Flaws in the new JobKeeper system could see some minimum wage workers lose half their income, new analysis from the Labor Party claims.

The proposed changes to the wage subsidy scheme have been branded an “economy killer” by the United Workers Union, with fears they may push low-paid workers into poverty.

“It’s a really stupid idea,” said UWU national secretary, Tim Kennedy.

JobKeeper is currently set to expire in September, so the government is extending the program this week in the federal parliament.

The program will now stretch until March 2021, supporting businesses that have sustained a significant hit to their turnover in the wake of the COVID pandemic and subsequent restrictions.

Tony Burke said low-income workers would be at risk. Photo: ABC

On Monday it was revealed around one million people in Victoria alone are on JobKeeper, with the state forecast to have around 60 per cent of the nation’s total reliance on the program in coming months.

But JobKeeper’s extension will be paired with its slimming down, with the current $1500 per fortnight flat rate for all eligible programs being trimmed to $1200 in the next quarter, and then $1000 for the start of 2021 for full-time workers. It will be cut to $750 then $650 for part-timers.

While businesses will still have to prove they’ve lost a substantial amount of money to keep accessing the government wage subsidy, some of those that have rebuilt their income and therefore no longer qualify will still be able to access a suite of controversial industrial relations “flexibility” arrangements.

Under the government’s proposal for ‘JobKeeper 2.0′, businesses which have seen their incomes decrease by just 10 per cent will be able to cut their employees’ hours by 40 per cent.

But Labor’s shadow industrial relations minister, Tony Burke, said the impact on lower-paid workers who rely on penalty rates could be even bigger.

In analysis provided to The New Daily, Labor claims that a full-time retail worker whose boss cuts their weekend hours – for which they could receive penalty rates of up to 50 per cent – could see a reduction in their pay by nearly half.

The analysis shows that a 40 per cent cut in hours could mean a 50 per cent cut in wages for low-paid workers – meaning that a business which has not sustained enough of a financial hit to qualify for JobKeeper would actually be able to pay their workers less than a JobKeeper-eligible business which has sustained a big loss.

“The Government says a worker’s hours cannot be cut by more than 40 per cent – but once you take penalty rates into account the cut to a workers’ take home pay can be closer to 50 per cent,” Mr Burke told The New Daily.

“For low-paid workers that is simply too much.”

He  said the example showed the government needed to add a “safety net” that workers in such a situation couldn’t be paid less than the JobKeeper rate.

Treasurer Josh Frydenberg said the government rejected Labor’s amendments. Photo: AAP

“The Government’s changes means businesses on the road to recovery will have permission to slash their workers’ pay by more than those still struggling enough to be on JobKeeper,” Mr Burke said.

“As turnover goes up, take-home pay can go down.”

The JobKeeper legislation has already passed the House of Representatives, but Labor expects the vote in the Senate to come down to the wire. Speeches and debate in the Senate will continue through Monday night and potentially drag on through the week.

Treasurer Josh Frydenberg rejected Labor’s calls for change to the legislation, saying businesses needed more flexibility.

“They can’t keep all of their employees fully employed because their doors are not necessarily fully open,” the treasurer told Sky News on Sunday.

“If we were to force those businesses to keep their staff working at 100 per cent of hours then ultimately that would cost jobs.”

Mr Kennedy said the UWU feared the impact of the changes on Australia’s lowest-paid workers.

“The minimum wage could go down to $400 a week. It’s an economy killer,” he told The New Daily.

Unions say hospitality and retail workers would be at risk. Photo: AAP

“It will put people under increasing financial pressure, with people living way below the poverty line. It won’t be much better than the dole.”

He called the 10 per cent income drop for businesses to access the industrial relations changes “an arbitrary line” and said unions feared employers “gaming” the system to decrease their wages bills.

“This opens up the floodgates after a number of employers mucked around with JobKeeper the first time around. It will do damage,” Mr Kennedy said.

“It’s poorly thought out. It’s vindictive.”

Mr Kennedy said he feared workers in sectors like hospitality and tourism, as well as those working in small businesses, would be most at risk. In a high unemployment situation such as Australia is currently experiencing, he said he worried about employers setting unreasonable terms and simply hiring new workers if current ones protested.

“We’d say the safety net needs to be at least $750 a week, that’s the minimum wage. It’s crazy to go less than that,” he said.

“Workers can be easily replaced in this kind of unemployment situation. This only ratchets up the power of employers. Economically it’s madness, socially it’s dangerous.”