Governments throughout the world have been responding to the ongoing COVID-19 pandemic, ranging from public health initiatives to stem the spread of the virus to economic support for businesses and individuals. A popular fiscal tool that some governments have pursued is to subsidise an employer’s payroll costs.
Under a wage subsidy program, an employer receives money from the government to cover some or all of their payroll costs. While there are variations among the programs, the intent is the same: to keep as many people on payroll as possible so they can support themselves and their families, and then enable businesses to quickly return to normal operations when the crisis subsides.
This blog focuses on the wage subsidy programs that have been implemented in Australia and New Zealand. You may learn about similar programs in the UK and Ireland here. As you will learn, employers who decide to participate are expected to follow strict rules and will need to understand how their participation impacts their workforce, both during the period of time that the employer is receiving the subsidy and afterward.
The Australian government launched a JobKeeper payment program (JobKeeper scheme) under which eligible employers may receive a fortnightly payment of $1,500 per eligible employee. The JobKeeper scheme is available from 30 March 2020 to 27 September 2020. In addition, legislation was passed to help employers facilitate the JobKeeper scheme, which will be discussed in more detail below.
To qualify for the JobKeeper scheme, the employer has to have suffered loss of revenue and are not subject to the Major Bank Levy. If a business is in liquidation, it is not eligible.
For private sector businesses that have less than $1 billion in annual turnover, their turnover must have fallen or will likely fall by at least 30 percent to be eligible. For private sector business that have an annual turnover of $1 billion or more, their turnover must have fallen or will fall by at least 50 percent to be eligible.
Registered charities and non-profits may qualify as well, but they only need to have suffered (or will suffer) a drop in turnover of 15% relative to a comparable period. However, this lower turnover test does not apply to universities and non-government schools, even if they are registered as charity.
Universities and non-government schools are subject to the same standards as private sector businesses. The ATO has published guidance to help employers understand how to measure whether they have experienced sufficient turnover. Employers will have to self-evaluate their eligibility each fortnight. Employers who may not have initially been eligible for the program may become eligible at a later date, at which point they may enroll.
Employers who qualify for the JobKeeper scheme must enroll through the Australian Taxation Office (ATO). The ATO developed an online JobKeeper portal, which became available on 20 April 2020. Employers have until 31 May 2020 to enroll. Employers may direct their BAS or Tax agent to register and manage the program on their behalf.
Much like with a similar program in the UK, the JobKeeper start date predates when employers could register and begin receiving the subsidy or payment. After enrolling in the JobKeeper scheme, employers will continue to pay eligible employees through their normal payroll process and will make claims through the ATO. The ATO will issue payments beginning from the first week of May 2020. Payments are expected to be made in arrears on a monthly basis.
Employers will have to determine which employees are eligible for the JobKeeper payment. An employee is eligible if:
Employers must inform any eligible employee that they will be benefiting from the JobKeeper scheme. The ATO published a form that employers must provide to each employee, which the employee should complete and return to their employer.
Employers who participate in the scheme and receive a subsidy are required to provide the entire payment to each employee. The subsidy may not cover the entire cost of an employee’s wages. Unlike the UK scheme and Ireland scheme, when it comes to the amount the employer receives per employee, all employees are treated equally when it comes to the subsidy payment.
For workers who earn less than $1,500 per fortnight, the employer must provide the entire amount to the worker. If an employee is paid more than $1,500 per fortnight, the employer is only reimbursed for $1,500 of the employee’s total pay. The employer should continue to pay the remainder of the worker’s salary. If an employee has been stood down, they must receive the minimum amount of $1,500 per fortnight. If an employer becomes unable to meet their payroll costs, they will not be able to participate in the program.
To help employers participate in the JobKeeper scheme, the Australian Parliament passed Coronavirus Economic Response Package (Payments and Benefits) Bill 2020 and the Coronavirus Economic Response Package Omnibus (Measures No. 2) Bill 2020 on 8 April 2020. The legislation amended the Fair Work Act by inserting a new Part 6-4C. Under Part 6-4C, employers are authorised, under certain circumstances, to:
In practice, these amendments will help employers lower their payroll costs to a level they can sustain while at the same time enabling them to continue to participate in the JobKeeper scheme.
Importantly, an employer must consult with an employee before using any of the provisions under new Part 6-4C. The legislation also provides conditions that must be satisfied when an employer takes action under Part 6-4C. For instance, if an employer directs an employee to perform different duties, the duties must be safe and the employee must possess any required licenses or qualifications to perform the work.
Employers are encouraged to carefully review the legislation to understand all the rules that need to be followed. In addition, an employer needs to act reasonably when making decisions under the amendment. If the employer acts unreasonably, the direction may be deemed to not apply to the employee.
Outside of new Part 6-4C to the Fair Work Act, employers will still need to follow existing employment law. Employers should consult with their advisors if they have any questions about the interaction of the JobKeeper scheme with any paid leave entitlements or other benefits an employer provides to its employees.
Employers may find more details about the JobKeeper scheme here.
The New Zealand government developed two wage subsidy programs, under which employers may be reimbursed $585.50 per week for full-time employees and $350 per week for part-time employees. Both programs offer the same wage subsidy amounts, however they serve different purposes and durations, which will be discussed below.
Under the regular COVID-19 Wage Subsidy Scheme, employers are eligible if they satisfy the following conditions:
A tool is available to help employers determine whether they are eligible.
Once an employer determines they are eligible, they may apply online. Employers should understand that when they are applying, it is for the entire duration of the program, which will last 12 weeks. Employers also have to complete a declaration form, which should be carefully reviewed. The employer will be notified about whether their application was approved.
If approved, the employer must try their hardest to pay every employee named in the application at least 80% of their usual wages. If the employer finds it impossible to do that, they need to pay at least the subsidy rate to each employee. However, if the employee’s wages are less than the subsidy, the employer may pay them their normal wages. This is different than in Australia, where employees who made less than the subsidy still received the full amount.
The other subsidy program is the COVID-19 Leave Support Scheme (New Zealand leave scheme). Under this program, an employee is eligible if:
Employers may apply for a subsidy under this program if a worker meets one of the above conditions. All businesses may apply, provided that they meet one of two conditions.
Either condition, not both, needs to be satisfied to be eligible. Note that the first condition is somewhat squishy, which was likely by intention to help ensure that if an employee is eligible, the employer is able to receive a subsidy for them. If an employer meets the other condition (drop in revenue), it may make more sense to pursue the New Zealand subsidy scheme because it lasts a longer duration.
The New Zealand leave scheme covers a four-week period, but employers may re-apply if needed. When an employer is receiving a subsidy for an employee, the employer should make attempts to continue paying the employee at least 80 percent of their normal wages. If the employee’s usual wages are less than the subsidy, the employer must pay the employee at least their usual wages. The employer may use the excess subsidy amount for wages for other workers.
Employers may learn more about the New Zealand leave scheme here.
Employers may participate in both programs at the same time, they just cannot claim the same employee under each.
An employer’s obligations to their employees do not change if they are participating in either of the New Zealand subsidy schemes. This means that if an employee is still working, they need to be paid for all hours they are working, pursuant to their employment agreement. In addition, employees continue to be eligible for any statutory entitlements or employer-provided benefits while their employer participates in the program.
The public will be able to easily identify any employer who is participating under a New Zealand subsidy scheme by using the following tool. While some commentators have suggested that this will discourage participation, the government’s intent is to provide transparency to the public about which organisations are receiving government moneys.
Employers may learn more about the New Zealand schemes here.
Ceridian provides periodic and selected compliance updates that may have relevance to many of our customers. Ceridian provides this information to customers for general information purposes only. This information should not be construed as legal, tax or other advice specific to any individual or organisation. Please consult your appropriate adviser for such specific advice.
Adam Wysopal is Compliance Counsel at Ceridian with years of experience advising organizations on regulatory obligations and internal compliance programs. Adam is passionate about technology, innovation, and collaboration. In his current role, Adam enjoys being able to support development teams in their continuous effort to ensure Ceridian’s HCM solutions keep up with evolving employment-related compliance needs.View Collection