The new legal Rules just released on 14 April, clarify important details about how employers go about applying for and claiming the $1,500 a fortnight JobKeeper payment and who is an eligible employee.  They apply from 9 April 2020.

For those readers who want to look at the actual legislated Rules, they are called the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (referred to in the Amended Fair Work Act as the “JobKeeper payment rules”).

There is a lot of detail in these Rules.  This update gives you the key highlights.  And at the end of this update, we have a couple of worked examples which we hope you find helpful.

By way of a recap, JobKeeper is a Federal Government wage subsidy scheme that will operate from 30 March 2020 to 27 September 2020.  Eligible employers will effectively be invoicing the Federal Government regularly for $1,500 per fortnight for payments they pass on as taxable income to each “eligible employee”.  In order to qualify for this rebate, each fortnight, the JobKeeper employer needs to demonstrate (i) the employee is an eligible employee for that fortnight, and (ii) the employer has satisfied the $1,500 a fortnight “wage condition” for that fortnight.  The payment from the Federal Government is a payment in arrears from 30 March.

The key observations in brief

1. The Employer eligibility rules have been set as based on a percentage reduction in the employer’s turnover depending on the size of the employer.

We can expect to see further refinement of these eligibility rules, because there are difficulties in developing a “one-size-fits all” test.  For example, the current rules are difficult to apply for a corporate group employer, where the company collecting all the receivables (and suffering the reduction in turnover) is not the same entity as the entity that employs the workers in the business.

2. Employers wanting JobKeeper payments to start from 30 March 2020 must gather the required paperwork and apply before 26 April 2020.

3. Employers will need to take care in selecting casual employees to be part of the scheme. Only casual employees who have been “regularly and systematically employed” for more than 12 months are potentially eligible for JobKeeper payments.

The term “regular and systematic casual” frequently arises in industrial laws; these kinds of casuals usually have additional rights compared to other casuals: e.g. they may be permitted to bring an unfair dismissal claim and in Modern Awards casuals who work a consistent pattern of hours can request to be converted to full or part time employment.  So there is guidance in cases about who is regular and systematic as a casual employee.

Employers should therefore be mindful that by including a casual employee into the JobKeeper scheme, it may be setting expectations amongst its casual workforce that could have flow-on, significant industrial and practical implications.

4. The $1,500 per fortnight wage condition is the central obligation of the employer. The Rules clarify that it is not a $1,500 per fortnight payment to the employee directly.  Certain payments in respect of the employee will count towards the $1,500; specifically, payments for PAYG withholdings and payments made as part of salary sacrifice arrangements will also count.  Superannuation contributions only count in the “wage condition” if they are part of a salary sacrifice arrangement (i.e. not the usual superannuation contribution in relation to hours worked by the employee).

The Rules do not seem to prevent an employer from using JobKeeper payments to fund long service leave or annual leave payments.

5. The Treasurer has flagged that further rules will be written to deal with superannuation contributions. It is clear that superannuation contributions will need to be paid on employees’ wages for work. So if $1,000 of the JobKeeper $1,500 is attributable to wages for work, then superannuation is payable on the $1,000, and not the remaining JobKeeper $500.

6. We would expect that if the JobKeeper payment is used by the employer to fund annual leave or long service leave, superannuation will need to be paid on those payments.

Employer eligibility – Becoming a JobKeeper employer

Once an employer becomes a JobKeeper employer, they are not reassessed again during the scheme (which runs until September 2020).  The Federal Government publicised the JobKeeper employer eligibility criterion for some time, and the published rules are consistent with those earlier announcements.  The business needs to have been operating at 1 March 2020 and not be subject to liquidation.  The Commissioner for Taxation determines eligibility based on the decline in turnover (the so-called “decline in turnover test”); the larger the business, the larger the decline needs to be.  The Rules provide for several “decline in turnover” tests, the key ones are these:

• For entities with a turnover of less than $1 billion, a decline in turnover of at least 30% is required;
• For entities with a turnover of more than $1 billion, a turnover reduction of at least 50% is required as against the same time last year;
• Charities need only demonstrate a reduction in turnover of 15%. However, universities, pre-schools, secondary schools and schools for children with disabilities are excluded from the definition of “charity” for the purposes of the “decline in turnover” test.

Although the Rules provide for several ways of applying the “decline in turnover test”, the Commissioner for Taxation has the power to make new “decline in turnover” rules for particular classes of business if there is no relevant “comparison period” for the entity to demonstrate the decline in turnover.

This flexibility will be important as the Federal Government implements this scheme.

One area where the Commissioner for Taxation may develop a revised “decline in turnover test” is for corporate groups: the current “decline in turnover test” assumes that the entity employing workers is the same company that earns the revenue for the business of the employer group.  This is not how many businesses are organised; the eligibility of corporate group employers would seem to be ripe for further clarification and regulation.

Do employers need to apply now?

Employers that want to be paid the JobKeeper amounts from 30 March 2020 will need to apply before 26 April 2020.

But employers can apply at anytime while the JobKeeper scheme is in operation.

Businesses that expect a delayed impact of COVID-19 on its business can be assured that JobKeeper can still be an option if the required decline in turnover comes later.  The “decline in turnover test” will be applied as at the period that the employer seeks JobKeeper payments.

The Government will make a payment of the JobKeeper amounts to the employer before making a full assessment of their eligibility for JobKeeper.  If ultimately, the employer was not entitled to those JobKeeper payments, it will need to repay the monies to the Federal Government.

Eligible employees

Every time an employer “invoices” the Government for its employees, it needs to show to the Federal Government that the employee is an “eligible employee” in that fortnight, and that it has met the “wage guarantee” for that fortnight in respect of that eligible employee.

The employee does not need to have had a drop in pay or hours of work, to be eligible.

There has been some media coverage about the “all in” requirement, i.e. the idea that the employer must apply for JobKeeper payments for all of their employees, not selective ones. Labor wanted all employees of an eligible employer to receive it. This “all in” aspect is not stated in the legislation or the Rules.

To receive the payment, the employee needs to be an Australian resident, over the age of 16, full time or part time employees or long term casuals on 1 March 2020.

The employee will also need to sign a form and provide it to the employer, which states that they agree to be part of the JobKeeper Scheme, and that they confirm that they have not been nominated by another employer to receive the JobKeeper payments.  The ATO has on 15 April published on its website the Employee Nomination Notice for both the employer and employee to complete for JobKeeper.  On its website the ATO says to employers: “You do not need to send this notice to us, however you should keep a record to document that your employee has agreed that you claim the JobKeeper Payment for them.”

Two types of employees are excluded from JobKeeper:

1. Employees receiving the Federal Government’s paid parental leave subsidy. If during the JobKeeper Scheme (i.e. before September 2020), the employee ceases receiving the paid parental leave subsidy, s/he will be entitled to the JobKeeper payments provided that s/he completes the prescribed form and provides it to their employer.
2. Employees receiving workers compensation payments and are fully incapacitated will also be ineligible for JobKeeper. If during the JobKeeper scheme, an employee on worker’s compensation gains capacity to work, they will become eligible to receive JobKeeper payments if they complete the prescribed form and provide it to their employer.

JobKeeper “wage condition” explained

As mentioned, every time a JobKeeper employer in effect “invoices” the Federal Government for its employees for the JobKeeper $1,500 a fortnight rebate, it needs to demonstrate that the employee is an “eligible employee”, and that it has met the “wage condition” for that eligible employee in that fortnight.

The “wage condition” is essentially the condition that the employer only gets the money if they pass it on to/in respect of the employees. In other words, the condition is that the employer pays at least $1,500 a fortnight for each eligible employee; but the Rules clarify what payments to or in respect of an employee count towards the $1,500, as follows:

• salary, wages, commission, bonuses or allowances – in our view, this would permit the use of the $1,500 to fund annual leave and long service leave;
• amounts withheld from the employee for income tax or HECS-HELP loans (i.e. PAYG withholdings) – in fact, employers are required to withhold PAYG monies from JobKeeper payments to employees;
• superannuation payments that are made under a salary sacrifice arrangement); and
• amounts that are applied or dealt with by agreement between the employee and employer for salary or wages to be reduced (e.g. salary sacrifice arrangements).

In other words, the $1,500 a fortnight JobKeeper money can be used to fund the usual wage entitlements of employees, but it cannot be used to pay for superannuation contributions.

Superannuation contributions on JobKeeper payments

The SGC legislation has not yet been changed.  But in the Explanatory Statement from the JobKeeper Rules, the Treasurer indicates what the intention is for super in relation to JobKeeper situations. Our comments assume the content in the Explanatory Statement makes its way into the SGC legislation.

What is made clear in that Statement is that employers only need to make superannuation payments for the actual hours worked by an employee, at their usual rate (not based on a rate of pay that is calculated by reference to the $1500 JobKeeper amount).

Whether or not an employer uses the $1500 JobKeeper payment to fund some or all of the employee’s wages, is not the question.   It is about hours worked and the usual rate of pay. Consider these examples we have created:

• If an eligible employee’s usual wage is $1,400 per fortnight and they are currently stood down entirely and performing no work, and the employer receives and pays the $1500 to/in respect of the employee, no super is paid. There were no hours worked.
• If an eligible employee’s usual wage is $1,400 per fortnight and they work full time their usual 38 hours per week, (but the employer paid $1,500 JobKeeper monies to/in respect of that employee), the employer is only required to make superannuation contributions on the $1,400.
• If an eligible employee’s usually earns $2,000 in wages per fortnight, and works their normal full working week, the JobKeeper $1500 payment is irrelevant for superannuation calculations. They get superannuation paid for the hours worked, – in this case, 9.5% on $2000. (even though the employer funded part of that $2,000 using JobKeeper monies).
• If an eligible employee usually earns $2,000 in wages per fortnight, and works no hours because they are stood down entirely, there is no super to be paid. Because no hours were worked. That is still the case even if the employer pays to/in respect of the employee, the $1,500 JobKeeper that $2,000 using JobKeeper monies).

A Word about Casuals and “long term” or “regular and systematic casuals”

Casuals are only included if as at 1 March 2020, they have been employed for at least one year and are “regular and systematic”.  The “regular and systematic” test is familiar under the Fair Work Act.  In the Fair Work Act, we see this terminology being used for the entitlement to paid parental leave; under the Fair Work Act, a casual employee can make an unfair dismissal claim against their employer if they have been employed on a regular and systematic basis for at least 6 months and have a reasonable expectation of ongoing employment.  In some Modern Awards, we also see that casual employees who have a pattern of hours on an ongoing basis that, without significant adjustment, have the right to request to be converted to part-time or full time positions.

Employers with a casual workforce will need to be judicious in selecting casual employees to be JobKeeper eligible.  We would expect that there could be some industrial disputation about which casual employees are within the scope.  As this “regular and systematic” concept is frequently used in this area, what is at stake could see the employer setting an expectation among casual workers not just about JobKeeper payments, but also about other significant industrial issues.

15 April 2020.