Work tensions rise over JobKeeper wages support

Laid off workers gather outside a Centrelink office. Many other workers are receiving JobKeeper payments, but with government money yet to flow through to companies, employer tensions are rising. Picture: AAP

The twists in the COVID-19 tale never cease. Suddenly many employees are faring much better than their employers and tensions are rising.

While enterprises are falling over around Australia the increase in government benefit payments over the past month has been bigger than the fall in wages and salaries paid. The net result has seen growth in household income.

Not surprisingly consumer confidence, as measured by Morgan Research, has suddenly jumped.

Meanwhile many struggling enterprises are discovering that while staff benefit from JobKeeper they are out of pocket. So, as I will explain below, they are considering pulling out of JobKeeper -- much to the anger of staff.

Commonwealth Bank reports that while spending on debit and credit cards has plunged, payments into CBA bank accounts paint a very different picture.

CBA says the reduction in household income from job losses to date has been more than offset by an increase in government benefit payments.

It would seem that the annual growth rate in wages and salaries paid, plus government benefits paid, has actually risen during April.

Included in CBA’s wages and salaries paid estimate will be people who have lost their jobs but have continued to receive some form of payment from their employer due to items like four weeks paid notice on termination, leave paid out etc.

So, there will be a lag between job losses and the full impact on the total wages and salaries bill.

Nevertheless, the CBA data is a clear signpost, because JobKeeper payments will be captured as salary and wages. And much of the first tranche of the $750 JobKeeper payments to 6.5 million Australians has come out of the pockets of employers -- the government money arrives mid-May.

There has been a 50 per cent increase in the number of CBA bank accounts receiving JobSeeker. The net result has seen total government benefits paid rise by 60 per cent as of late April. This does not take into account the doubling in JobSeeker, which takes effect from April 27.

CBA says that monetary and fiscal stimulus can’t boost spending in the economy on a range of goods and services when the businesses that produce them are not open.

But fiscal stimulus can help to plug the gap in household income that is the normal consequence of job losses.

Accordingly there is set to be a surge in savings, which will stimulate retailers to chase after the spare cash while other avenues of spending are severely curbed because of the COVID-19 restrictions.

As struggling enterprises discover the cash building up in community bank accounts the pressure on state and federal politicians to lift restrictions will intensify. But the politicians are governed by what their medical officers advise.

Meanwhile the story on the employer side is grim and Westpac CEO Peter King says that some of Westpac’s business customers will “not be able to navigate the financial and economic changes of this crisis and may not re-open”.

Nevertheless King says Westpac “will work closely with those customers to help them through that process”.

Many banks are reluctant to lend to struggling enterprises to enable them to pay their April staff salaries in advance of JobKeeper in mid-May.

Flight Centre CEO Graham Turner says many tourism enterprises will be decimated if domestic travel restrictions are not lifted within a month.

CBA believes around one million people receiving JobKeeper will not be turning up to work over the next few months because their employer is shut. These people will receive JobKeeper but will not be producing any output.

That situation is suddenly causing second thoughts to sweep across many small employers.

JobKeeper is one of the most innovative programs in the world and its implementation is a credit to Treasurer Josh Frydenberg and the Australian Taxation Office.

But employers are suddenly discovering at the state level they are up for workers’ compensation payments for those dormant workers. And the workers’ compensation bills for dormant workers are much higher than normal when JobKeeper payments are higher than existing salaries.

At the same time many employers will need to pay payroll tax on JobKeeper. In Victoria South Australia and Western Australia the payroll tax exemption is limited to enterprises with small turnovers. In Victoria the cap is $3 million. In NSW, payment is deferred but not eliminated. In Queensland it is to be determined.

If you’re a struggling business then these payments can make the difference between survival or collapse.

Despite urging from the Prime Minister, banks are very reluctant to lend additional money to businesses that are effectively shut and will face higher charges as a result of the payroll tax and workers’ compensation bills to be eligible for JobKeeper.

But employees see JobKeeper payments as something akin to an entitlement and a way of getting a greater payment than that made available under JobSeeker. Watch for increasing anger.