How to deal with your employees if COVID-19 has reduced your income
If your business has been impacted by COVID-19, there are some steps that may assist you to manage your cash flow and keep your business viable moving forward.
Does your business qualify for JobKeeper?
JobKeeper provides a mechanism to keep eligible employees in their employment whilst your business is impacted by COVID-19. There are eligibility requirements, for both the employer and employee, linked to business turnover, and the length and nature of the employment.
To be eligible, an employer must:
- have been in business as at 1 March 2020;
- have employed at least one eligible employee as at 1 March 2020;
- continue to employ eligible employees for each fortnight JobKeeper is claimed;
- demonstrate a reduction of business turnover of 15% (ACNC registered charities excluding universities and schools), 30% (for an aggregated turnover of $1 billion or less) or 50% (for an aggregated turnover of more than $1 billion); and
- not be an ineligible employer.
Ineligible employers include government agencies, local governing bodies, companies in liquidation, and individuals who have entered bankruptcy. Sole traders and other business owners actively engaged in the business, however, may be eligible.
The Australian Tax Office provides a useful guide to this initiative.
Does your business have work for your employees?
If the impact on your business is such that there is a reduction in work, there are a number of options which may suit your circumstances:
- Businesses eligible and participating in the JobKeeper initiative may stand down employees where the employees cannot be usefully employed for their usual hours or days as a result of COVID-19. Such a direction must be made in writing, and include a period of consultation with the impacted employees. The period of consultation must be at least 3 days unless otherwise agreed by the impacted employees. Employees stood down under such a direction continue to be paid under the JobKeeper initiative.
- Businesses that are not eligible, or are not participating in JobKeeper may also stand down employees in limited circumstances including where there is a stoppage of work for which the employer cannot be reasonably be held responsible. Stand downs in these circumstances apply only for national system employers, and should be considered with caution where there has been a slowdown in business that runs short of stoppage.
- Stand down may also be provided for in any applicable award or enterprise agreement.
- Businesses eligible and participating in the JobKeeper initiative, may request that employees take annual leave provided that as a result the employee is not left with an annual leave balance of less than 2 weeks. The employer and employee may also agree that the employee take annual leave at half pay for twice the duration.
- In response to COVID-19, a number of awards in effected industries have undergone change. These changes include provision for 2 weeks unpaid pandemic allow, and for employees to take annual leave at half pay for twice the duration.
- Where an employee’s job is no longer required, it may be appropriate to consider redundancy. In order to mitigate the risk of the ending of employment in these circumstances being characterised as an unfair dismissal, employers should ensure they meet consultation obligations in any applicable award or enterprise agreement and consider opportunities for redeployment as an alternative. Employers should ensure they have the capacity to pay an employee any entitlements at the end of the employment including notice, accrued annual leave, and redundancy.
Can your business direct employees to do different work, to work in a different location or to work different hours?
Businesses eligible and participating in the JobKeeper initiative may, where certain conditions are met, direct employees to undertake different duties, days and times of work, and to work from a different location.
- Any change in duties must be in the scope of the business’s usual operations, in line with the employee’s skills and competencies, and any relevant licensing or qualifications must be in place.
- Any change in the location of work must not require employees to travel an unreasonable distance, and the location must be suitable for the duties being carried out.
- Any change in days and hours of work must not result in a reduction in the employee’s hours of work, although hours of work may in effect be reduced by a JobKeeper stand down direction, or possibly through any stand down provisions in an applicable award or enterprise agreement.
- Any directions as to a change in duties or location of work must be made in writing, and include a period of consultation with the impacted employees. The period of consultation must be at least 3 days unless otherwise agreed by the impacted employees.
Where a business is not eligible for, or not participating in, the JobKeeper initiative, there may still be scope for changes to days and hours of work. Any changes, however, must be in line with any relevant award, enterprise agreement or employment contract, or negotiated as a change to the latter. An employee may also seek to enter into a flexible working arrangement under the Fair Work Act.
Can your business reduce what it pays its employees?
During the COVID-19 pandemic, the employment relationship remains governed by an applicable employment contract, award, or enterprise agreement. Beyond JobKeeper directives being made as to duties or location of work, or the employer and employee agreeing to changed days and hours of work under the JobKeeper umbrella, no further variation to conditions can be made outside of the usual process of negotiating contractual changes individually, the enterprise bargaining process, or the Fair Work Commission or relevant state body affecting changes to awards. In effect, a JobKeeper stand down direction, or a stand-down under an applicable award or enterprise agreement may result in a reduction in the hours worked and thus in the pay received.
Some further considerations
Changes made to workplace laws in response to COVID-19, supplement rather than replace existing obligations and protections. With that in mind, should it be necessary to end an employee’s employment, employers should do so with consideration of their obligations regarding redundancy, unfair dismissal law, and with respect to the general protection provisions of the Fair Work Act.
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