3.2.1.15 JSP temporary incapacity - work to return to after incapacity ends - definition of work

Introduction

This topic provides the definition of work for JSP claimants who have a temporary incapacity for work due to sickness or an accident and immediately before the incapacity occurred they were employed and have work to return to after their incapacity ends.

Note: As part of the implementation of JSP on 20 March 2020, a person may be eligible for JSP if they are temporarily incapacitated for work or study due to sickness or an accident and immediately before the incapacity occurred the person was:

  • employed and has employment to return to after the incapacity ends, or
  • in full-time education and receiving ABSTUDY and is committed to resuming full-time study when the incapacity ends, or
  • undertaking qualifying study and receiving Austudy and is committed to resuming study when the incapacity ends.

For JSP claimants who have a temporary incapacity for work and have NO job to return to could be subject to the activity test or may be exempt from the activity test, if relevant exemptions apply.

Provisions relating to temporary incapacity for work are provided in 1.1.T.70 and mutual obligations requirements for JSP 3.11.5.10.

Definition of work

Work means work that the person is contracted to perform under a contract of employment that:

  • the person had immediately before the person becomes incapacitated, and
  • continues after the person becomes incapacitated.

A person may be:

  • employed by another person on a full-time, part-time, casual or temporary basis, or
  • self-employed, including people who do not operate through a company.

Act reference: SSAct section 593(1A)(d)(i) This subsection applies in relation to …, section 593(1AB) In subsection (1A): work, in relation to a person …

Contract of employment

If a person has a contract of employment (written or oral) for an indefinite period and it is verified that the person will resume work at the end of their incapacity, then the recipient satisfies the definition of work.

If the contract is a fixed term contract, then the contract of employment ends when the term expires and the person no longer satisfies the definition of work and should be regarded as unemployed at the expiration of the contract. However, if the person can provide evidence that the contract of employment has continued past the expiration of the specified term, the delegate should consider the new information and assess the continuing eligibility of the person for JSP as a person who has work to return to after their incapacity ends.

If the contract has specific provisions for the termination of contract in the event of incapacity, then the contract ceases on the person's incapacity.

Casual employees with more than 1 employer need only demonstrate that they have a contract of employment with any of their employers.

Contract of employment indicators

The following table provides indicators of whether a person has a contract of employment.

Note: It is NOT necessary for all the following indicators to be present for a contract of service to exist, however, the presence of 1 or more of these indicators suggests that such a contract may be in place. When making a decision, the delegate must allow for a degree of flexibility and weigh up all the circumstances of the particular case, including the considerations below.

Indicators Potential contract of service exists if … Potential contract for service exists if …
Lawful authority to command The payer usually has the right to direct the way in which the work is done. The person maintains a high level of discretion and flexibility as to how the work is performed.
How the work is performed Tasks are performed at the request of the payer. The person may be said to be working in the business of the payer. The person enters into a contract for a specific task or series of tasks. The person maintains a high level of discretion and flexibility as to how the work is performed.
Risk The person bears little or no risk nor is exposed to any commercial risk. This is borne by the payer. Generally, the payer is responsible for any loss resulting from poor work. The person stands to make a profit or loss on the task/s and bears the commercial risk. The person bears the responsibility and liability for any poor work or injury sustained in the performance of the task and generally the person would be expected to carry their own insurance policy.
Place of performance The person generally performs the tasks on the payer's premises. The person generally provides all their own assets to perform the tasks and may work at a number of locations.
Hours of work The person generally works standard or set hours. The person generally sets their own hours.
Leave entitlements The contract provides annual leave, long service leave, sick leave or other benefits or allowances. The contract may not contain leave provisions.
Payment The person is paid an hourly rate, piece rates or award rates. The person is paid based on the performance of the contract.
Expenses The person is reimbursed for expenses incurred in the course of employment. The person is responsible for their own expenses.
Termination Subject to state and federal laws, the payer reserves the right to dismiss the person at any time. The payer may only terminate the contract without penalty where the person has not fulfilled the conditions of the contract.
Equipment The plant and equipment is generally provided and maintained by the payer (in some cases the person will agree to use their own equipment). The plant and equipment is the responsibility of the person.
Taxation The person pays PAYG tax which the payer pays on behalf of the person. The person deals with their own tax.
Delegation The person has no inherent right to delegate tasks to another although there may be a power to delegate some duties to other employees. The person can delegate all or some of the tasks to another person and may employ other people.

Self-employed person who operates through a company

Self-employed people whether they are sub-contractors, contractors, sole traders or primary producers who operate through a company (as a principle or employee) will satisfy the definition of work. A contract of employment exists between the self-employed person and the company.

Franchisees will need to demonstrate that they are the owners of the franchise. These people are likely to be operating through a company or the franchise will have contractual arrangements with the parent company.

Self-employed person who does not operate through a company

Self-employed people who do not operate their business through a company and do not have a contract (written or oral) to provide goods or services will not satisfy the definition of work. The person should be considered as unemployed JSP (incapacitated).

For those self-employed people who do not operate their business through a company but have a contract (written or oral) to provide goods or service, the terms of the contract need to be examined to determine whether it is a 'contract of service' or a 'contract for service'.

Contract of services is considered to be a contract of employment whereas a contract for service is not

A contract of service can be distinguished from a contract for service by:

  • looking at the degree of control the contract exercises over the recipient.
  • the greater the degree of control the greater the possibility that the relationship is one of employment and a contract of service exists.

If it is considered that a self-employed person has a contract for service:

  • the recipient will not satisfy the definition of work and therefore should be considered as unemployed JSP (incapacitated).

Example 1: A painter has been contacted by a builder to paint a group of townhouses. The builder prescribes what work will be done, when work will commence, and when it must be completed. The painter sets his own hourly rate and mode of remuneration, and the builder agrees to these arrangements. The builder will not deduct income tax from the payments. The builder will supply the paint, but the painter will provide his or her own equipment. The terms of this contract exercise sufficient control over the applicant for a contract of service to exist.

Example 2: A couple sells flowers from a van on the side of the road. They determine the time and location for setting up the stall according to traffic patterns, weather and personal commitments. They also determine the selling price of the flowers. They have no regular customers and rely on drive-by customers. They have no contract to supply flowers to local florists or any other business/person. Their business would not be considered to be a contract of service and would not meet the definition of work.

Working credit participants

A JSP recipient who has a working credit balance and returns to their job, is treated as being qualified for the period it takes to run down their working credit balance despite not satisfying the temporarily incapacitated requirement. This allows the recipient to benefit from their working credit balance - providing encouragement to recipients to return to their job.

Act reference: SSAct section 1073J Working credit balance prevents loss of qualification in certain cases

Policy reference: SS Guide 3.1.11.30 Working credit depletion

Last reviewed: 20 March 2020