I’m here with the COVID-19 continuity update for Australian businesses on 6th November. (Article updated with a correction on 9 December 2020 – see note below)
Today I want to explain some of the mechanics of JobMaker hiring credit. It received some fanfare during the Australian federal budget announcement. As a refresher, the JobMaker hiring credit is a wage subsidy from the Federal government to incentivise businesses to employ younger, unemployed job seekers.
Employers will receive a small wage subsidy (paid quarterly in arrears) for new employees you add to your business from 7 October 2020 to 6 October 2021. For a business to be eligible to claim JobMaker Hiring credit, there are 3 tests that must be met.
First test: Age
The first test to be eligible to receive the JobMaker Hiring credit is that the new employee must be aged between 16 and 35 years old. The JobMaker Hiring credit has two tiers based on the employee’s age:
- 16 to 29 years old will be eligible to receive $200 per week
- 30 to 35 years old will be eligible to receive $100 per week
Second test: government support payment
The second test is that the new employee must have received JobSeeker payment, Youth Allowance (other) or Parenting Payment for at least one month out of the three months prior to when they are hired.
Third test: increase in headcount
The third test is that your total employee headcount must increase by at least one by the end of the quarter. For the first reporting period (7 October to 31 January), the reference date for the headcount is 30 September 2020.
Going forward, the headcount needs to increase again by at least one employee compared to the previous reporting period.
The 3 tests are the main qualifiers to be eligible for JobMaker Hiring credit. Once you’ve met those entry hurdles there are other boxes you’ll have to tick, including:
- Your business must not be in the JobKeeper scheme (not receiving JobKeeper payments) for any employees or business participants. You can be eligible for JobMaker after you have exited JobKeeper.
- Be up to date with your tax lodgement obligations;
- Be registered for PAYG withholding;
- Report through Single Touch Payroll;
- Your payroll must have increased by more than the value of the JobMaker Hiring credit you claim for;
- You must be the only employer claiming JobMaker Hiring credit for that employee. There will be a nomination form to confirm this.
- Employees can be employed on a permanent, casual or fixed term basis, and they must work at least 20 paid hours per week, averaged over the quarter to be eligible for the credit;
- As the employer, you can’t receive other Commonwealth government wage subsidies (such as the apprentice wage subsidies) for the employee you claim JobMaker Hiring credit for;
- Also note ‘non-arm’s length’ employees will not be considered eligible employees. This condition means that JobMaker Hiring credit is not eligible for new employees who are family members of the directors or shareholders of the employing company.
What the JobMaker Hiring credit means for Australian small businesses:
The headcount test makes sense for growing businesses; as the economy recovers, we’re going to need to hire additional employees. One of the primary purposes of JobMaker is to stimulate extra employment and get people out of the Centrelink queue.
The age qualifier encourages us to employ someone young, so it makes sense to prioritise young and generally less job-ready people for work opportunities. However, the challenge is that the credits are only for someone who has been on an unemployment benefit payment for at least a month. We have had many business coaching clients who have hired young people recently but their new team member won’t be eligible for the credit because they don’t pass the hurdle of being unemployed for long enough.
I know that there’s been a bit of commentary in the media and from some industry bodies about this extra money on offer so I want to give you some context:
The maximum annual value of the JobMaker Hiring credit is $10,400 for an employee who is under 30 years old (and only $5,200 for an employee who’s 30-35 years old). That’s to subsidise you for their full year’s salary plus all the on-costs you have to pay (super, WorkCover, industry payments, allowances, etc).
It’s natural that the idea of “free money” may have some appeal to employers, especially as many of you got used to the wage support from JobKeeper. But there’s a big difference between the two incentives: JobKeeper was designed to help us retain the employees we had already working in our businesses. Those were employees we had actively recruited for roles we knew the business needed before we had any idea COVID was coming. Additionally, an employee on JobKeeper for the full 12 months is worth around $34,000, which is significantly more than the $10,400 on offer.
JobMaker is designed to get businesses to take on new employees, and it rewards employers for taking on people from a segment that the government has identified as needing an extra leg up.
Verdict: JobMaker is good, but not great.
My advice is don’t rework your business around this latest subsidy. Think about the speed to result plans and the big picture you and your coach are working on, and select the best candidate for your business based on that.
And if that person also happens to tick all the boxes for the JobMaker hiring credit, then that’s an added bonus for you. Tenfold offers business coaching services to support you with your thinking and decision making around this.
For more information including a worked example of the JobMaker hiring credit, see this fact sheet: https://budget.gov.au/2020-21/content/factsheets/download/jobmaker_hiring_credit_factsheet.pdf
The government also has a tool to calculate the amount of JobMaker Credit you may be entitled to – see here: https://www.ato.gov.au/Calculators-and-tools/JobMaker-Hiring-Credit-payment-estimator/
*Update: This post was updated on 9 December 2020 with a correction. The earlier version of this post incorrectly implied that employers could receive JobKeeper for some employees and JobMaker Hiring Credit for other employees. The correct information is that employers are only eligible for JobMaker Hiring Credit if they are not receiving JobKeeper for any employees or business participants.
I’m sure that, like me, you’re looking forward to good news when we get Sunday’s updates on the further loosening of Victorian restrictions.
Have a great weekend.
Ashley Thomson B.Eng(Hons), Grad. Dip. Mgmt, MEI
Tenfold Business Coaching