The COVID-19 virus, more commonly referred to as coronavirus, has been making headlines for over two months and the fear and uncertainty have been accelerating in the last week as the number of cases in Australia and around the world continue to rise and share markets have tumbled. Many of you have been paying attention and wondering when and how this may have an impact on your business.
We have put together a quick guide of some of the factors you should be considering. Keep in mind some of these factors revolve around your legal obligations in the workplace such as conditions of employment and the health and safety of your workers.
This week the Government have announced a stimulus package to assist the economy both recover from the recent bushfires and weather the coronavirus storm. Three of these measures will impact small business:
- A temporary increase to the instant asset write-off threshold from $30,000 per item to $150,000 as well as an increase to the eligibility threshold from $50 million turnover p.a. to $500 million turnover p.a.). This will apply to all asset purchases from 12 March to 30 June 2020.
- Accelerated depreciation measures for large asset purchases that do not qualify for the instant asset write-off. Under these measures you will claim a depreciation deduction as usual and then claim an additional depreciation deduction of 50% of the cost of the asset.
Cash for assistance for small and medium business (turnover less than $50 million):
- Tax free payments of up to $25,000 for employers. This will be via a credit applied to your activity statement account at the ATO equal to 50% of the PAYG tax withheld from wages reported on quarterly activity statements for the March and June quarters, as well as the monthly activity statements for April and May (if you report your wages monthly).
- Wage subsidy of up to 50% of an apprentice or trainee wage for businesses with less than 20 employees for 9 months. This is capped at $21,000 per apprentice. This is only available to apprentices or trainees already employed and undertaking their training as at 1 March.
Targeted support for severely affected sectors, regions and communities. This is targeted at the tourism, agriculture and education sectors and will be developed in partnership with the affected industries and communities.
The ATO may also provide some administrative relief to affected businesses on a case-by-case basis including deferral of tax payments by up to four months.
For a fact sheet providing more information regarding these measures, please click on the following link. A PDF will automatically download:
What Opportunities Are There?
For some businesses the current impact on your business may present some opportunities:
- Consider what cash assistance you will receive under the Government Stimulus package and factor this into your cash flows.
- Consider whether you have the cash flows and resources to bring forward any major asset purchases to take advantage of the more generous instant asset write off and accelerated depreciation stimulus package.
- Take the time to review your business and get out In front of your (key) customers.
- Prepare a cash flow forecast. This will get you thinking about what necessary expenditure is and what your projected income will be over the coming months.
Make a Plan
A business continuity plan is critical when dealing with major disruptions.
You will need a plan in place for the impact on your employees including their health and well-being and also the impact of public policies such as the closure of public transport or their fear of using public transport.
For your business you should be identifying the critical people, processes, materials and technologies that if affected could have the biggest negative impact on your business. You may need to consider:
- Commuting options
- Flexible working arrangements, including working from home
- Back up plans with suppliers
Review Your General Operations
Debt Collection: Make sure you are on top of your debtors and collecting what is owed to you.
Trim the fat: Review your overheads and determine what is necessary expenditure and what can be postponed or cancelled.
Review stock and ordering practices from both a cost reduction perspective and a supply chain perspective:
- If you are experiencing a slow down consider how long your existing stock will last you, when you may need to reorder and whether you can reduce your reorder levels.
- Alternatively, you may need to consider stockpiling inventory if there may be a disruption to the supply chain.
Review your workflows and customer orders. These form the basis of your business and is often an area of inefficiency of both employee time and use of resources. Consider the timing of when your customer needs their product or service. This will then help you make decisions around staff rostering and hours as well as stock ordering.
Reconsider travel and meetings. Coronavirus is transmitted from person to person, so consider whether travel or meetings can be postponed or held electronically.
Be proactive and start taking action sooner.
- No business will be exempt from the impact of coronavirus and this may cause longer wait times to reach personnel within an organisation due to both increased demand and a potential reduced capacity to deal. Delivery delays should also be expected.
- If you are having problems or think you will have problems paying suppliers get in contact with them and sort out revised payment terms for the coming months.
Whilst all businesses want to look after their employees, they must also look after the health of their business. The coronavirus impact on your business may require you to cut back production, services and/or staff hours. You should consider the following:
- Review casual rostering
- Direct employees to take annual leave
- Discuss with employees their long service leave
- Undertake a combination of reduced hours with the potential for the remaining ordinary hours to be paid as annual leave. (e.g. work 3 days, annual leave 2 days)
We have provided more detailed information below on Fair Work requirements in relation to coronavirus and employee leave.
In relation to loans and other finance, you should always talk to your bank manager first, however some actions you should be considering include:
- Meeting with your bank manager to discuss the potential impact of coronavirus on your business and what they can do to help you guide your business through this and manage your cash flows
- If you are ahead on your loan repayments discuss whether you can skip a few payments to assist your short-term cash flow
- If you are in any doubt about missing a payment make sure you are talking to your bank manager in advance to minimise any impact on your credit rating and serviceability of the loan.
Review your insurance policies to consider what and if you are covered for in situations such as the coronavirus pandemic. This could include chatting with your insurance broker or directly with the insurer. Policies you may hold that should be reviewed include:
- Travel insurance
- Workers’ compensation insurance
- Public liability insurance
- Management liability and directors and officers’ liability insurance
- Business interruption insurance
- Cancellation or abandonment of events insurance
- Marine cargo insurance for goods in transit.
Work & Health Safety
Work Health and Safety legislation requires the employer to take all reasonable steps to protect their employees. Precautions you should consider include:
- Reconfiguring the physical workspace so that there is more distance between employees
- Increasing the frequency of work-place cleanings, in particular work surfaces, telephones and keyboards
- Providing hand sanitiser
- Review your work from home policy
- Educate your employees on recommended hygiene practices such as frequent washing of hands, coughing or sneezing into a disposable tissue (preferable) or the corner of your elbow, no shaking of hands (fist bumps or elbow claps may be an acceptable alternative)
- Making it clear when employees should not attend work and encouraging employees to stay at home if they are experiencing related or indicative symptoms
- Remind employees they have a duty of care to not adversely affect the health and safety of others.
Fair Work Requirements
When considering the impact of coronavirus on both your business and your employees you should review the minimum conditions set out by:
- The Fair Work Act 2009 and the National Employment Standards
- The applicable Modern Award, Enterprise Agreement or Employment Contract
An employee or their family member is sick with COVID-19
Paid personal leave is available to all full and part time employees if they cannot come to work because they are sick or are caring for a family member who is sick with coronavirus.
Two days unpaid carer’s leave are available to casual employees and full or part time employees who have exhausted all of their paid personal leave. This is on a per occasion basis. Given the 14 day quarantine status for people who contract coronavirus you would need to come to an agreement with the employee in relation to extending the unpaid leave beyond 2 days.
As an employer you are entitled to request evidence of the illness, such as a medical certificate.
An employee has been quarantined
The Fair Work Act does not provide any specific rules for this situation. Employees and employers need to come to their own arrangement which may include:
- Taking personal leave if the employee has coronavirus or caring for a family member who has coronavirus
- Taking annual leave
- Taking any other leave available to them (such as Long Service Leave, Time-in-lieu or other leave available under an Award, Enterprise Agreement or Employment Contract)
- Arranging any other paid or unpaid leave by agreement between the employee and the employer.
Up-to-date quarantine requirements can be found on the Department of Health’s website.
This would also apply to employees who are stuck overseas because of the coronavirus.
The employee wants to stay home as a precaution
Where an employee wants to stay home as a precautionary measure, they will need to make a request to work from home (if possible) or take some form of paid or unpaid leave. Any requests for such leave should be in accordance with your normal leave application processes.
The employer wants their staff to stay home
In the context of the coronavirus there may be a variety of situations whereby you have to shut your doors for a period of time, including lack of customer orders, lack of materials for manufacture, keeping your employees safe from exposure to coronavirus.
If you are considering shutting your doors for a period of time you will need to consider whether the primary reason is due to factors outside of your control as this will impact on whether you have to pay your employees their ordinary pay during this period.
Under the Fair Work Act an employee can only be stood down without pay if they can’t do useful work because of equipment breakdown, industrial action or a stoppage of work for which the employer can’t be held responsible. There may be additional conditions in the Modern Award, Enterprise Agreement or Employment Contract.
Long service leave needs to be taken in accordance with the relevant requirement Award, Enterprise Agreement and State or Territory legislation. A full list of relevant agencies can be found on the following link:
Sources of Information
Department of Health
Fair Work and the National Employment Standards