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Covid-19

Explained: The Employment Situation in Australia right now

Thanks to COVID-19, thousands of Australians have recently found themselves unemployed. And if you’re a business owner who’s had to (or is close to) shutting its doors, being able to continue paying your staff and general overheads is a daunting, yet real prospect.

With that in mind, we thought it would be wise to discuss the cost of employee turnover and explain the employment situation in Australia right now. With new legislation and lockdown laws coming out everyday, it can be hard to keep up.

So what is the situation in Australia?

This past week, the Australian Government pledged $130 billion to the new JobKeeper program, to help businesses survive the coronavirus pandemic without having to let go of their workforce. This legislation has recently been passed in the House of Representatives and now just needs to be passed in the Senate for it to become law.

This means that an estimated 6 million workers will be eligible to receive a payment of $1500 per fortnight (before tax) through their employer. This is around 70% of the nation’s median wage.

Who is eligible for this payment?

Eligible employers are those who have an annual turnover of less than $1 billion, and who have seen a reduction in revenue of 30% or more due to the virus.

Company structures include:

  • Companies
  • Partnerships
  • Trusts
  • Sole Traders
  • Not-for-profit / Charities

Full time and part time employees, including employees recently stood down, are eligible to receive the JobKeeper payment. Where a casual employee has been with their employer for at least the previous 12 months they will also be eligible for the payment. An employee will only be eligible to receive this payment from one employer.

Self-employed individuals are also eligible to receive the JobKeeper payment if they operate under an ABN.

How will the ATO distribute money?

The ATO will use the Single Touch Payroll to administer the funds to employers, who will then pay current employees. Businesses are encouraged to keep employees employed in order to be eligible for the payment.

Employers will be paid $1,500 per fortnight gross, which must be passed on to all eligible employees.

So what does this mean for employee turnover?

This means that if some businesses have to shut down entirely, or ask employees to take leave, they will not have to let go of their valuable employees, as the GOVERNMENT will cover all or a percentage of regular wages.

This will allow businesses to keep their employees, so when the pandemic is over and the world begins to heal, Australia will be ready to commence building a stronger economy.

Do employees have to actually work to receive the payment?

This payment, is to incentivise employers to keep their staff employed, to better prepare for when this is over and businesses are ready to rebuild. This means working with your teams, together to get the best outcome for both of you. In instances where employees have been stood down and there is no work available, this payment is in place of a Job Seeker payment and has no requirement for them to look for work.

The JOBKEEPER payment ensures that working relationships remain intact for when the business can again operate.

Instances where the business has seen or can demonstrate a future drop in revenue of 30% and was planning on standing down staff/making them redundant or asking people to take unpaid leave, it will again contribute to keeping people active and employed. So letting go of your entire team is avoidable for the next 6 months.

What should employers do?

Register your interest through the ATO if you and your staff are eligible.

The payment will be paid to employers, for up to six months and backdated to March 30, for each eligible employee that was on their books on 1 March 2020 and is retained or continues to be engaged by their employer for the whole 6 months.

Where a business has stood down employees since 1 March, the payment will help them maintain connection with their employees.

When will the payments come through?

The program commenced on March 30th, with the first payments to be received by eligible businesses in the first week of May as monthly arrears from the Australian Taxation Office. Eligible businesses can begin distributing the JobKeeper payment immediately and will be reimbursed from the first week of May.

What about superannuation?

Employers are expected to continue to pay the superannuation guarantee on the employees regular wages.

However, it will be up to the employer if they want to pay superannuation on any additional wage paid because of the JobKeeper payment.

How long will the scheme last?

The scheme will last six months.

The true cost of employee turnover

When the virus has subsided, our immune systems have adapted and the government gives us the green light to go ahead and recommence operating, if you have let your workforce go, who will be there to pick up the pieces? Who in your team will still be there to help your business bounce back when you really need it?

The cost of employee turnover is difficult to accurately measure, but it affects many aspects of businesses.

Culturally, changes in the team will always impact the team dynamics, productivity and overall job satisfaction. Not to mention the recruitment and on-boarding of new employees requires advertising, interviewing, screening, training and lots of patience.

Both the tangible and intangible costs of employee turnover, impact the bottom line. A CAP study found the financial cost of replacing an old employee with a new one to be:

  • 16% annual salary for low-paying, high-turnover jobs
  • 20% for mid-range positions
  • Up to 213% for executive positions

So all in all, letting employee’s go at this time may not be the best answer for your business in the long run, especially with the support from the Jobkeeper program.

We understand that this is a testing time, and as HR specialists it is our job to guide you through this process. For more information and employment relations support, please contact us at hr@lorenmitchell.com.au.