With the existing furlough scheme shortly ending on 31 October 2020, most employers and employees will be aware that the Government has announced new measures to take effect from 1 November 2020.
The new Job Support Scheme (“JSS”), as it was announced, comprises two main elements which seek to mollify the financial difficulties faced by businesses subject to tightening lockdown restrictions and lower demand over the winter months.
Commencing UK wide (applying to all employers with a UK bank account and UK PAYE scheme) in a matter of weeks, the JSS will be available until 30 April 2021 (with a review in January 2021) as part of the Government’s Winter Economic Plan to help protect and support jobs throughout the pandemic.
Employers and employees wishing to benefit from JSS should be in discussions and preparing documentation to be agreed between them. A written agreement is required, given the new JSS will vary the employee’s basic terms of employment (in respect of hours worked and pay, among other things).
1) The Government’s first announcement 24 September 2020 – JSS for businesses which can stay open under local or national COVID-19 restrictions
Chancellor Rishi Sunak explained how the JSS seeks to protect viable jobs in businesses which are facing lower demand due to COVID-19.
Employers will continue to pay its employees for time worked, but the burden of paying for any hours not worked will be split between the employer and the Government, one third each. This will mean employers pay a total of 55% of their employees’ wages with the Government providing 22% (capped at £697.92 per month for each employee).
Consequently, employees will earn a minimum of 77% of their normal wages. Although it is worth noting that this is lower than the 80% employees received under the furlough scheme (also, here, the entire 80% was the highest contribution by the Government with businesses having the option to top this up, something which is not an option under the JSS. Employers must pay 55% of wages, as opposed to an optional 20% top up).
The underlying purpose behind the JSS appears to be to keep employees in work (albeit on reduced hours) as opposed to the Furlough scheme, which was to pay employees not to work.
Who is eligible?
Employees must be on an employer’s PAYE payroll on or before 23 September 2020 Ie. a Real Time Information (RTI) submission notifying payment to that employee to HMRC must have been made on or before 23 September 2020.
For the first three months of the scheme, employees must work at least 33% of their usual hours. For the time worked, employees must be paid their normal contracted wage. For time not worked, employees will be paid up to two-thirds of their usual wage. After 3 months, the Government will review this and consider whether to increase the minimum hours threshold. This will need to be factored into drafting agreements with employees to vary their hours.
Employees will be able to cycle on and off the JSS and do not have to be working the same pattern each month. However, importantly, each short-time working arrangement must cover a minimum period of seven days.
Large businesses will have to meet a financial assessment test (to show their turnover is lower now than before COVID-19 related difficulties). There is no test for small and medium enterprises (SMEs).
2) The Government’s Second announcement9 October 2020 - JSS for businesses which are required to close their premises due to local or national COVID-19 restrictions
Under the extended JSS, the Government will pay two-thirds of employees’ salaries (up to a maximum of £2,100 per month) for businesses which are legally required to close under Government lockdown restrictions. Employers will not be required to contribute towards wages (unlike the grant available for businesses suffering from lower demand, discussed above). Employers will however still have to cover NICs and pension contributions.
Who is eligible?
Only businesses which are legally required to close are eligible (and only for the period they are closed). Businesses which close as a result of specific workplace outbreaks or because of the broader impact of COVID-19 restrictions are ineligible.
Employees must be off work for a minimum of seven consecutive days in order for businesses to utilise the JSS.
Importantly, employees cannot be made redundant or put on notice of redundancy during the period within which their employer is claiming the grant for that employee. Therefore, the grant cannot be used to help pay some of an employee’s notice pay (as it could if an employee was on furlough throughout their notice period, under the furlough scheme)
The two grants discussed above are designed to support businesses that are facing low demand over the winter months or are forced to close because of an uptick in COVID-19 cases. It brings an end to the existing furlough scheme, but seeks to provide further, needed support in the months ahead. Neither the employer nor the employee needs to have previously used the Coronavirus Job Retention Scheme to qualify under the new JSS. If, for example, a business is instructed to close by the Government, the employee could qualify under the extended JSS for the period of closure (so long as it is at least 7 consecutive days). Upon reopening, the employee could return to work and potentially benefit under the original JSS scheme, so long as the employee works 33% of their hours.
The existing Job Retention Bonus Scheme (as detailed in our article of 15 July 2020) remains in operation as an incentive to employers to try to retain furloughed staff throughout the pandemic.
It is important to note that payments to businesses in relation to both grants will be made in arrears, via a HMRC claims service that will be available from early December 2020. Class 1 employer NICs or pension contributions remain payable by the employer for both JSS grants, as we have highlighted above.
HMRC intend to publish the names of employers who have used the JSS and so employers should ensure that they are utilising the scheme correctly. Further guidance on this and the scheme itself is expected over the coming weeks.
What is clear at this stage is that suitable, written agreements will be needed between the employer and relevant employee to vary their underlying contractual terms. Employers must agree the new scheme with the relevant employees, making any changes to their employment contract in writing (for example, varying hours and/or pay). This written agreement must be made available to HMRC on request and will stand as important evidence going forward. We would advise employers to take legal advice on the drafting and implementation of such terms.
Please note this article reflects our understanding of the Guidance as at 20 October 2020. We highly recommend consulting the latest version of the Guidance before making key decisions, as this is a vastly developing area and it may well have changed. If in doubt, contact our team.