Shine wears off the $130bn jobkeeper subsidy as millions are left in the cold

two women and their dogs stand outside a closed cafe with stacked chairs




Jobkeeper, the wage subsidy designed to keep employees on the books while businesses were shuttered due to the coronavirus pandemic, was hailed as a triumph, but the reality has proved very different.
Photograph: Eric Gaillard/Reuters

When the Australian government announced a $130bn wage subsidy employers, unions cheered.

Here was the solution to growing queues for unemployment benefits, and a neat way to support workers’ livelihoods without sending businesses broke, keeping them in jobs until coronavirus restrictions were lifted.

But while both still support the jobkeeper program, some of the shine has come off as employers and workers are bogged down in eligibility questions and fights for their share of the $1,500 fortnightly payment.

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The subsidy was the first of its kind in Australia, requiring changes to industrial laws so employers could order employees to work at their usual rate of pay for as many hours as matched the payment.

But those powers – and employees insisting they want to stay home during the coronavirus pandemic – are now the source of class conflict, with payment or exclusion from jobkeeper the ultimate carrot and stick.

The first controversies about jobkeeper centred on eligibility. While Labor and unions welcomed the scheme, they criticised the exclusion of 1 million shorter-term casuals and 1.1 million temporary visa holders.

Not every business can meet the 30% revenue downturn threshold to participate. Many industries are excluded explicitly, such as the public sector, including all local government employees, or in practice – such as those with high rates of contract work or short-term engagements including education, construction and the arts. Partnerships can only claim jobkeeper for one partner and employees.

Employment barrister Ian Neil says many employers are not applying for the scheme because they are concerned about uncertainty if they make a claim but then fall short of the 30% revenue reduction to be eligible.

Neil says the Australian Tax Office has issued guidance that it will “substantially accept their self-assessment”, provided the employer has an objective basis for predicting the revenue downturn and the assessment was reasonable. But most employers are unaware of this flexibility.

The biggest hurdle is the month-long gap in payments that must be bridged. Although jobkeeper is backdated to 30 March, employers must stump up the $1,500 payment all through April until reimbursement in the first week of May in order to be eligible.

The one-in all-in rule, that every eligible employee who nominates must be given a payment if the employer chooses to participate, prevents employers playing favourites and requires every worker to be paid.

And because workers are entitled to $1,500 even if their regular pay packet is less, in many cases businesses will have a larger wage bill than usual, while suffering from the downturn.

For Blossom McKenzie-King’s employer, that month of above-average wage bills was the difference between dropping out and participating in the scheme.

Blossom McKenzie-King


Blossom McKenzie-King has worked for four years for a retailer in the CBD in Melbourne that could not afford to pay her until jobkeeper was reimbursed. Photograph: Blossom McKenzie-King

McKenzie-King, who worked for four years in a retail store in Melbourne’s CBD, tells Guardian Australia she and her co-workers “got all our hopes up” when jobkeeper was announced. “We thought ‘we’ll be fine, and this is really good news for the employer too’.”

But the business, which had already suffered poor sales as bushfire smoke blanketed Melbourne over summer, did not have enough cash to pay McKenzie-King and others until jobkeeper was reimbursed.

“Speaking for my employer – they’ve said they might not be able to reopen the store … and if another opportunity comes up I should take it.

“They want to keep me employed, but it’s hard to make promises when you can’t be 100% sure you can keep them, when everything is so uncertain. It’s a bit disappointing – I was expecting to be able to ride this out.”

Emily Bitto, the co-owner of Heartattack and Vine, is one such employer who couldn’t afford to make a month of payments for employees to access jobkeeper at her small cafe and wine bar in inner-city Melbourne suburb Carlton.

The cafe managed to keep its eight permanent staff, but with the business reduced to a takeaway window and home delivery, revenues are down about 80% and it could not afford to keep 18 casuals.

Bitto says that Heartattack and Vine had 11 casuals eligible for the scheme, but the business would have to pay them $48,000 to cover the first month, before it was reimbursed.

“We just don’t have the cash flow to do it without a loan,” she says.

Bendigo Bank offered “a regular sort of loan at 12% interest”.

“We considered that but then we realised that because the scheme is continuously paid in arrears, even if we took out that loan to cover the first month, we get that reimbursement, pay back the bank, then we’re essentially in the exact same position for the next month and the next month up until the end of the six-month period where we get the last payment.”

On Thursday, the Morrison government offered a stop-gap: the big four banks agreed to set up “dedicated hotlines” for customers calling asking for bridging finance to pay staff ahead of receiving jobkeeper payments.

Bitto said a bank hotline might not help. “I already feel like it’s, not too late, because it goes for six months,” she said. “But we’ve already missed the boat for the first month.

“If you lose two months of the program trying to get that bridging finance it’s an issue.”

an empty queen victoria building with closed shops


More than 900,000 employers have registered their interest in the scheme, and 400,000 businesses covering 2.4m employees have completed applications, as they close due to Covid-19, but the process has proved fraught. Photograph: James Gourley/AAP

Despite the teething problems, more than 900,000 employers registered their interest in the scheme, and 400,000 businesses covering 2.4m employees have completed applications. Half of those are sole-traders and 90% are microbusinesses.

Australian Council of Trade Unions secretary, Sally McManus, says “the slow uptake of jobkeeper is concerning”.

“If workers are missing out on payments because companies are simply choosing to opt out, that’s a serious problem that people can address by applying pressure through their union.”

Opting to participate in the scheme is just the first hurdle. Employers and employees increasingly find themselves locked in battles about attendance at work and duties while physical distancing restrictions are still in place.

Luke, a hairdresser in Sydney’s inner west, asked his employer to apply for jobkeeper after the salon shut down in late March.

When the salon reopened last week, Luke offered to work from home, answering phone calls, taking bookings and preparing salon equipment for use but the boss insisted he come back in to work.

He refused, citing his roommate’s asthma and his fears that working in close proximity to customers in the personal services industry wasn’t safe.

Luke is not sure if his employer will pay jobkeeper to other employees or start his payments in May, and will approach the ATO rather than ask his boss.

“We stopped … contact the last week. It really exploded – our discussion over it – with the reopening of the salon.”

Luke says he loves his job and coworkers but “now that I’ve had this massive disagreement with my boss I feel like I can’t return”.

“I’ve lost a really good workplace – in just trying to get … what I’m owed, or what’s mine.”

Participation in the scheme is more complicated than a straight $1,500 payment to workers. Employers can use jobkeeper to pay down leave entitlements until just two weeks of annual leave remain, and Qantas has innovated by using it to pay penalty rates.

Unions are on the lookout for employers that go beyond pushing the envelope to outright illegal practices, such as paying workers less than $1,500 fortnightly or demanding they repay a portion of jobkeeper, a practice resembling the infamous “cash-back” scam at some 7-Eleven franchise convenience stores.

Neil said enforcement “will be very strict” for employers who don’t pass on the full amount, but the epidemic of wage theft has unions worried.

From employers’ perspective, staff expecting to get paid the subsidy not to work is the biggest potential abuse.

Australian Industry Group chief executive, Innes Willox, accused “some employees” of “a misguided view that they can choose not to come to work if their employer is accessing the jobkeeper scheme”.

“If the employee is not stood down or on approved or authorised leave, the employee must comply with any lawful and reasonable direction given by their employer,” he said.

“This includes any reasonable and safe direction to carry out work.”

The Council of Small Business Organisations Australia, Peter Strong, blames unions, who he claims are “not being helpful, they’re saying everyone should be allowed to work from home”.

“Employers are busting their guts out and the majority of employees are doing the right thing,” Strong says.

“But we’re getting enough people saying ‘you can’t tell me what to do’, ‘I won’t come to work because it’s unsafe’ – but then they also say ‘you can’t tell me what to do at home’ either.”

McManus rejects the “bizarre” charge, explaining that “many businesses just can’t operate at the moment because of the decisions governments have rightly made regarding social distancing to keep us safe”.

Both sides hope jobkeeper will be a $130bn lifeline for struggling employees and employers, but in practice it is already bringing out the adversarial nature of the industrial relations system.