COVID-19: Reduce Hours, Annual Close Down, Stand Down or Redundancy? - Australian Workplace Laws
- Suzanne Johnstone
- Mar 24, 2020
- 7 min read
Updated: Mar 25, 2020
Enforceable Government Directions
Sunday, 22nd of March 2020 will go down in history, as the most impactful and powerless moment in Australian Hospitality, Food, Entertainment and Sporting history.
Add to that the conditional closure of Places of Worship, and just when people need to come together, we have to find a way to do this, but from a Social Distance…
The business landscape, as Australians (and the World) knew it, has changed forever.
That’s a pretty big statement, but, it’s true. This new normal isn’t something anyone has asked for, but it’s what we are left to come to terms with.
First thing affected businesses have to do, is not make rash decisions, but informed and strategic decisions.
Once the dust has settled, if it is found that an Employer has adversely treated or unlawfully terminated a staff member, there will be repercussions.
It’s natural to panic, but as this situation is unprecedented and fluid, take the time to assess your situation and find out what options are open to you…
As the title of this article suggests, this article will cover what options from an Australian Workplace Law perspective are open to the business owners affected by this decision. But first, I want to provide data on just how what kind of percentages of Australian Business and associated employees stand to be affected by this enforced widespread closure of business…
According to The Australian Small Business and Family Enterprise Ombudsman “Small Business Counts” report (2019), Small businesses account for 35% of Australia’s gross domestic profit and employ 44% of Australia's workforce.
“Against the ABS definition of a small business (less than 20 employees), small businesses continue to account for nearly 98% of all Australian businesses. Since our last report in 2016 the total number of Australian businesses has increased 5.5%, with increases across all categories. Small businesses employ 2.2 million people. The 3.3 million figure that is often quoted relies on historic Treasury data.”
Using Table 6 of this same report, “Small business share of the total value added by industry 2017-18, “Accommodation and Food Services” equates to 38%, “Arts and Recreation Services” at 21% and "Manufacturing" at 20% (which has been decimated for those industries affected) and that’s a vast majority of total Small Business Share affected (2017-18).
To access the full copy of this report, go to:
So, what now?
Assess your capacity to keep the business running.
1. If you think there is a chance of keeping the doors open, you might be able to continue employing staff, with the help of the Australian Government’s Economic Response Package, “Boosting Cash Flow for Employers”. If you can manage to pay the rent and keep the plant and equipment running, then maybe you can keep the staff employed and the business afloat. With the revised “Boosting Cash Flow for Employers” Economic Response Package increase, “the Government is now providing up to $100,000 to eligible small and medium sized businesses, and not-for-profits (including charities) that employ people, with a minimum payment of $20,000”.
“Eligibility
Boosting Cash Flow for Employers payments
Small and medium business entities with aggregated annual turnover under $50 million and that employ workers will be eligible. Eligibility will generally be based on prior year turnover.
The payment will be delivered by the Australian Taxation Office (ATO) as a credit in the activity statement system from 28 April 2020 upon businesses lodging eligible upcoming activity statements.
Eligible businesses that withhold tax to the ATO on their employees’ salary and wages will receive a payment equal to 100 per cent of the amount withheld, up to a maximum payment of $50,000.
Eligible businesses that pay salary and wages will receive a minimum payment of $10,000, even if they are not required to withhold tax.
The payments will only be available to active eligible employers established prior to 12 March 2020. However, charities which are registered with the Australian Charities and Not for profits Commission will be eligible regardless of when they were registered, subject to meeting other eligibility requirements. This recognises that new charities may be established in response to the coronavirus pandemic.”
To qualify for the additional payment, your business must continue to be ACTIVE.
For more information, go to:
https://www.business.gov.au/Risk-management/Emergency-management/Coronavirus-information-and-support-for-business/Boosting-cash-flow-for-employers If maintaining your current staff numbers simply isn’t viable, but you can continue to trade, albeit in a smaller capacity, you may have to either reduce hours, offer Job Sharing, or decide on making permanent full time positions redundant and offer part time roles instead.
2. If your business is included in the list of Non-Essential Businesses and Services, apart from the gut-wrenching task of walking away from your livelihood, you also have no choice, but to deliver the bad news to your Employees that they are to be Stood Down, with no pay. Being Stood Down is not the same as being fired. It more of a “holding pattern”, where;
“Employers are not required to make payments to employees for the period of a stand down but may choose to pay their employees. Employees accrue leave as normal.
An employee is not taken to be stood down during a period when the employee is taking paid or unpaid leave that is authorised by the employer or the employee is otherwise authorised to be absent.”
Once the Enforceable Government Directions are lifted, and if the business can begin trading again, the Employer has the responsibility to resume the contract of employment.
The reality of this current situation, where the Australian Government has implemented “Enforceable Government Directions”, for what is an undetermined period of time, many of the affected businesses will not survive and may find themselves with no choice but to terminate an employee’s employment, such as providing notice of termination.
3. If your business is not amongst the Non-Essential List of Business and Services, and the decision is made that you can no longer trade, you may have to terminate all staff under redundancy, with the view that should you be able to get the doors open again, you will offer them their jobs back. As per the Fair Work Act Volume 1, “Subdivision B – Redundancy Pay - 119 Redundancy Pay”, and if the Employer is not excluded under “Subdivision B – Redundancy Pay - 121 Exclusions from obligation to pay redundancy pay”, all statutory entitlements must be paid.
Amount of redundancy pay
(2) The amount of the redundancy pay equals the total amount payable to the employee for the redundancy pay period worked out using the following table at the employee’s base rate of pay for his or her ordinary hours of work:
4. Annual Close Down would be the last option. Use this option if you really want to “wait and see” where the business is in 2-4 weeks. What you have to keep in mind is that if staff are on Annual Close Down, you can’t terminate their employment during that time and count the Annual Leave as part of their Notice Period. You would have to legally wait for them to return and then pay them throughout the Notice Period. Only alternative to this is if you request the Employee to remain at work and they decline. In this case, you are only liable for the amount of time worked.
The Fair Work Ombudsman “Coronavirus and Australian workplace laws” website page is being updated daily. As this situation is unprecedented and fluid, as added information comes to hand, they are doing their best to share it.
"We'll continue to update the information on our website as the situation develops and as needed. The information provided is current as at the time of the last update. It is not legal advice but represents the views of the Fair Work Ombudsman based on the best available information. We encourage you to regularly check this page for more information.”
Reduce Hours
If you want to temporarily reduce a permanent employee’s hours, you can, however you require the employee’s agreement.
The suggestion is that if the alternative were to make the permanent full time role redundant in favour of a permanent part time role, most staff would agree to the reduced hours.
If business picks up and recovers, you can offer the full time status back to them.
Stand Down
In my last article, “COVID-19 and Australian Workplace Laws: WHAT/HOW Do Employers Execute Payroll?”, I addressed the scenario of Standing Down an employee, however as Enforceable Government Directions have now been implemented, the advice has evolved, for those that are now listed as Non-Essential Businesses and Services.
For the remainder of Businesses and Services, the response I got from the FWO on 19/03/2020 regarding whether a business can implement a “Standing Down Employees” as a result of “a deterioration of business conditions” could be legally enacted, if not specifically covered in the relevant Modern Award, remains;
“If you are going to close the business down temporarily due to a down-turn and your employee's are ready and willing to work and they are full time and part time then they need to be paid at their ordinary rate of pay not asked to use their Annual Leave.
You could ask if your employees are willing to reduce their hours during this time however, they need to agree to this. If they do not, then some employers may need to make employees’ positions redundant in response to a business downturn.”
The advice on the FWO website, as at 24/03/2020, is;
“If an employer unlawfully stands down employees without pay, the employees will likely be able to recover unpaid wages.
Employers cannot generally stand down employees simply because of a deterioration of business conditions or because an employee has coronavirus.”
The exception to this is those businesses affected by the Enforceable Government Directions.
Redundancy
If your business is classed as Small Business, you do not have to pay your staff a Redundancy Package, as per “Subdivision B – Redundancy Pay - 121 Exclusions from obligation to pay redundancy pay”, of the Fair Work Act 2009 Volume 1.
You would, however, have to give the appropriate Notice Period.
Annual Close Down
If the option of implementing an Annual Close Down is the right choice for a business, allowing time for the Employer to assess available options, such as relocation, downsizing or diversification, there are still mandatory notice periods that apply.
You would not be able to force your employee's to take their annual leave under “Annual Close-Down” if you have not provided the 4 weeks’ notice under the relevant Clause of the appropriate Modern Award.
As previously mentioned, what you have to keep in mind is that if staff are on Annual Close Down, and during that period the Employer discovers that keeping the business open is not viable, you can’t terminate their employment during that time and count the Annual Leave as part of their Notice Period.
This article is general advice only.
The appropriate Australian Workplace Laws must be reviewed independently.
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