The Fair Work Act 2009 (Cth) (FW Act) has been amended to assist employers, who qualify for the JobKeeper subsidy, in dealing with the impact of COVID-19. These amendments only apply to employers eligible for the JobKeeper subsidy. These are temporary measures to assist employees in keeping jobs during the economic downturn and work restrictions as a result of the coronavirus pandemic. Below is a summary of the amendments to the Fair Work Act and the eligibility to the JobKeeper subsidy.
Who is an eligible employer?
Employers will be eligible for the subsidy if:
- their business has a turnover of less than $1billion and their turnover has fallen by more than 30% (of at least a month); or
- their business has a turnover of $1billion or more and their turnover has fallen by more than 50% (of at least a month); and
- the business is not subject to the Major Bank Levy.
It should be noted that the percentage fall in turnover is based on the corresponding period in the prior year. This will be dependent on the businesses usual reporting period.
In order to receive payments under the JobKeeper subsidy, employers must first demonstrate that they meet the eligibility criteria and evidence the relevant fall in turnover. The Business Activity Statement will be used to establish that a business has (or is likely) to face the relevant fall in turnover in the relevant month or quarter (depending on the reporting period). The turnover will be calculated as it is for the GST purposes within the Business Activity Statement (including all taxable supplies and all GST free supplies but not input taxed supplies).
If the business was not in operation the year prior, the Tax Commissioner will have discretion to seek additional information and evidence of the fall in turnover, in determining eligibility. The Australian Tax Office (ATO) will provide applicants with further information and guidance in this area.
Who is an eligible employee?
Eligible employers will receive the JobKeeper subsidy for each eligible employee that was on their books on 1 March 2020 and continues to be engaged by that employer (including full-time, part-time, long-term casuals and stood down employees).
It should be noted that eligible employers who have stood down their employees before the commencement of the scheme will be able to participate. Further, employees that are re-engaged by a business that was their employer on 1 March 2020 will also be eligible.
To be eligible, an employee must be 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 or more years, or a Special Category (Subclass 444) Visa Holder.
The Treasury has indicated that causal employees are not eligible for the JobKeeper subsidy unless they are employed on a regular and systematic basis and have been for a period longer than 12 months. The Treasury has further indicated that a casual employee may still satisfy the condition if the entity operating the business has recently changed or were transferred from another member of a corporate group within the last 12 months
Self Employed, Partnerships, Beneficiaries of Trust and Directors or Shareholders
Whilst not legislated as yet, the Treasury has advised that in the interim the following parties will be eligible for the JobKeeper subsidy if they meet the requirements of the turnover tests:
- self-employed individuals;
- one member of a partnership who is actively engaged in the business;
- one individual beneficiary of a trust; and
- one company director or shareholder to be nominated to benefit.
Please note that the rules in relation to eligibility have not yet been released. The information concerning eligibility to participate in the scheme is based upon fact sheets and FAQs previously provided by Treasury.
What if I am not an eligible employer?
For all employers, including employers who are not eligible in respect of the above, the Fair Work Commission has also made changes to a wide variety of Awards to include the ability to take annual leave at half pay and unpaid pandemic leave. Although, currently, the Electrical, Electronic and Communications Contracting Award 2010 (MA000025) (Award), along with most awards in the construction industry, have not been included in this update.
NECA are also seeking to make amendments to the Award that will assist members in navigating this difficult period. Further updates will be provided on this in due course.
How will payments be made?
The subsidy commenced on 30 March 2020, however the first payments will be received by eligible employers in the first week of May. These payments will then continue to be paid by the ATO on a monthly basis in arrears. The payments will be available until 27 September 2020. Businesses should register their interest in participating in the JobKeeper subsidy from 30 March 2020 by going to the ATO website.
Payments will be made directly to eligible employers, who must then pass the payment down to the eligible employees.
Income tax will apply as normal on the eligible employees’ wages, and will be paid on any JobKeeper portion of the payment received by the employee. In other words, the amount of $1,500 (i.e. the JobKeeper payment) is a gross sum and standard tax obligations apply.
Regular superannuation obligations will apply where an eligible employee is paid more than $1,500 per fortnight.
For employees who are regularly paid less than $1,500 per fortnight (prior to the JobKeeper subsidy), eligible employers will have the discretion as to whether they pay superannuation on any additional wages the employee will receive as a result of the JobKeeper subsidy.
What are your payment obligations as an employer?
The amendments to the FW Act have implemented a minimum payment guarantee. This minimum payment guarantee ensures that an eligible employee is not receiving less than the greater of the following (during any given fortnight):
- the amount of the JobKeeper payment payable to the employee (i.e. $1,500); and
- the amount payable to the employee for the performance of work during that particular fortnight.
As a result, if an eligible employee is earning less than the JobKeeper payment, the employee will still be entitled to receive the full JobKeeper payment. If an employee is performing work in the fortnightly period that is in excess of the JobKeeper payment amount then they will need to be supplemented for the additional hours worked.
Further changes implemented are the hourly rate of pay guarantee, whereby the employer must ensure that an eligible employees’ base rate of pay is not reduced.
JobKeeper Enabling Stand down
The changes authorise an employer who qualifies for the JobKeeper subsidy to provide a JobKeeper enabling stand down direction to an employee because the employee cannot be usefully employed for their normal days or hours of work as a result of the COVID-19 pandemic or the government’s initiatives to slow the transmission of COVID-19 (i.e. the closure of non-essential services).
Please note this differs from the regular stand down provisions (as contained at section 524 of the FW Act) as it does not have to be a stoppage of work outside the employer’s control. This provision in respect of JobKeeper stand down directions is much broader and flexible and the employer must ensure that it meets the requirements that an eligible employee cannot be usefully employed due to the COVID-19 pandemic and government initiatives to slow the transmissions. This means you can stand down employees for a lack of work which is a result of COVID-19.
A JobKeeper enabling stand down direction is a direction given by an employer to:
- not work on a day or days that the employee would usually work;
- work for a lesser period than what the employee would usually work; or
- work a reduced number of hours compared to their ordinary work.
When the JobKeeper enabling stand down applies, the employer is still required to satisfy the wage condition, the minimum payment guarantee and the hourly rate of pay guarantee.
Consultation obligations also apply please see below with respect of consultation.
The changes authorise an eligible employer to give a direction to an eligible about:
- Duties to be performed that:
- are within the employee’s skill and competency;
- the employee has the necessary licence or qualifications to carry out;
- are safe regarding the nature and spread of COVID-19; and
- are within the scope of the employer’s business;
- Location of the employee’s work:
a. including performing duties at a place different from the employee’s normal place of work; or
b. performing duties at a place that is suitable,
so long as:
- the place does not require the employee to travel an unreasonable distance;
- the location is safe regarding the nature and spread of COVID-19; and
- the location is within the scope of the employer’s business.
JobKeeper enabling direction includes JobKeeper enabling stand down and authorised direction.
Consultation obligations also apply, please see below section titled “Consultation”.
All JobKeeper enabling directions will apply until or unless withdrawn or replaced by the employer, varied by the Fair Work Commission, or until 28 September 2020.
The changes authorise an eligible employer to make an agreement with an eligible employee in relation to:
- the days or times when the employee is to perform work; and
- the employee taking annual leave.
Days of Work
An eligible employer can request an eligible employee to perform duties on different days or at different times compared to an employee’s ordinary hours provided that it is safe regarding the nature and spread of COVID-19 and within the scope of the employer’s business.
If this request is made the employee is under an obligation to consider the request and must not unreasonably refuse the request.
Any agreement made needs to be in writing.
The amendments to the FW Act allow an eligible employer to request an eligible employee to take annual leave. This is essentially switching the onus regarding annual leave. Outside of this amendment, an employee has the right to request annual leave, and the employer must not unreasonably refuse. This amendment gives the employer the ability to request, and the employee must not unreasonably refuse this request.
The eligible employer can now request that an eligible employee take annual leave if the following elements are satisfied;
- the employer qualifies for the JobKeeper subsidy; and
- the employer is entitled to one or more JobKeeper subsidy for the employee; and
- compliance with the request will not leave the employee with a balance of fewer than 2 weeks annual leave.
The employee will then be required to consider the request and must not unreasonably refuse the request.
It is also permissible to agree in writing between an eligible employee and an eligible employer regarding the employee taking twice as much paid annual leave at half the employee’s rate of pay. By way of example, an employer and employee can agree to four weeks leave being taken, but the employee only has two weeks annual leave deducted and is paid at half pay for each week of annual leave taken, thereby totalling a payment of the full two weeks annual leave.
The employer must also meet the consultation requirements of the FW Act – please see below section titled “Consultation”.
These amendments do not affect any power to direct, request or make an agreement in relation to the taking of annual leave that already exists under the National Employment Standards, or under a Modern Award or an enterprise agreement.
An employee that is stood down or receives half pay on annual leave in accordance with these amendments will continue to accrue leave entitlements as though these directions had not been given. Additionally, redundancy pay and payment in lieu of notice of termination are also to be calculated as though these directions had not been given.
A direction given by an eligible employer will not apply under the amendments to the FW Act unless the following conditions are met:
- the eligible employer must give the eligible employee 3 days written notice (or a lesser period if agreed) of its intention to give the direction;
- the eligible employer must consult with the eligible employee before giving the direction and must keep a written record of a consultation;
- the direction will not apply if it is unreasonable in all of the circumstances; and
- the direction will have no effect unless the eligible employer reasonably believes that the direction is necessary to continue the employment of one or more eligible employees.
This notice might be in a prescribed form (which is still yet to be formulated). It is not yet clear whether a form will be prescribed by the Government.
If an eligible employer provides its eligible employee with a JobKeeper enabling direction, that period counts as service.
Request for secondary employment or training
If an eligible employer provides its eligible employee with a JobKeeper enabling stand down and the employee requests the following:
- engaging in reasonable secondary employment;
- professional development, the eligible employer must consider the request and not unreasonably refuse the request.
Under the Award, employees have the right to accrue RDOs during any of the following periods:
- paid personal/carer’s leave;
- annual leave;
- long service leave;
- public holidays;
- workers compensation;
- paid compassionate leave;
- training leave; and
- jury service.
The employee will not accrue time toward an RDO on unpaid leave, such as stand down.
Scenario 1: Employer with multiple employees who are all currently paid more than $1,500 per fortnight and are still working their normal hours of work
Joe runs an electrical business and employs five full-time electricians. Joe’s employees are all receiving $2,000 per fortnight before tax. Joe’s turnover has declined by more than 30% and Joe may need to lay staff off or consider reducing wages (if entitled to do so).
As a result of this, the JobKeeper subsidy will apply (as long as the employees are eligible employees) and Joe will be required to pay each of the employees $1,500 per fortnight from the JobKeeper subsidy and make up the difference of $500 per employee per fortnight.
Scenario 2: A full-time employee works 2 days per week and is stood down for the remaining 3 days, thereby on reduced hours, are they entitled to the JobKeeper subsidy?
Yes, they will be entitled if the employer and the employee are eligible for the JobKeeper subsidy. The employee in this instance would be paid a minimum of $1,500 per fortnight, assuming that the employee does not earn in excess of $1,500 for the 4 days worked in the fortnight. If the employee does earn in excess of $1,500 for the 4 days worked in the fortnight, then the employer would need to make up the difference.
Scenario 3: Employee has one week off and then works 38 hours next week. Are they entitled to the JobKeeper subsidy?
Yes, they will be entitled if the employer and the employee are eligible for the JobKeeper subsidy. The employee in this instance would be paid a minimum of $1,500 per fortnight, assuming that the employee does not earn in excess of $1,500 for the 5 days worked in the fortnight. If the employee does earn in excess of $1,500 for the 5 days worked in the fortnight, then the employer would need to make up the difference.
Scenario 4: Employee works two days per week, can an employee to take annual leave for the remaining three days in the week and the employer use the JobKeeper subsidy to pay the annual leave entitlement?
Yes, they will be entitled if the employer and the employee are eligible for the JobKeeper subsidy. An employer is entitled to request an employee to take annual leave and the employee cannot unreasonably refuse provided that the employee retains at least 2 weeks annual leave in their accruals. Further, the request must comply with the annual leave requirements under the amendments. In this scenario, the employee would be paid a full week’s wages, the employee would be entitled to receive the JobKeeper subsidy and the leave would be taken from the employee’s annual leave accruals. Additionally, annual leave loading should be paid (if applicable).
Scenario 5: Employee works 6 days in a fortnight, is stood down for the remaining 4 days in the fortnight, however, the employee earns $2,000 gross for the 6 days actually worked
The employer and the employee (if eligible) will be entitled to use the JobKeeper subsidy in this scenario. As the employee, in this instance, is earning $2,000 for the 6 days actually worked in the fortnight, the employer would be obligated to pay the employee the JobKeeper subsidy of $1,500 plus the additional $500 for time actually worked. This is set out in gross amounts. Additionally, the employee would be entitled to be paid superannuation on the entire amount ($2,000) because it is for ordinary time earnings. Note: the only time that superannuation is not paid is for time that is paid whilst on stand down.
Scenario 6: Employee works 3 days in a fortnight and the employee is stood down for the remaining 7 days in the fortnight. For the 3 days actually worked in the fortnight, the employee earns $1,000 (gross). Would the employee be entitled to the full JobKeeper subsidy?
The employer and the employee (if eligible) will be entitled to use the JobKeeper subsidy in this scenario. In this instance, the employee would be paid the full $1,500 JobKeeper subsidy, however, the employee would only be entitled to payment of superannuation on $1,000 paid for time actually worked.
Disclaimer: This summary is a guide only and is not legal advice. For more information on legislative or contractual obligations, contact CTI Lawyers on 1300 361 099 or email [email protected].