Question on JobKeeper and declared wages for Business Interruption
Hi Allan,
Was looking for your expertise on the above if you have a moment – I am working with a Registered Club and the treatment of Jobkeeper payments were mentioned. They have advised:
The payroll for the financial year excluding Job keeper was $590,353. There were thirteen staff on job keeper and the Club received $126,750 from the Job keeper subsidy.
The client has Dual Payroll so will keep paying staff post loss, but the contention is where Jobkeeper is to be mentioned in the BI.
As it is a reimbursement do we look at including in the GP? Or do we somehow reduce the Payroll to reflect the ‘Nett’ amount incurred by the insured.
I am to approach the underwriter for his thoughts on the mechanics but would also appreciate your input if you have a moment.
Please give me a call If you have any questions or require any further details.
Kind Regards,
Mark [surname and email provided]
My approach to this is:
As JobKeeper is only a temporary measure that is in all likelihood going to end well before the period of insurance. The start date for any claim under the policy is not today or the start date of the policy but the date the policy is triggered by an insured event.
I would not make any adjustment in respect of Jobkeeper but declare the full amount.
I would also be questioning the value of insuring wages under the Dual Wages method for a pay-roll of this size. I do not think the premium saving would warrant the loss of coverage or risk of getting it wrong. It also greatly complicates a claim adjustment.
As I understand it the client is in a country town and I am assuming, always dangerous, that the staff are locals and the insured would like to continue to look after them long after Jobkeeper.
I hope this helps.
Regards,
Allan
Hi Allan,
Interested in the above on Jobkeeper. Are you saying that if an Insured received Jobkeeper from Government that this is not to be considered in the calculation of Loss of Gross Profit (GP)?
What about the following example:
a) The Insured states their Business would not have been affected by Covid-19 i.e. their trend would have continued “but for the damage” and
b) The Insured acknowledges that their Business would have been affected by Covid-19 i.e. their trend is adjusted “but for the damage”
Are both examples to be treated the same way?
Under (a) above, but for the damage they would not have received Jobkeeper. Would you then not adjust for the Jobkeeper?
Regards,
I am saying not to reduce the wages declaration to the net amount after JobKeeper. Certainly the payments would be regarded as savings in any claim adjustment.
I am looking more to the fact that Jobkeeper is going to stop at some time well before the next renewal and not to declare gross payroll whether it is insured separately or part of insurable Gross Profit will lead to an under insurance issue. i hope this clarifies my position.
Hi Allan,
Thanks for the clarification. 100% agree with your comments and insight.
Great, glad we are on the same page.