With the JobKeeper payment scheme due to end on 27 September 2020, many employers are wondering what their rights and obligations are when JobKeeper ends, and what they can do to prepare in advance for when JobKeeper payments cease.
Common questions we are being asked include what are employers’ rights to keep employees on reduced hours when JobKeeper ends; and what can employers do if they can no longer afford to continue to employ employees when the JobKeeper subsidy stops.
We provide answers to some of the most common questions below. It should be borne in mind that the Federal Government has announced that it will deliver a mini-budget on 23 July 2020, which will include the response to a review of the JobKeeper scheme. It is possible that the JobKeeper payment period may be extended (or reduced) in some industries.
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Can I keep employees on reduced hours when JobKeeper ends?
As part of the JobKeeper scheme, sweeping changes were made to the Fair Work Act 2009 to allow employers to reduce the hours of employees eligible for the JobKeeper subsidy by the use of a “JobKeeper Enabling Stand Down Direction”.
The direction could be used to require employees to keep working, but on fewer hours than usual or to reduce their hours to nil.
With the end of JobKeeper insight, the question arises as to what happens to employees on reduced (or nil) hours at the end of the JobKeeper scheme.
The Fair Work Act 2009 is clear on how the law operates in this area: JobKeeper Enabling Stand Down Directions cease to have any effect on 28 September 2020. This means that full-time and part-time employees will have an automatic right to return to the hours they were working prior to any JobKeeper Enabling Stand Down Direction being issued.
Where an employer does not wish a permanent employee to return to their pre-JobKeeper hours, it is important to note that the general position is that (outside of the JobKeeper payment period) employees’ hours cannot be varied without their consent.
In other words, it will generally be the case that an employer will not be able to require a permanent employee working reduced hours to continue to do so once JobKeeper ends, if an employee does not agree.
It would be hoped that in a situation where an employee is being asked to continue to work reduced hours in order to safeguard the viability of the company (and their job) that such agreement should be forthcoming.
We would, therefore, recommend that prior to the JobKeeper scheme ending, that employees be fully consulted about the employer’s future plans.
It will also be important for employers to also check any modern award or enterprise agreement that applies to the business as these sometimes have rules about changing employees’ hours (although it is rare for the number of hours an employee works per week to be capable of amendment without the employee’s consent). Any agreement made with an employee should be evidenced in writing.
Where casual employees are concerned the situation is more straightforward: employers are generally free to vary a casual employee’s hours as they see fit, so there should be no issue in asking a casual employee to work whatever hours the employer requires them to, post-JobKeeper.
If an employer wishes an employee to remain on zero hours (but still employed) after JobKeeper then it may be possible to rely on alternative stand down provisions at 524 of the Fair Work Act 2009. These provisions have always been part of the Fair Work Act 2009 and allow employers to (in effect) require an employee to take a period of unpaid leave where there is a “stoppage of work for any cause for which the employer cannot reasonably be held responsible” so long as ‘the employee cannot usefully be employed” (i.e. there is no work for them to do).
These provisions could possibly be used either to require an employee on zero hours to stay on zero hours, or for an employee working any other number of hours to also be reduced to zero hours, so long as all the requirements of section 524 of the Fair Work 2009 are met. These stand down provisions (unlike the JobKeeper Enabling Stand Down Directions) do not allow an employer to require an employee to work reduced hours – the only option is to totally stand down an employee (i.e. to compel them to work no hours at all). Given the complexity in this area, we would recommend that employers seek legal advice before relying on the stand down provisions in section 524 of the Fair Work Act 2009.
Where an employer cannot secure an agreement with an employee to work reduced hours, and/or where a stand-down under section 524 is not available, employers may face the prospect of terminating the employment of members of staff due to issues of affordability. We discuss this further below.
What if I can’t afford to continue to employ people when JobKeeper ends?
The JobKeeper wage subsidy has helped many businesses continue to employ workers by providing a payment of $1,500 per fortnight to subsidise their wages.
With the subsidy due to finish on 27 September 2020 many businesses face the difficult reality that they will not be able to keep paying employees’ wages without the help of JobKeeper. What options exist for such employers?
In respect of casual employees, employers should generally be free to vary their hours as they see fit. If this means that a casual employee can no longer be offered any hours due to JobKeeper ceasing, then employers should be able to adopt this position with relatively low risk (although we would always advise consulting employees, particularly if they have been working regular hours).
As explained above, it is not generally possible to force permanent employees to reduce their hours without their agreement. If an employer is faced with a position where it cannot come to an agreement to reduce an employee’s hours or an employer reaches a decision that it can no longer afford to an employee in any capacity, then this will generally provide a valid reason to make an employee redundant. In other words, an ability to safely terminate an employee’s employment on the grounds that their job is no longer required.
To avoid the risk of claims for unfair dismissal, employers should always follow a redundancy process (which involves consulting with affected employees before a final decision is made). Employment Innovations has a free downloadable redundancy guide, which takes employers through this process step-by-step.
The guide also sets out the scenarios in which employees will be entitled to a redundancy payment when made redundant. This is likely to apply where permanent employees have at least 12 months’ service and the employer has at least 15 employees (although certain modern awards vary these rules).
Employees who are working reduced or zero hours as a result of a JobKeeper Enabling Stand Down Direction are still entitled to redundancy pay based on their pre-JobKeeper hours/pay (and the same rules apply to payments in lieu of notice and to leave paid out on termination of employment).
Where an employer is unable to afford to make a redundancy payment there is an ability under the Fair Work Act 2009 to apply to the Fair Work Commission for a reduction in the amount (potentially to a zero payment). We would recommend that legal advice is sought before making such an application.
I know I’ll need to make redundancies when JobKeeper ends – are there advantages of making redundancies sooner?
For businesses that know that when the JobKeeper subsidy ends they will need to make redundancies due to issues of affordability, a question arises as to whether there are any advantages of making redundancies prior to the JobKeeper end date.
One example of where this may arise, is a situation where an employer has employees who are not actually performing any work (having been stood down on zero hours), but whose wages are being funded by the JobKeeper payments.
The main advantage of making employees redundant prior to JobKeeper ending is that whilst employees remain employed but stood down they are still accruing leave which (in the case of annual leave and sometimes long service leave) will need to be paid out on termination of employment. This means the longer the employee is employed the greater leave balance will have to be paid out.
In addition, given an employee’s rights to notice pay and redundancy pay is calculated on the length of service, there may also be greater liabilities in respect of these entitlements the longer they are employed. As noted above, redundancy payments (and payments in lieu of notice) need to be paid at the employee’s rate of pay prior to the implementation of any JobKeeper Enabling Stand Down Direction.
In light of the above, there may be some financial advantages to “letting an employee go” sooner rather than later. Whilst such a decision is unlikely to be viewed favourably by an employee, there does not seem to be an obvious ground for an employee to legally challenge such a decision, given there is no legal obligation to retain the employment of employees to the end of the JobKeeper period. That said, given this is a largely untested area of the law we would always encourage businesses to seek professional advice before making a decision to terminate.
Employers may, of course, wish to retain JobKeeper employees for as long as possible in case circumstances change which mean that the redundancy is not necessary or because they acknowledge that extending employment for as long as possible will be “helping out” the employees by ensuring they receive the JobKeeper payment for the longest possible period of time. Given the competing issues of employers’ financial viability, such decisions are unlikely to be straight-forward. Employment Innovation’s advisers are always on hand to talk through these difficult questions.
About Employment Innovations
Employment Innovations is one of Australia’s leading providers of employment services designed to increase productivity and ensure compliance. Its services and solutions include all the tools that every Australian small to medium sized employer needs – including workplace advice, legal services, payroll solutions, migration, human resource management and HR software.
Our partner firm EI Legal provides legal advice and representation.
The information provided in these blog articles is general in nature and is not intended to substitute for professional advice. If you are unsure about how this information applies to your specific situation we recommend you contact Employment Innovations for advice.