The Chancellor has significantly expanded the Job Support Scheme after objections from businesses, particularly those in areas under restrictions (including Northern Ireland) that they are facing massively reduced demand but less support from the government.
Under the revised scheme, employees will have to work fewer hours and employers will need to contribute less in order to qualify. The changes could have a significant impact – but there is precious little time available to employers to take the steps needed to take advantage of the scheme before it comes into effect.
What is the Job Support Scheme?
The original scheme was designed to replace the furlough scheme when it ends on 31 October 2020, and was intended to provide ongoing wage support from the government for employees provided the employee worked at least one third of their usual hours and the employer contributed an additional one third of their usual pay for hours not worked.
Why has the JSS had to be changed?
The JSS as originally announced was criticised widely because the overall level of support that it provided employers who were being affected by coronavirus restrictions was comparatively low compared its predecessor, the CJRS.
The view from many businesses was that it did not provide enough support to justify retaining jobs at a time where businesses were being either closed or severely restricted in terms of operations. For many businesses, the simpler choice was to move to redundancy processes and that was likely to accelerate as more areas in the UK move into local or regional restrictions.
The updated JSS will operate through the same period as previously intended, from 1 November 2020 to 30 April 2021.
The key changes which have been announced by the chancellor are as follows:
- The JSS is now being split into two different types
a. the JSS (Open) for employers who are suffering decreased demand
b. the JSS (Closed) for employers whose premises have had to close due to legal restrictions
These can be summarised as follows:
|JSS Open||JSS Closed||Original JSS|
|Time to be worked and to be paid by employer as worked||Minimum of 20% of their usual hours||No minimum||Minimum of 33% of their usual hours|
|Employer contribution to wages required for hours not worked||5% of reference salary for hours not worked up to a maximum of £125 a month||None||33% of reference salary up to a maximum of £697.92 a month|
|Government contribution||61.67% of reference salary up to a maximum of £1,541.75 a month||66.67% of reference salary up to a maximum of £2,083.33 a month||22% of reference salary up to a maximum of £697.92 a month|
|Can an employer voluntarily add further pay||Yes||Yes||Was not expected|
|Total wages which can be earned by the employee under the measure||At least 73% of normal wages, where an employee earns £3,125 a month or less||At least 66.6% of normal wages, where an employee earns £3,125 a month or less||77% of normal wages|
|Pension and Employer NIC costs||Paid by employer||Paid by employer||Paid by employer|
|JSS funds payment received when||In arrears, the month after payroll RTI submitted||In arrears, the month after payroll RTI submitted||In arrears, the month after payroll RTI submitted|
For businesses who want to use the JSS (Closed) scheme it is a requirement that any claims made relate only to periods where the restrictions applied by Government in their area have caused that closure to occur and the claims under JSS (Closed) are required to cease when those restrictions no longer apply.
However, a business that has been in the JSS (Closed) scheme can then move into the JSS (Open) scheme when the restrictions are eased so that their premises can open but operating at a level of reduced demand.
2) Large employers will have to show reduced sales to use the JSS (Open)
Large employers with more than 250 employees will have to be able to show that their “income” has remained equal to, or been negatively affected, compared to the same period in 2019.
In practice, it is expected that this will be carried out by using VAT returns which are to be filed from 31 August 2020 to 7 November 2020 and comparing those to the VAT returns for the same period in 2019.
The Financial Impact Test requirement for large businesses is stated to apply to the JSS (Open) scheme and so the assumption is that large businesses can use the JSS (Closed) for employees at premises which have been closed by legal requirement without the Financial Impact Test applying to those premises.
3) No JSS claims by large employers where shareholder distributions made
The guidance states that where large employers (i.e. those with >250 employees) are claiming JSS (Open) or JSS (Closed) then they will not be able to make capital distributions in the form of dividends, charges, free distributions or any equivalent payment a partnership may make to its partners.
4) Employers can top up pay
The government has now said that employers using the scheme can top up employees’ pay if they wish, something many employers had queried. Employers’ obligatory contribution to pay for unworked hours is capped at £125 per month, but they can choose to pay more.
5) JSS grants count toward the Job Retention Bonus
Employers can get the £1,000 bonus for bringing a furloughed employee back to work in addition to claiming ongoing support for that employee under the JSS. To qualify for the bonus, the employee would need to remain continuously employed to the end of January 2021 and earn a minimum of £1,560 (gross) between 6 November and 5 February 2021. And the JSS grant can count towards that minimum income threshold.
6) Employers can claim under both schemes for different employees
The government says employers can claim under both JSS Open and JSS Closed at the same time, but not in relation to the same employees. This seems to be aimed at employers one part of whose business is subject to a compulsory closure, and another part of whose business isn’t – for example, a bar or a gym in a hotel.
7) Employees who can be claimed for (JSS Open)
Employers can only claim for employees that were in their employment on 23 September 2020. If employees ceased employment after 23 of September 2020 and were subsequently rehired, then employers can claim for them.
An individual is an employee for the purposes of this scheme if they are treated as an employee for Income Tax purposes.
Employees can be on any type of contract, including zero hours or temporary contracts.
Agency workers are regarded as employees of an employment agency for the purposes of this scheme, provided they are employees for Income Tax purposes.
Employees do not need to have been furloughed under the Coronavirus Job Retention Scheme to be eligible for the Job Support Scheme.
8) National Minimum Wage
Employees are entitled to the National Living Wage, National Minimum Wage or Apprentices Minimum Wage for the hours they are working or treated as working (such as training undertaken at the request of the employer in non-working hours) under minimum wage rules. For JSS Open, at least minimum wage rates must be paid for all hours worked or treated as worked.
9) JSS Open temporary working agreements
To be eligible for the grant, employers must have reached written agreement with their employee (or reached written collective agreement with a trade union where the relevant terms are determined by collective agreement) that they have been offered a temporary working agreement. The agreement must be available for view by HMRC on request.
This temporary working agreement must cover at least seven consecutive days.
Employers should discuss with their staff and make any changes to their employment contract by written agreement. When employers are making decisions, including deciding to whom they should offer reduced hours, equality and discrimination laws will apply in the usual way.
10) JSS Closed temporary working agreements
Employers should discuss with their staff and make any changes to their employment contract by written agreement. When employers are making decisions in relation to the process, including deciding who they should instruct to cease work, equality and discrimination laws will apply in the usual way.
To be eligible for the grant, employers must have reached written agreement with their employee (or reached written collective agreement with a trade union where the relevant terms are determined by collective agreement) that they have been instructed to and agree to stop working for a minimum of 7 consecutive calendar days. The agreement must be available for view by HMRC on request.
Despite some further information, there are still a number of outstanding issues.
Do employees need to be doing their normal work? Employees can undertake training during their 20% working hours. If they are not doing training, do they have to be doing their normal work? It is possible that some employers might try to find work for employees to do even if there is no business need for them to perform their contractual duties, now that the government contribution is more generous.
Further conditions for employee eligibility. The policy paper says that more details about employee eligibility will be available in further guidance before the end of October.
Further guidance on the calculations. The calculations given in the policy paper for JSS Open are “indicative” and we can expect further details of the necessary calculations at the end of October. We are also waiting for details of how “reference salary” and “usual hours” should be calculated for JSS Closed.
What goes into the JSS Open employee agreement? Employers must have a written agreement in place with affected employees. The policy paper says that further guidance on what to include in this agreement will be forthcoming by the end of October.
What should employers do now?
Employers who may wish to access the scheme should be thinking about how they will notify and reach agreement with employees. While full guidance on what to include has not yet been published, employers may feel that they do not have time to lose if they are to put arrangements in place before 1 November, and would be well advised to instigate discussions with employees and, where applicable, recognised unions without delay.
In this context, they should also work out what to do about pay: employees are generally entitled to full pay if they are ready and willing to work (although this is not true for all staff – casual workers, for example, are generally only entitled to be paid for the hours they actually work). Employers will need to negotiate and agree any reduced pay arrangements with employees, or unions where a union is empowered to negotiate terms on behalf of staff.
Employers who have already commenced redundancy consultation having concluded that the JSS was insufficiently generous to retain staff will need to consider their next steps – and can expect employees and their representatives to argue that the expansion of the scheme is a reason for them to stay their hand. An employee cannot be made redundant or put on notice of redundancy during the period within which their employer is claiming a JSS grant for that employee. Employers will therefore need to consider whether to continue with redundancy consultation or whether this should be paused. The relative costs and benefits of redundancy versus rehiring and training new employees in the future will be different now that the costs to the employer of using the JSS will be lower.
Employers should consider if they have enough time before 1 November to make the necessary arrangements. For those who do not think they will have enough time to make decisions, arrange practicalities and reach agreement with employees, they could consider extending furlough at their own cost, or asking employees to take holiday or unpaid leave whilst they finalise planning.
Get Ready to Claim
Employers will be able make their first claim from 8 December 2020 on GOV.UK.
Full details of the scheme are available at https://www.gov.uk/government/publications/the-job-support-scheme/the-job-support-scheme
“This is a very significant improvement in the support available to businesses struggling with the impact of increasing restrictions across Northern Ireland” says Business Services Partner Stephen McConnell.
“However, it’s vital that businesses can have quick and easy access to the help to ensure they are supported through these difficult weeks ahead.”
“We are aware that the rules determining when a business is considered JSS (Open) and JSS (Closed) will create additional complexity and difficulty for the claimant. But we are of course on hand to help with any assistance with JSS claims.”
To discuss your own situation please contact Stephen McConnell, Business Services Partner Tel: 028 90 323466 or email firstname.lastname@example.org