The most significant changes are the reduction in the monetary value of the wage subsidy and the move to a two-tier system. One of the major criticisms of the current wage subsidy is that a large number of part-time and casual employees have a higher income while receiving Jobkeeper than prior to the commencement of the wage subsidy. The two-tier system is intended to redress this, at least in part.
Employers must now determine which of their employees will receive the new full rate wage subsidy of $1200 from October 2020 and $1000 from January 2021, and who will receive the lower rate subsidy of $750 from October 2020 and $650 from January 2021.
The good news is that this is an objective test and employers are not required to make this decision themselves. Employers are required to look back at the 4 weeks prior to 1 March 2020 to determine if, on average over that period, each employee worked more or less than 20 hours per week. Needless to say, this exercise is not needed for full time employees as they will have always worked more than 20 hours per week. Where part-time or casual employees worked 20 hour or more per week (on average) during the 4 weeks prior to 1 March 2020, they will receive the higher rate wage subsidy. Where a part-time or casual employee worked less than 20 hours (on average) during the period of 4 weeks prior to 1 March 2020, they will receive the lower wage subsidy. The ATO may consider alternative methods for calculating pre 1 March 2020 working hours, in exceptional circumstances.
This may well mean some significant changes need to be made at workplaces from October 2020. Many employers have utilised the wage subsidy for casual and part-time employees to increase their hours of work. However, this may no longer be possible. From October 2020, some part-time and casual employee's will have to work less hours if the time worked is to be accommodated within the wage subsidy. Where employers have the financial capacity to do so, they can continue the higher hours and make up the difference in pay at the employee’s normal hourly rate (including any overtime or penalty rates which may apply).
To illustrate this, we have Fred who is a casual employee earning $25 per hour (inclusive of casual loading). Currently, he is able to work 30 hours per week or 60 hours per fortnight under the current wage subsidy of $1500 per fortnight. However, in February 2020 Fred worked an average of 15 hours per week. Therefore, from October 2020, Fred’s employer will only receive $750 per fortnight as a wage subsidy for Fred. If his employer does not have the financial capacity to pay him more than the hours covered by the wage subsidy, Fred will be restricted to working 15 hours per week or 30 hours per fortnight.
Similarly, full-time employees will see a reduction in hours of work if their employer is unable to make payments in addition to the wage subsidy. A full-time employee who earns $30 per hour is currently able to work 25 hours per week or 50 hours per fortnight and have all time covered by the wage subsidy. From October 2020, this same full-time employee, if the employer is unable to make payments over and above the wage subsidy, will only be able to work 20 hours per week or 40 hours per fortnight.
Of course, the hope is that by October 2020 business will have sufficiently improved so that employers are not solely reliant on the Jobkeeper wage subsidy to pay their employees. Let’s hope that is the case, but for those who may not be in that fortunate position, we recommend that you start planning now for how you are going to fill any available hours under the terms of Jobkeeper 2.0.
Now is also an excellent time to look back at your time and wages records for the 4 weeks prior to 1 March 2020, to determine if any part-time or casual staff worked (on average) less than 20 hours per week in that period. If so, they will need to be moved to the lower rate of subsidy from October 2020. The sooner employees are made aware of the wage subsidy which will be available to their employer, the sooner they too can plan how they are going to manage on the lower income if their employer is not in a position to engage them for additional hours beyond that covered by the new wage subsidy.
These are difficult times which call for innovative solutions. If you would like assistance in understanding all of your options available to you as an employer and for your business, please contact our HR Consulting specialist, Cheryl-Anne Laird, at firstname.lastname@example.org or 0412 746 419.
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