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JobKeeper payments, Tier 1 or Tier 2?

The below information is current as at 6th Nov 2020.

For the JobKeeper extension periods, businesses must calculate the hours worked by their eligible employees in order to assess whether they will receive the higher rate or lower rate of JobKeeper payments. The higher rate is Tier 1, the lower rate is Tier 2.

This will generally only be relevant for part-time or casual employees (as full time employees are likely to exceed the minimum hours required for the higher rate).


If you were eligible for the first JobKeeper extension, you would have already been required to work out your employee tiers. If you are eligible to continue on the scheme for the second extension, your employee tiers will stay the same.


If you expect to be eligible to re-enter the JobKeeper scheme for the second extension, you will need to work out your employee payment tiers before the 4th of January 2021 to ensure you're aware of the minimum wage condition and any top-ups required.


To be eligible for the higher rate (Tier 1) employees must have worked 80 hours or more in either of the following reference periods:

  • The 28 day period ending before 1 March 2020,

  • The 28 day period ending before 1 July 2020.

Both periods are applicable to all eligible employees - you do not need to choose the same reference period for all employees.


If the employee has not worked 80 hours or more, then the lower rate applies (Tier 2). Information on alternative tests are detailed below.


Businesses must notify their employees in writing the payment rate which applies to them - this needs to be done within 7 days of notifying the ATO of the relevant rates for each employee.


The 28 day period is based on when an employer's pay cycle ends and therefore will not be the same for all employers. However, it should include the last two consecutive fortnights or last four weekly consecutive pay periods ending before 1 March or 1 July. If an employer's pay period is monthly, average hours are identified over a pro-rated basis.


Checking payroll records for the relevant periods should enable a business to accurately calculate hours worked.


Example - before 1 March:

Jess pays her employees fortnightly on every second Wednesday. In February 2020, the pay cycles ended on the 5th and 19th. The next consecutive pay cycle ended on the 4th March. As the reference period is the 28 days ending before 1 March, Jess must calculate the hours based on the last two pay cycles (being the 5th and 19th of February). This period is 23 January to 19 February.


Example - before 1 July:

In June 2020, the pay cycles for Jess ended on the 10th and 24th. The next consecutive pay cycle ended on the 8th July. As the reference period is the 28 days ending before 1 July, Jess must calculate the hours based on the last two pay cycles (being the 10th and 24th of June). This period is 28 May to 24 June.


The payment rates as above also apply to eligible business participants. However, the test to determine which payment rate applies for eligible business participants is based on hours of active engagement in the business.


Active engagement means time spent actively operating the business, undertaking specific tasks in business development such as training, planning, regulatory compliance or similar activities. Both the business and the eligible business participant (or sole trader) must be in a position to reasonably prove the basis of calculating active hours.


To be eligible for the higher rate, the eligible business participant must have been actively engaged in the business for 80 hours or more in the following reference period:

  • The month of February 2020.

80 hours averages out to about 20 hours per week. If the business participant was actively engaged in the business for less than 80 hours in February, then the lower rate applies.


The ATO must be notified which payment rate applies.


The ATO have issued guidance on alternative reference periods for eligible business participants and employees. These are the circumstances for which there are alternative tests:

  • Not representative of normal hours.

  • Employed part-way through the reference period.

  • First pay cycle ends on or after 1 March or 1 July.

  • Businesses that change hands.


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