263: The Job Support Scheme – the employers know-how guide
The Job Retention Scheme, known as furlough, will close as planned at the end of October. The Chancellor said furlough was a temporary fix but cannot be a long-term solution and will therefore be replaced by a new support package called the Job Support Scheme, that is due to open on 1 November 2020 and run for six months until April 2021. The government is gradually issuing guidance in relation to the Job Support Scheme and we believe there is more to come in due course before the scheme is put into practice, but in the meantime, we have highlighted the top points that employers should be aware of.
1. What is the Job Support Scheme (JSS) and how does it work?
The scheme is designed to prevent employees from being made redundant and instead work reduced hours, with the government contributing to wages.
Employees must work at least 33% of their usual hours for the first three months of the scheme, after which the government will consider whether to increase this minimum hours threshold. The employer continues to pay its employee for time worked, but the cost of hours not worked will be split between the employer, the government (through wage support, capped at £697.92 per month per employee) and the employee (through a wage reduction), and the employee will keep their job. This will ensure employees earn a minimum of 77% of their normal wages, where the government contribution has not been capped. It is the government’s expectation that employers will be prohibited from ‘topping up’ an employee’s pay to full pay on a voluntary basis whilst on the scheme.
See below examples of employee’s earnings, government grants and employer’s costs on various scenarios:
|Hours employee worked||33%||40%||50%||60%||70%|
|Hours employee not working||67%||60%||50%||40%||30%|
|Employee earnings (% of normal earnings)||78%||80%||83%||87%||90%|
|Government grant (% of normal wages)||22%||20%||17%||13%||10%|
|Employer cost (% of normal wages – excluding NICs and pension contributions)||55%||60%||67%||73%||80%|
2. What organisations does the JSS apply to?
The scheme applies to employers with a UK bank account and UK PAYE scheme.
Large organisations will have to meet a financial assessment test (details of which are currently unspecified), with the JSS only being available to those whose turnover is lower now than before experiencing difficulties from coronavirus (COVID-19). However, other employment-related legislation specifies that an employer with 250 or more employees is classed as ‘large’; other legislation uses criteria such as turnover and balance sheet. The government’s ‘expectation’ is that large employers using the JSS will not be making capital distributions, such as dividend payments or share buybacks, while accessing the grant.
Small and medium enterprises (SMEs) will not face financial assessment tests . The government has not provided a definition of an SME under this context but the usual definition of a ‘small and medium enterprise’ is one which has at least two of the following:
- turnover of less than £25 million;
- under 250 employees; and
- gross assets of less than £12.5 million.
We are waiting on further guidance.
3. Which employees does the JSS apply to?
Employees must be on an employer’s PAYE payroll on or before 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. This includes employees on zero-hours contracts and irregular hours.
Unfortunately, an employer cannot re-engage an employee that was made redundant because of COVID-19 and place them on the JSS nor can an employee be on redundancy notice.
4. What does ‘reduced hours’ mean?
Details provided so far by the government are that:
- the employee must be working 33% of their ‘usual hours’;
- an employee cannot be made redundant or put on notice of redundancy during the period within which their employer is claiming the grant for that employee. However, there is no guidance yet as to whether an employer can begin the redundancy consultation process whilst an employee is on the JSS;
- the government is yet to confirm how the scheme will impact annual holiday leave; and
- the government says there will be ‘calculations for those with variable working patterns’, but it has not yet given details.
5. How do you calculate what an employee can claim?
‘Usual wages’ calculations will follow a similar methodology as for the CJRS (full details are promised in guidance shortly). For employees who have previously been furloughed, their ‘usual wage’ will be based on underlying usual pay and / or hours, not the amount they were paid while on furlough. Again, we are waiting on guidance for employees with variable working patterns.
6. Do employers have to agree these changes with employees?
Yes, the government says that the employer must agree the new short-time working arrangements with their staff, make any changes to the employment contract by agreement, and notify the employee in writing.
7. How do I make a claim?
The JSS will be open from 1 November 2020 to the end of April 2021. Employers will be able to make a claim online through GOV.UK from December 2020.
Grants under the JSS will be paid on a monthly basis and will be payable in arrears, meaning that a claim can only be submitted:
- in respect of a given pay period;
- after payment to the employee has been made; and
- after that payment has been reported to HMRC via an RTI return.
If you would like any further guidance then our employment team is here to help.