payments-frequently-asked-questions

Be sure to get ready for JobKeeper by following our to do list here: https://www.linkadvisors.com.au/blog/covid-19/employer-to-do-list-before-jobkeeper-payments-online-applications-commence

Now the legislation has been passed by parliament, some practical examples can be laid out.

There have been new provisions made for ‘JobKeeper-enabling stand down’. This is effectively the changes applied to the Fair Work Act for the next 6 months (to 28th September). It is designed to make it easier for employers and employees to navigate this time. ‘If a person cannot be reasonably employed and usefully employed in the present circumstances because of the extreme circumstances that we’re facing, there’ll be an ability for an employer to give a JobKeeper-enabling stand down’

Practically, this means the following for employers:

1. You can reduce the number of hours employees work, this could be a slight reduction, or could be a reduction down to nil

2. You can change the type of work the employee performs as long as the employee has the capability and any required licences to do that work. An example was given that a chef could be asked to deliver coffee

3. You can change where the employee works, as long as it’s reasonable, ie you can direct an employee to work from home instead of the office. Note that you can’t direct an employee to work a substantial distance away from home or the normal place of work

4. You can change the normal days an employee is to work as long as the employee agrees. The employee cannot decline if the request is a reasonable request.

5. Note that you cannot change the normal rate of pay for employees. If they are paid $30 an hour normally, they still need to be paid that amount unless you renegotiate their employment contract.

6. Employers can direct employees to use Annual Leave, as long as they have more than 2 weeks of leave remaining at the end of the pay period. An employee could therefore work 10 hours and take 10 hours leave to bring them to the $750 a week JobKeeper minimum payment level

7. It’s important to note, that no matter how many hours an employee works, they are still to accrue Annual and Personal leave at the same rate they normally would. So, if they usually work 40 hours, but are now only working 10, they still accrue leave on the normal 40 hours. This was the case where employees were stood down even before JobKeeper was announced.

8. Employees who have had hours cut can go and get secondary employment in order to supplement income

Note that it is essential to communicate with your staff during this process. Document the essential items in an email or letter, and keep the lines of communication open so everyone is on the same page.

Following is a straight forward summary of each scenario for business owners (All amounts are gross, before tax);

IF BUSINESS IS CLOSED, PEOPLE NOT WORKING

1. Employer will get $1,500 per employee per fortnight from the ATO

2. Employer will pay each employee $1,500 per fortnight

3. Employer must have given written stand down instructions to employees

4. Employer can direct any employee to take annual leave as long as they have more than 2 weeks left at the end of the pay period

5. Annual Leave direction doesn’t need to be the full 38 hours per week, just simply to take the employee to $1,500 per fortnight

6. No super payable if employee isn’t working, super payable if taking annual leave

7. Leave still accrues at the employees normal rates before the stand down

IF BUSINESS IS STILL OPEN, STAFF STILL WORKING FULL TIME

1. Employer will get $1,500 per employee per fortnight from the ATO

2. Employees work normal hours

3. Employer pays employees normal wage. If they earn more than $1,500 per fortnight normally, they get paid as usual. If they normally earn less than $1,500 they get paid $1,500 per fortnight.

4. Super is payable on normal hours worked, super is not payable on the top up amount if an employee normally earns less than $1,500 a fortnight

5. Leave still accrues at the employees normal rates

IF BUSINESS IS STILL OPEN BUT REDUCED HOURS

1. Employer will get $1,500 per employee per fortnight from the ATO

2. Employer will pay each employee $1,500 per fortnight

3. Employer can direct an employee to work the number of hours that would get them to $1,500 per fortnight wages (based on normal hourly rate), ie this could be a reduction in hours compared to normal

4. Employer can direct employee to take annual leave (as long as more than 2 weeks left at the end) for the number of hours that would get them to $1,500 per fortnight

5. Employer must have given written instructions to employees if reducing hours or taking leave

6. Employer can direct a combination of hours worked and annual leave if the employee cannot be usefully employed for those number of hours

7. No super is payable if employee isn’t working (ie on the top up hours), super is payable if taking annual leave

Example 1

So in this example let’s say someone’s normal hourly rate is $25/hour (ie $950/week)

The business has seen downturn and only has work for the employee to do 30 hours per week.

Assuming all the correct JobKeeper stand down provisions were adhered to the employee would work 30 hours per week, at the normal pay rate of $25/hour and would be paid $750.

The employee would be paid Super on this amount as they are working the hours, and they would accrue leave at the normal working hours of 38 hours per week

Example 2

Let’s assume the same 38 hour normal week at $25/hour

But in this example let’s assume the business has a significant downturn and there is only 15 hours of work per week for the employee.

Again assuming the correct JobKeeper stand down provisions were adhered to the employer could have the employee take 15 hours of Annual Leave per week on top of the 15 hours a week they are working to get to a total of $750 per week gross payments. It’s important to note the employee must have 2 weeks annual leave left at the end of the pay period, otherwise they cannot be directed to take Annual Leave. 

What else has to happen?

  • The employer must give the employee notice in writing of an intention to give a direction to change hours of work, days or work or annual leave etc.
  • This notice needs to be given 3 days prior to the direction, or the employee needs to agree to a lesser notice period.
  • The employer needs to have consulted the employee before giving the direction
  • Employers must keep evidence of the written notice to the employee.
  • The direction then remains in place until such times as it is withdrawn, or another directive is given. This must cease on the 28th September 2020.

Note that if you have access to a HR consultant or service, then you should be making the most of their expertise during this period. The information we are providing here is a guide only.