JobKeeper 2.0: What employers need to know

The JobKeeper scheme was originally scheduled to cease on 27 September 2020. While it has come at considerable cost to the Commonwealth Government (although approximately half of the $130 billion initially forecast), the scheme has provided critical support to 960,000 businesses and 3.5 million workers – approximately 30% of the pre-COVID-19 private sector workforce. [1]

A recent Treasury review found the scheme has met its objectives and there is a strong case for it continuing, given employment is expected to decline by 5% between the March and September quarters. However, the review noted if the scheme is to continue, it will need to be the subject of some amendments. [2]

Legislation has just passed (on 1 September 2020) to continue the JobKeeper scheme until 28 March 2021, [3] albeit with some reduced benefits for both employers and employees. The extended JobKeeper scheme will occur over two extension periods and is expected to cost the government an additional $16.6 billion. The JobKeeper scheme is administered by the Australian Taxation Commissioner and implemented through the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Cth), which have also been amended and extended.

A summary of the key differences between the schemes is set out below, and explored in greater detail in this article.

Original JobKeeper | 30 March 2020 to 27 September 2020

• Employers are required to meet a projected downturn in revenue threshold in order to be an "eligible employer"
• "Eligible employers" are able to access a $1,500 per fortnight wage subsidy for each "eligible employee"
• JobKeeper enabling directions do not apply if the direction is unreasonable in all the circumstances
• Ability to request employees reach agreement to take annual leave (such agreement cannot be unreasonably withheld)

JobKeeper 2.0, Phase 1 | 28 September 2020 to 3 January 2021

• Employers will be required to establish that their actual downturn satisfies the requisite threshold in order to be an "eligible employer"
• "Eligible employers" are able to access a $1,200 or $750 per fortnight wage subsidy for each "eligible employee" depending on whether the employee's average hours of work exceed 20 hours per week
• JobKeeper enabling directions do not apply if the direction is unreasonable in all the circumstances
• A direction regarding the reduction of hours given to employees in a particular category may be unreasonable if the directions have an unfair effect on some employees in that category compared with other employees in that category who are also subject to those directions
• No ability to request employees reach agreement to take annual leave

JobKeeper 2.0, Phase 2 | 4 January 2021 to 28 March 2021

• Employers will be required to establish that their actual downturn satisfies the requisite threshold in order to be an "eligible employer"
• "Eligible employers" are able to access a $1,000 or $650 per fortnight wage subsidy for each "eligible employee" depending on whether the employee's average hours of work exceed 20 hours per week
• JobKeeper enabling directions do not apply if the direction is unreasonable in all the circumstances
• A direction regarding the reduction of hours given to employees in a particular category may be unreasonable if the directions have an unfair effect on some employees in that category compared with other employees in that category who are also subject to those directions
• No ability to request employees reach agreement to take annual leave

With the exception of agreements to take annual leave, any existing JobKeeper enabling directions or agreements will automatically be extended beyond the original repeal date of 28 September 2020.

In addition, previously "eligible employers" who do not qualify for the JobKeeper subsidy after 28 September 2020 but have a certificate stating they satisfy a 10% decline in turnover test (referred to in the explanatory materials as "legacy employers") will be able to access modified flexibility measures. That is, they will have the right to issue previously "eligible employees" with JobKeeper enabling directions in relation to duties and location of work and to reach agreements with that employee around days and times of work, save that the employee's ordinary hours of work cannot be reduced to less than 60% of the employee's ordinary hours as at 1 March 2020 and the employee cannot work less than two hours in a day.

Previously eligible employers must provide seven days' notice before issuing a JobKeeper enabling direction (increased from three days) and are subject to more extensive consultation obligations than "eligible employers". Previously eligible employers must re-satisfy the 10% decline in turnover test for each of the subsequent quarters in order for any JobKeeper enabling directions to remain effective, in respect of which they are subject to strict employee notification requirements.

JobKeeper: The original scheme

Since 30 March 2020, "eligible employers" have been able to access a $1,500 per fortnight wage subsidy for each "eligible employee". The subsidy was designed to support employees and incentivise businesses to maintain employment relationships with as many employees as possible.

In order to be eligible for the JobKeeper subsidy, employers generally had to satisfy a "decline in turnover test", [4] by demonstrating a requisite % decline in projected turnover (with the requisite decline varying depending on the size of their business) for a month or quarter in 2020 when compared to the corresponding month or quarter in 2019.

As part of the scheme, the government also passed temporary amendments to the Fair Work Act 2009 (Cth) to provide "eligible employers" with a range of flexibilities in order to adapt to the COVID-19 economic climate via a new Part 6-4C - Coronavirus economic response. These JobKeeper flexibilities gave "eligible employers" the right to direct "eligible employees" to perform other duties, change their location of work, reduce their hours to as little as zero and agree to take annual leave (including at half-pay) via "JobKeeper Enabling Directions" and "JobKeeper Enabling Stand-down Directions".

You can read more about the original scheme in our previous articles: regarding the announcement of the scheme, and about the changes to the Fair Work Act 2009 (Cth).

While the scheme has been the subject of some criticism for excluding short-term casuals and employees on visas, and resulting in windfalls for employers who did not experience a sustained downturn in revenue and employees who ordinarily earned less than the subsidy, it has been a critical mechanism to deliver widespread support at scale for the more than two million Australians who either lost or experienced a reduction in their employment between February and May 2020 as a result of the pandemic.

JobKeeper 2.0: What's changed?

The revised "decline in turnover test" for determining who remains an "eligible employer"

In order to be eligible for the JobKeeper subsidy from 28 September 2020, employers will have to meet a further decline in turnover test for each of the two periods of the JobKeeper extension.

Previously, employers were required to meet a projected downturn in revenue. [5] Employers will now be required to show that their actual downturn satisfies the requisite threshold in order to be an "eligible employer".

This means that in order to be eligible for JobKeeper payments in the initial extension period of 28 September 2020 to 3 January 2021, an employer will need to establish they have suffered the requisite decline in actual GST turnover in the September 2020 quarter (i.e. July, August, September 2020) relative to a comparable period (generally the corresponding quarter in 2019). This means that employers will be required to assess their GST eligibility prior to lodging their business activity statement.

In order to be eligible for the subsidy in the second extension period from 4 January 2021 to 28 March 2021, employers will need to demonstrate that their actual GST turnover has fallen in the December 2020 quarter (i.e. October, November, December 2020) relative to a comparable period (again, generally the corresponding quarters in 2019).

The Commissioner of Taxation will retain the existing discretion to set out alternative tests in particular circumstances.

For businesses who remain "eligible employers"

Removal of flat subsidy and phased reduction of subsidy

For businesses who remain "eligible employers" from 28 September 2020, the existing flat-rate subsidy (where all eligible employees automatically receive $1,500) will cease and be replaced with a two-tiered structure depending on an employee's weekly average hours of work, with phased reductions in the amount of subsidy as follows.

According to guidance issued by the Treasury, an employee's average weekly hours of work will be assessed based on their hours worked in the month of February 2020. However, the Commissioner of Taxation will have discretion to set out an alternative test where an employee's hours were not usual during the February 2020 period (e.g. if the employee was on leave, volunteering or not employed in all or part of February 2020). [6]

"Eligible employees"

The scheme retains the eligibility criteria that meant that the JobKeeper subsidy was not available to casuals who had worked for their employer for less than 12 months, to most visa workers, local government employees, employees of universities and for foreign-owned entities.

However, as a result of the introduction of the two-tiered payment structure based on average weekly hours of work, combined with the retention of the requirement that an employee can only be an "eligible employee" with one employer, JobKeeper v2.0 is likely to significantly disadvantage eligible part-time or regular casual employees who work less than 20 hours per week with multiple employers.

Ongoing flexibility under Part 6-4C of the Fair Work Act 2009 (Cth), with a twist

Eligible employers will continue to be able to utilise the JobKeeper flexibilities (e.g. to issue JobKeeper enabling directions to eligible employees, including to perform other duties, change location of work and reduce their hours to as little as zero) as discussed in our previous article.

However, the current right to request an "eligible employee" (who could not unreasonably refuse such a request) take annual leave (including at half-pay) will no longer apply from 28 September 2020, when Division 5 of Part 6-4C of the Fair Work Act 2009 (Cth) will be repealed. Any agreements with "eligible employees" regarding the taking of annual leave will cease to have effect from that date (however any other aspects of the agreement will remain in force, e.g. regarding hours of work, duties and the times when the employee is to work).

The legislation also introduces a new note to section 789GK, the provision which states that a JobKeeper Enabling Direction does not apply if the direction is unreasonable in all of the circumstances. The new note specifies that if a direction regarding the reduction of hours is given to employees in a particular category, the directions may be unreasonable if the directions have an unfair effect on some employees in that category compared with other employees in that category who are also subject to those directions.

For businesses who were previously "eligible employers", ongoing flexibilities available where a 10% decline in turnover is satisfied

A business which was previously an "eligible employer" under the original JobKeeper scheme, but which does not meet the revised "downturn in turnover test" to qualify from 28 September 2020, will remain eligible to access some of the flexibilities under Part 6-4C of the Fair Work Act 2009 (Cth) in certain circumstances.

This reflects a softening of the government's initial position that all former "eligible employers" should remain able to access the flexibilities, which was met with significant opposition from the union movement. However, amendments proposed by Labor to limit the flexibilities to current "eligible employers" or, alternatively, to ensure that employees of formerly "eligible employers" could not be subject to a JobKeeper enabling direction that reduced their pay to less than the JobKeeper rate, both failed to secure sufficient support from the crossbench. [7] Amendments proposed by the Greens to provide the Fair Work Commission with broader powers to hear disputes about JobKeeper also failed. [8]

The amendments passed today introduce a new Division 5A into Part 6-4C. Like the other core provisions of Part 6-4 (except for Division 5, as discussed above), Division 5A will remain in force until repealed on 29 March 2021.

10% decline in turnover test

To continue accessing some of the Part 6-4C flexibilities from 28 September 2020, employers who previously qualified for the JobKeeper scheme must be able to establish they have suffered a 10% decline in turnover in a designated quarter.

The "10% decline in turnover test" requires that: [9]

• after commencement and before 27 October 2020 (inclusive), a previously eligible employer must have a 10% decline in turnover certificate for the June 2020 quarter (April, May and June 2020) compared to the June 2019 quarter;
• between 28 October 2020 and 27 February 2021 (inclusive), a legacy employer must have a 10% decline in turnover certificate for the September 2020 quarter (July, August and September 2020) compared to the September 2019 quarter); and
• between 28 February 2021 and 28 March 2021 (inclusive), a legacy employer must have a 10% decline in turnover certificate for the December 2020 quarter (October, November and December 2020) compared to the December 2019 quarter). [10]

The 10% decline in turnover certificate must be issued by an "eligible financial service provider" [11] and confirm the provider's satisfaction that the employer meets the requirements of the 10% decline in turnover test. Small business employers with less than 15 employees will be able to "self-certify" via a statutory declaration from an individual authorised by the employer who has knowledge of the employer's financial affairs.

To continue to utilise the flexibility provisions in Division 5A of Part 6-4C, previously eligible employers must obtain a further 10% decline in turnover certificate for each subsequent quarter, including before 28 October 2020 (in relation to the September quarter) and 28 February 2021 (in relation to the December quarter).

Previously eligible employers: Ongoing flexibility via a new Division 5A of Part 6-4C of the Fair Work Act 2009 (Cth)

Where they meet the 10% downturn threshold, Division 5A of Part 6-4C provides previously eligible employers with the same ability to issue JobKeeper directions to employees with respect to the performance of duties, location of work and time and days of work [12] as businesses which remain "eligible employers". Previously eligible employees may also request an employee reach agreement regarding their days and times of work (which must not be unreasonably refused by the employee). [13]

However, there are a few critical differences when it comes to JobKeeper Enabling Stand-Down Directions under section 789GJA of Division 5A.

Previously eligible employers will only be able to issue a JobKeeper Enabling Stand-Down Direction to reduce an employee's hours of work by up to a maximum 40%. That is, reductions to an employee's hours of work cannot be below 60% of the employee's ordinary hours of work as at the start of 1 March 2020. [14] However, an employee cannot be required to work less than two hours in any day they work.

Notification and consultation requirements

JobKeeper directions issued by previously eligible employers under Division 5A of Part 6-4C are broadly subject to the same regime as those issued by "eligible employers", namely the requirements that:

• the direction must not be unreasonable in the circumstances;
• the employer must reasonably believe the direction is necessary to continue the employment of one or more of its employees;
• the direction must only be given following consultation with the employee (which must be recorded in writing);
• the employee must be provided with advance notice of the intention to give the direction; and
• the direction must be given in writing.

However, a previously eligible employer must provide seven days' advance notice of the intention to give a JobKeeper direction under Division 5A – an increase from the three days' notice previously required (which remains the requirement for "eligible employers").

In addition, the consultation requirements for a previously eligible employer seeking to issue a JobKeeper direction are far more proscriptive. [15]

Duration of directions and penalties for previously eligible employers

A JobKeeper direction issued by a previously eligible employer will immediately cease to have effect after the "test time" (being the start of 28 October 2020 or the start of 28 February 2021) if the employer does not hold a 10% decline in turnover certificate for the designated quarter applicable to that time (being the quarter ending on 30 September 2020 or the quarter ending on 31 December 2020).

Previously eligible employers are subject to strict obligations to provide written notification to employees as to whether JobKeeper enabling directions or agreements will cease or continue based on whether the employer has obtained a new 10% decline in turnover certificate for the relevant quarter.

The Federal Court has jurisdiction to terminate a JobKeeper direction given by a previously eligible employer who does not satisfy the 10% decline in turnover test.

Previously eligible employers who do not meet the 10% downturn threshold, but who knowingly or recklessly try to use the Part 6-4C provisions [16] or who fail to notify employees that a JobKeeper direction is continuing or ceasing each quarter, [17] will be subject to penalties of up to $13,200 for individuals and $66,600 for body corporates.

[1] https://treasury.gov.au/sites/default/files/2020-07/jobkeeper-review-executive-summary.pdf

[2] https://treasury.gov.au/sites/default/files/2020-07/jobkeeper-review-executive-summary.pdf

[3] The Coronavirus Economic Response Package (JobKeeper Payments) Amendment Act 2020 (Cth), which extends the operation of the Coronavirus Economic Response Package (Payments and Benefits) Act 2020 (Cth) and the amendments introducing Part 6-4C of the Fair Work Act 2009 (Cth) (and makes further amendments).

[4] The Commissioner of Taxation also has discretion to set an alternative test to determine whether an employer qualifies for JobKeeper payments.

[5] 50% for employers with an annual turnover higher than $1 billion; 30% for employers with an annual turnover of less than $1 billion; and 15% for charities registered with the Australian Charities and Not-for-profits Commission.

[6] Further guidance will be provided by the ATO where an employee is paid in non-weekly or non-fortnightly pay periods and in other circumstances which the general rules do not cover.

[7] The first proposed amendment was lost 26-24 (independent Rex Patrick and Jacqui Lambie Network's Jacqui Lambie voting with Labor and the Greens); and the second lost 27-25 (Centre Alliance Senator Stirling Griff joining Labor, the Greens and Senators Patrick and Lambie).

[8] Lost 24-24 (Labor and Senators Patrick, Lambie and Griff supporting the Greens).

[9] Section 789GCC.

[10] The Explanatory Memorandum to the Coronavirus Economic Response Package (JobKeeper Payments) Amendment Bill 2020 (Cth) notes that these dates align with the BAS lodgement dates for each completed quarter, rather than with the application of the turnover test for employers to qualify for the JobKeeper scheme under the Rules (because previously eligible employers are no longer party of the JobKeeper payment scheme, so these dates are not relevant to them).

[11] A registered tax agent or BAS agent (within the meaning of the Tax Agent Services Act 2009 (Cth)); or a qualified accountant.

[12] Under sections 789GJB (duties of work) and 789GJC (location of work).

[13] Under section 789GJD.

[14] The new section 789GJA also provides for the percentage reduction to be assessed against the ordinary hours of work for a particular class of employees specified in the regulations, where the employee belongs to that class.

[15] Compare section 789GMA (previously eligible employers) and section 789GM (eligible employers).

[16] Section 789GXB.

[17] Section 789GJE. However, a civil penalty will not be applied to a previously eligible employer's contravention of their obligation to notify an employee of the continuation of a JobKeeper direction unless the employer has previously contravened that obligation (section 789GJE(6)).

Our team is actively monitoring and considering the implications of legal and regulatory developments in response to the COVID-19 pandemic. You can find our COVID-19 collection here.