COVID-19 | JobMaker: How the Federal Budget Hiring Credit scheme works

The Federal Government has recently announced the introduction of the JobMaker Hiring Credit scheme, designed to give businesses incentives to employ younger, unemployed job seekers.  The scheme is expected to support around 450,000 employment positions.

As part of the 2020/2021 Federal Budget, the JobMaker scheme targets the creation of new jobs, as opposed to the focus of the continuing JobKeeper scheme on keeping existing roles alive. JobKeeper 2.0 will continue to operate until 28 March 2021, together with the accompanying flexibility changes to the Fair Work Act 2009 (Cth) (Act) (see our previous article here.)

Under the JobMaker scheme eligible employers will be able to claim $200 a week for each additional eligible employee they hire who is aged 16 to 29 years old (to a maximum credit of $10,400), and $100 a week for each additional eligible employee who is aged 30 to 35 years old (to a maximum credit of $5,200). The JobMaker Hiring Credit can be claimed for each employee for up to 12 months from the date the new position is created.

The JobMaker Hiring Credit is to be claimed quarterly in arrears from the Australian Taxation Office (ATO) by an employer, commencing from 1 February 2021. Employers will need to report to the ATO quarterly that they continue to meet the eligibility criteria.

Along with the scheme, the Commonwealth government has also introduced further upskilling programs for apprentices and trainees, together with a wage subsidy for businesses that employ them.

To assist in your understanding of the JobMaker scheme and how it operates, this ‘factsheet’ sets out key facets of the scheme and the various eligibility criteria.

JobMaker scheme in operation

The JobMaker scheme commenced on 7 October 2020 and is available to employers for each new job they create over the next 12 months for which they hire an eligible young person, aged 16 to 35 years old. JobMaker payments cannot be claimed for existing employees.

Eligible employers will be able to receive JobMaker payments for up to 12 months for each new role created and for which they hire an eligible employee. The scheme itself will close to new participants on 7 October 2021.

Eligible employers who hire an eligible employee on 6 October 2021, being the last day that the scheme is open to new entrants, could then be eligible to receive JobMaker payments for 12 months up until 6 October 2022.

Interaction with JobKeeper 2.0

Employers who are currently participating in JobKeeper 2.0 and receiving payments for eligible employees will not be able to receive JobMaker payments. Only once an employer has ceased to receive JobKeeper payments for any of their employees, will they then become eligible to participate in the JobMaker scheme from the next reporting period.

The introduction of the JobMaker scheme does not affect the operation of JobKeeper 2.0 or extend its operation beyond 28 March 2021. No substantive changes were made to JobKeeper 2.0 as part of the Federal budget.

Registration and making a claim for a JobMaker payment

Employers may register for the JobMaker scheme online with the ATO from 7 December 2020. Importantly, employers do not need to be registered at the time that they hire an employee in order to be eligible to participate in the scheme. Registration has to simply occur at any time before a claim for a JobMaker payment is made.

Employers will be able to submit claims from 1 February 2021 for those new roles created in the first reporting period up to 6 January 2021. Employers will generally have three months in which to submit claims, following the opening of the relevant claim period. The JobMaker payment will be paid to an eligible employer quarterly in arrears, and not to employees.  Employers will need to carry the full cost of any new employees until such time that they receive the JobMaker payment from the ATO.

Which employers are eligible to participate?

In order for an employer to be eligible to receive the JobMaker Hiring Credit for an employee, they must meet the following conditions:

• meet the additionality criteria (summarised below);
• keep adequate records of the paid hours worked by the employee they are claiming the hiring credit for;
• have an Australian Business Number;
• be up to date with their tax lodgement obligations;
• be registered for PAYG withholding; and
• be reporting through a Single Touch Payroll (STP) system – for those employers who do not currently report their tax and superannuation information through an STP, they can seek to enrol with the ATO using existing or new software, utilising low cost solutions for small employers, or by utilising the services of a registered tax agent or payroll service provider.

Unlike the JobKeeper scheme, employers do not need to satisfy a fall in turnover test in order to be eligible for JobMaker.

What is the additionality criteria?

The additionality criteria means that:

• there must be an increase in the business’ total employee headcount (minimum of one additional employee) from the reference date (30 September 2020); and
• there must be an increase in the payroll of the business for the reporting period, as compared to the three months to the reference date.

Headcount for each reporting period will be taken from the last day of the relevant reporting period.

The amount of the hiring credit claim cannot exceed the amount of the increase in payroll for the reporting period.

The initial total employee headcount on 30 September 2020 and payroll in the three months to 30 September 2020 represent the baseline values for the employer. In the second year of the JobMaker scheme, those baseline values will increase to take into account the number and cost of new employees for which an employer is receiving JobMaker payments.

What is the position for a new business?

Newly established businesses and businesses with no employees at the reference date (30 September 2020) are able to claim the JobMaker Hiring Credit where they meet the criteria.

The minimum baseline headcount is one, so employers who had no employees at 30 September 2020 or who were created after that date, will not be eligible for the first employee they hire, but will potentially be eligible for the second and subsequent eligible hires.

Which employers are not eligible to participate?

The following employers are not eligible to participate in the JobMaker scheme:

• employers who are claiming the JobKeeper payment for any of their employees;
• Commonwealth, state and local government agencies, and entities wholly owned by these agencies — universities are not considered to be government agencies for this purpose;
• sovereign entities (foreign governments, their agencies and wholly owned foreign resident subsidiaries) — importantly, Australian resident entities owned by a sovereign entity that meet all other eligibility criteria are eligible to participate;
• entities in liquidation or who have entered bankruptcy — companies in voluntary administration or receivership will still be eligible to participate; and/or
• employers subject to the major bank levy.

Which employees are eligible for JobMaker?

To be eligible for the JobMaker scheme an employee must:

• be aged 16 to 35 years old, at the time their employment started;
• have worked at least 20 paid hours per week on average for the full weeks they were employed over the reporting period;
• commence their employment between 7 October 2020 and 6 October 2021;
• have received the JobSeeker payment, youth allowance (other), or parenting payment for at least one month within the past three months before they were hired — as a result, employees who look to change employers but were receiving JobKeeper payments immediately prior to that change will not be eligible;
• be in their first year of employment with this employer, reflecting that the hiring credit is only available for 12 months for each additional job; and
• be employed for the period that the employer is claiming for them.

An employer will seek the assistance of an employee to complete the relevant nomination form, confirming that the employee is eligible for the JobMaker scheme and that no nomination form has been completed for them by another current employer.

While eligible employees may be employed on a permanent, casual or fixed-term basis, they must work at least 20 hours per week on average. It remains to be seen whether this threshold may encourage employers to employ two 20 hour per week part-time employees, rather than one full-time employee, and whether employers may look to reorganise their workforces to maximise the number of eligible new employees at the cost of existing employees. The JobMaker scheme is not open to independent contractors to participate in.

Any paid leave provided to the employee will count towards those average hours, but any unpaid leave will not.

The amount of the JobMaker payment received by an employer should have no impact on what amounts are paid to an eligible employee. Employers will need to ensure that they comply with the terms of any relevant modern award, enterprise agreement, and the National Employment Standards in the Act.

Which employees are not eligible for JobMaker?

The following employees are not eligible employees for the JobMaker scheme:

• employees aged under 16 years or over 35 years at the time their employment started;
• employees for whom the employer is also receiving a wage subsidy under another Commonwealth program such as the Boosting Apprenticeship Commencements wage subsidy, the Supporting Apprentices and Trainees subsidy, and the Australian Apprentice Wage Subsidy Trial;
• employees that another employer is claiming the JobMaker Hiring Credit for; and
• employees that worked on average less than 20 hours per week.

As an integrity measure, ‘non-arm’s length’ employment relationships, such as those with family members of a family business, directors of a company, and shareholders of the company, will not be considered eligible employees.

Interaction with the temporary changes to the Fair Work Act

Temporary amendments were made to the Act to support the practical operations of the JobKeeper scheme. Those changes included allowing qualifying employers to issue JobKeeper enabling stand down directions to employees when they could not be usefully employed due to the business changes associated with COVID-19 pandemic or government initiatives to slow the transmission of COVID-19. Employers who continue to qualify for JobKeeper 2.0 can continue to benefit from those changes.

Importantly, where:

• an employer was eligible to participate in JobKeeper 1.0 (up to 28 September 2020);
• does not qualify to participate in JobKeeper 2.0 (such as because of an increase in turnover); but
• they have continued to nonetheless suffer a 10% decline in turnover,

they will be a ‘legacy employer” under the Act. Many employers will fall into this category.

Legacy employers can continue to take advantage of some of those temporary flexibilities under the Act even though they are not participating in JobKeeper 2.0 as such. Those employers will now also be eligible to participate in the JobMaker scheme.

Should you wish to discuss the JobMaker Hiring Credit scheme and how it may impact your business, please get in touch with Gadens’ team of Employment Advisory specialists.

Authored by:

Brett Feltham, Partner