In response to the devastating impact of COVID-19 on some sectors of the Australian economy, the Australian Government on 30 March 2020 announced it was introducing the JobKeeper payment as part of its suite of welfare packages. The idea of the payment is that the Government, through the Australian Taxation Office, will pay $1,500 a fortnight to eligible businesses for each employee who is eligible. This includes employees who were let go after 1 March 2020. The employer is then required to pay, after deducting PAYG tax, the amount to the eligible employee.
An interesting issue arises where the eligible employee is currently (or in the future) entitled to weekly payments for either total or partial incapacity due to a compensable injury. The Workers Rehabilitation and Compensation Act 1988 (Act) provides that in cases of total incapacity, the worker is entitled to the greater of their normal weekly earnings or ordinary time rate of pay (the weekly rate). This sum is paid by the employer to the worker and then indemnified by the employer’s licensed insurer. In cases of partial incapacity, the amount is the weekly rate less any amount the worker is earning or able to earn.
In many cases, workers who are injured will return on light or restricted duties earning from their employer less than the weekly rate and the balance is paid as compensation (commonly called the make up pay). It is unclear how the JobKeeper payment will be treated. It seems there is adequate high authority that the payment will not be earnings as defined in the Act. Generally, earnings are only payments received by a worker in exchange for the exercise of their skill and labour. The JobKeeper payment appears to be received without any work needing to be done. In addition, the Act says that no regard is to be had to a payment out of any “sustentation fund, or other fund (whether statutory or otherwise) of the like nature”.
What this means is that eligible employees are likely to receive the JobKeeper payment in addition to their weekly payments. Hence, a worker who has a weekly rate of $800 and is earning $300 on light duties, will receive the make up pay of $500 (subject to any step down) together with $750 a week being $300 in wages and $450 in JobKeeper payment leading to $1,250 gross pay rather than $800. As their earnings decrease, the JobKeeper payment will increase so if they were earning only $100 then the make up pay would be $700 and the JobKeeper payment $650 leading to a gross payment of $1,450. There is a disincentive to maximise the return to work. This will provide significant challenges to employers and insurers managing claims.
When the legislation is introduced, we shall update further together with any response from the State Government that controls the terms of the Act.
If you have any queries or would like any further information about this article, please contact:
Mat Wilkins
Principal
M: 0419 106 417
E: mwilkins@pageseager.com.au
Tom Pilkington
Principal
M: 0417 669 478
E: tpilkington@pageseager.com.au
Published: 8 April 2020
