On 22 October, the UK government announced significant changes to the Job Support Scheme which comes into effect on 1st November, replacing the Job Retention Scheme (also known as the furlough scheme). It has also set out more details about the scheme and how businesses qualify for it.
Bowing to pressure from the business community, the government has announced a number of extra ways in which it intends to provide financial support for businesses over the winter months. The announcement covers changes to the Job Support Scheme, self-employed grants and business grants. This update focusses on the Job Support Scheme and the government's new Job Support Scheme Policy Paper of 22 October 2020 which gives more detail on the scheme.
There are two distinct parts to the Job Support Scheme:
- For businesses that are closed -
businesses that are legally required to close their premises as a
direct result of coronavirus restrictions set by one or more of the
four governments of the UK can get the support through the Job
Support Scheme Closed (JSS Closed).
Each employee who cannot work due to these restrictions will receive two thirds of their normal pay, paid by their employer and fully funded by the government, to a maximum of £2,083.33 per month, although their employer has discretion to pay more than this if they wish.
The JSS Closed was originally announced on 9 October 2020. For more information, see our earlier client update on this scheme here. Further details about the eligibility requirements for the JSS Closed have been published in a Policy Paper and are summarised below.
- For businesses that are open - businesses
that are operating but facing reduced demand can get support for
wages through the Job Support Scheme Open (JSS
The JSS Open aims to support employers affected by COVID-19 to bring people in viable jobs back to work following furlough or retain people in work who have not been furloughed, by agreeing with those employees that they will work fewer hours and accept a pay reduction. The JSS Open was originally announced on 24 September 2020. For a summary of the original proposals for the JSS Open see our earlier client update here. Significant changes to this scheme have now been announced. The key changes are set out below.
Both schemes will come into effect on 1 November 2020.
Key changes announced to the JSS Open
The key changes to the JSS Open announced by the government on 22 October 2020 are as follows:
- The requirement for employees to work a minimum of 33% of their contracted hours has been reduced to a minimum of 20%. So a full time employee could be brought back on just one day a week under the scheme.
- The employer contribution for hours "not worked" is
reduced to 5%, subject to a cap of £125 per month. This means
- the government's contribution has increased to 61.67% of pay for hours not worked (up from one third as previously announced) and capped at £1,541.75 per month (up from £697.92 as previously announced). This translates to 49% of total pay (based on 61.67% of 80% of unworked hours)
- employees earning no more than the reference salary of £3,125 per month will now take home at least 73% of pay for working a new minimum 20% of hours. This being 20% for the minimum working hours, and then in respect of their "non-working" hours they will be paid 5% by the employer and 61.67% from the government.
The differences between the various employer support schemes at a glance
JRS pre 1 July 2020
Not permitted to work
Must work 20% normal hours
Business is legally forced to close by government
Pay employee receives (per month)
80% of pay (capped at £2,500)
At least 73% of pay
66.6% of pay (capped at £2,083.33)
80% of pay (capped at £2,500) plus pension and Employer NICs
49% of pay (capped at £1,541.75)
66.6% of pay (capped at £2,083.33)
None unless employer chose to top up pay
Employer NICs and pension on pay employee receives
- The government will not cover the cost of National Insurance Contributions (NICs) or automatic enrolment pension contributions. The employer must still bear these costs on all the pay received by the employee, both for hours worked and not worked. This is not a change as such, but it's a hidden cost since it applies to the proportion of pay relating to unworked hours which the government will now cover.
- Employers can top up employee wages above the 5% contribution at their own discretion. This was previously unclear and does mean that employees are not required to take a pay cut for the employer to benefit from the scheme.
General eligibility criteria for both schemes
To qualify for either JJS Open or JJS Closed, employees must be:
- On the employer's PAYE payroll between 6 April 2019 and 11.59pm on 23 September 2020. This means a Real Time Information (RTI) submission notifying payment to that employee to HMRC must have been made on or before 23 September 2020
- Employed by their employer on 23 September 2020
- Treated as employed for income tax purposes (this includes agency workers, zero hours or temporary workers provided they meet these criteria).
The JJS Open and JSS Closed are open to:
- All employees that meet these criteria, even if they were not previously furloughed
- Any employee who ceases employment after 23 September 2020 and is subsequently rehired.
The intention is that employees will be able to move on and off the scheme and do not have to be working the same pattern each month, but each short-time working arrangement must cover a minimum period of seven days.
Employers cannot claim under both schemes in respect of a single employee for the same day.
Additional eligibility criteria for the JSS Closed
Although the policy paper contains no significant changes to JSS Closed, there are a few additional clarifications on eligibility for the JSS Closed that are worth mentioning here:
- In addition to the general eligibility requirements applicable
to both schemes (see above) employers will be eligible for the JSS
- if their premises at one or more locations are legally required to close by one or more of the four governments of the UK , rather than by local public health authorities
- only while the relevant restrictions are in place – once lifted, employers will have to claim under JSS Open
- Employees will be eligible if their primary place of work has been legally required to close by the government and they must have been instructed to cease work for at least seven consecutive calendar days
- The employer must have a written agreement with the employee (or reached a written collective agreement with a union) that the employee has been instructed to and agrees to stop working for a minimum of seven consecutive calendar days. The employer must notify the employee of the agreement in writing. Records must be kept for five years.
This is not a complete list of all the conditions for eligibility for JSS Closed and further requirements and guidance are expected to be published by the end of October.
Additional eligibility criteria for the JSS Open
In addition to the general eligibility requirements applicable to both schemes (see above), there are some key additional criteria which need to be met in order to claim under JSS Open:
- Some, or all, of the organisation's employees must be working reduced hours - employees must still be working for at least 20% of their usual hours
- Employers must agree a temporary working arrangement for shorter hours in writing with employees (or reach written collective agreement with a trade union as appropriate), and this agreement must cover at least seven consecutive days. It is implicit that the employee also needs to agree to any cut in pay alongside this. The agreement must be available for view by HMRC on request and a record of the agreement must be kept for five years. The government will provide further guidance on what to include in the written agreement by the end of October 2020
- When employers are making decisions, including deciding to whom they should offer reduced hours, equality and discrimination laws will apply in the usual way
- Although the scheme is open to all small and medium sized employers who are facing decreasing demand, the availability of the scheme is limited for large employers i.e. those with 250 or more employees on 23 September 2020. Large employers need to complete a Financial Impact test to demonstrate that their income has been impacted due to coronavirus in order to qualify
- If the large employer's turnover has remained equal or has decreased compared to the previous year, then they will qualify. This test only needs to be taken once before the employer's first claim for the Job Support Scheme. This policy paper sets out the details of this test, but it involves a comparison of the employer's VAT returns
- Employers must keep records of how many hours employees work and the number of usual hours they are not working
- Employees are entitled to the National Living Wage, National Minimum Wage (NMW) or Apprentices Minimum Wage for the hours they are working or treated as working under minimum wage rules. At least minimum wage rates must be paid for all hours worked or treated as worked
- Employees can undertake training in their working and/or non-working hours. Time spent training during working hours and should be paid at the employee's full rate of pay and will count towards 20% of their usual hours. Training done during non-working hours should be voluntary and the employer will have to pay the employee for that time where the time spent training attracts a NMW entitlement in excess of the grant payment
Additional points that apply to both schemes
Conditions on claiming
Use of the JSS grant - grant monies can only be used to reimburse sums already paid to employees.
Redundancy - employees cannot be made redundant or put on notice of redundancy during the period for which their employer is claiming a grant for them under the scheme.
Shareholder distributions - the government expects that large employers (250 or more employees) and their corporate groups using the scheme will not make capital distributions whilst claiming the Job Support Scheme grant. This includes:
- a dividend
- a charge
- a free or other distribution
- any equivalent payment that a partnership may make to its partners.
The Policy Paper says that the government does not plan to make this expectation a contractual or legal condition of the scheme, but encourages business to reflect on their responsibilities. It also states that taxpayers should be able to rely on public money only being claimed where it is clearly needed.
Employee taxes and pensions – as noted above, the JSS grant will not cover NICs or pension contributions. These contributions remain payable by the employer.
Employers must deduct and pay to HMRC income tax and employee NICs on the full amount that is paid to the employee, including any amounts subsequently met by a scheme grant.
Employers must also pay to HMRC any employer NICs due on the full amount that that is paid to the employee, including any amounts subsequently met by a scheme grant.
Employers and employees must also still pay pension contributions in accordance with the applicable pension scheme terms, unless the employee has opted out or stopped saving into their pension.
Student loans and Apprenticeship Levy - if applicable, Student Loan deductions and the Apprenticeship Levy must also still be paid.
Salary sacrifice arrangements - employers cannot enter into any commitment or transaction with the employee which would reduce wages below the amount claimed (for example a salary sacrifice scheme). This includes any administration charge, fees or other costs in connection with the employment. Where an employee had authorised their employer to make deductions from their net salary, these deductions can continue while the employee is working reduced hours provided that these deductions are not administration charges, fees or other costs in connection with the employment (for example, pension contributions and charitable giving).
Interaction with other types of support
Job Retention Bonus - employers claiming under the JSS can still claim under the Job Retention Bonus in respect of the same employee if they are eligible.
Job Retention Scheme - the policy paper explains how employers should deal with JSS claims which overlap with Job Retention Scheme claims.
How to claim
Employers will be able to make their first claim from 8 December 2020. Claims are made online through Gov.uk. The grant will be paid on a monthly basis in arrears.
The Policy Paper sets out more details on how to calculate the reference salary and the employee's usual hours whether fixed or variable (this will follow a similar methodology as for the furlough scheme). Usual pay for employees who have previously been furloughed will be based on their underlying usual pay and/or hours, not the amount they were paid whilst on furlough. Further details of calculations employers need to do to work out their claim will be available in guidance due to be published at the end of October 2020.
When does the scheme end?
The scheme will run for six months until 30 April 2021 but the government will review the terms of the scheme in January 2021.
HMRC will publish the names of employers who use the scheme. Employees will be able to check if their employee has made a claim relating to them via their Personal Tax Account (sign up on GOV.UK).
The full amount of any grant must be repaid if a claim is found to be fraudulent. Penalties of up to 100% of the amount over-claimed may be applied where appropriate. HMRC will consider publishing the details of employers who are charged a penalty because of a deliberately incorrect Job Support Scheme grant claim.
What these changes mean for employers
Employers will welcome these changes. Whilst the JSS remains a substantially less generous support scheme than the Job Retention Scheme, the changes announced do increase substantially the government's contribution per employee claimed for under the scheme. When JSS Open was first announced in September, the maximum the government would pay was £697.92 per month per employee. This has now been increased to £1,541.75 per month per employee. Despite this increase, the cap is still relatively low when compared to the JRS where the cap was £2,500 per month until the end of August 2020.
The reduction in the required number of working hours from 33 % to 20% in JSS Open should also expand the range of employees which employers will be able to select to benefit from the scheme.
Lower paid employees are better off under JSS Open than under JSS Closed (see the table above) but this is to be expected considering they are required to work for at least 20% of their normal hours. It is notable that employees under both schemes can do training during non-working hours but, like the JRS, they must be paid at least National Minimum Wage rates for doing so. Significantly, training can also be done during working hours under JSS Open and can count towards the minimum 20% working hours. This will help employers retrain employees where there is little work for them to do in the short term.
The JSS remains restricted to employees on the payroll between 6 April 2019 and 23 September 2020. The fact that it's not available to new recruits (except those who left after 23 September and were then rehired by the same employer) means that it won't help those employers who may be hesitant to take on new staff in this climate.
We now await further guidance which the government has promised at the end of October 2020. We understand that this will include more guidance on eligibility requirements; what to include in the written agreement; the claim process and employee eligibility for parents entitled to statutory parental leave and pay.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.