The Job Support Scheme (JSS) announced by the Chancellor on 24 September 2020 is intended to protect viable jobs in businesses who are facing lower demand over the winter months due to Covid-19. This scheme will replace the previous Coronavirus Job Retention Scheme (CJRS) when it ends on 31 October 2020. On 9th October the Chancellor announced an expansion to the scheme for those businesses who are forced to close due to local lockdowns.
Employers which remain open may wish to consider the overall cost of participating in the standard scheme against alternatives such as varying staff contracts outside of the JSS, and redundancy. Here, our Employment team provide answers to some of the most frequently asked questions on this topic:
1. Why has the Job Support Scheme been developed?
The purpose of the scheme is to help employers to retain their employees and avoid redundancy even where demand for work is reduced due to the pandemic. Under the scheme the Government and the employer share wage support for employees who are working reduced hours.
The Government will pay a third of hours not worked (up to a cap) with the employer also contributing a third. This will ensure employees earn a minimum of 77% of their normal wages before the Government cap.
Where businesses are forced to close due to local lockdowns, Government will support eligible businesses by paying two thirds of each employees’ salary (up to a cap).
Both types of scheme will open on 1 November immediately after the closure of the CJRS and will run for six months until 30 April 2021.
2. Which employers are covered by the Job Support Scheme?
The scheme is broad and is open to all employers with a UK bank account and UK PAYE schemes, regardless of sector.
All small and medium sized businesses satisfying the above criteria can participate in the scheme without undergoing a financial assessment. Larger businesses will need to show that their turnover is lower now than before experiencing difficulties from Covid-19 and Government’s expectation is that large businesses will not be making capital distributions, such as dividend payments or share buybacks, for any period during which they participate in the JSS.
There is not yet specific guidance concerning what the financial assessment test for large businesses will cover or what counts as a small and medium sized business for the purpose of the scheme. However, in previous Covid-19 related legislation, small and medium sized enterprises have been defined as having fewer than 250 employees and so it is reasonable to expect that a similar definition will be used for the purposes of the JSS.
3. Which employees are covered by the Job Support Scheme?
The JSS only applies to workers and employees who are included on the employer’s payroll on or before 23 September 2020. To be included on the payroll means that the employer must have made a Real Time Information (RTI) submission to HMRC notifying them of the payment to the employee on or before that date. It is not enough for the employee to merely have been recruited on or before 23rd September.
Self-employed workers are not eligible. However, the Self-Employed Income Support Scheme has been extended.
The JSS does not apply to employees who have been made redundant or those who have been given redundancy notice. This means that an employer will not be able to claim reimbursement for unworked hours of an employee who has either been made redundant in the period claimed for or is under notice on grounds of redundancy during that period.
The Government guidance does not clarify whether this means that an employer may start redundancy consultation during the JSS period, provided that they do not issue a notice of termination during that period.
4. How much can employers expect to pay and to receive under the scheme?
Businesses forced to close due to local lockdowns
Under the expanded scheme, businesses whose premises are legally required to shut for some period over winter as part of local or national restrictions will receive grants to pay the wages of staff who are not able to work.
The government will support eligible businesses by paying two thirds of each employees’ salary up to a maximum of £2,100 a month. Employers will not have to contribute to wages themselves under the expanded scheme but will need to cover National Insurance Contributions and employer pension contributions.
Businesses continuing to trade and not subject to local lockdown rules
For the first three months of the scheme the employee must work at least 33% of their usual hours and will be paid for this work by their employer as usual. After 3 months, the Government will consider whether to increase the minimum hours threshold.
Of the remaining unworked hours, the Government and the employer will pay one third each of the usual hourly wage payable to that employee. The employee takes the remaining third of unworked hours as a reduction in wages. The Government contribution will be capped at £697.92 per month.
Employees will be able to cycle 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.
An employee’s usual hours will be based on their pre-furlough working hours where applicable and is likely to be worked out in the same way as for the CJRS. Similarly, the “usual hours” of those employees who are on zero hours or other non-fixed rate contracts are also likely to be worked out in the same way as for the CJRS.
5. When can employers start to claim support under the JSS?
Employees must be on the payroll on or before 23 September 2020. The scheme opens on 1st November and employees will be able to claim online from December, although details of exactly how to claim are still pending.
Payments to employers under the scheme will be payable monthly in arrears, covering only costs which have actually been incurred as at the date of the claim.
6. What Employment law issues may arise through participation in the JSS?
Employees under the scheme will be working reduced hours and receiving reduced pay, since the employer and Government will only pay the employee up to two thirds of their unworked hours.
Most employment contracts do not allow employers to make changes to pay and working hours without agreement. Employers will therefore need staff to consent to the new change to their terms of employment to avoid a breach of contract or unlawful deduction from wages claim.
Changes to the employment contract must be made in writing and must be made available to HMRC upon request.
If employers wish to apply the scheme to 20 or more employees then the requirement under the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) to collectively consult with employees may arise.
There is no Government guidance to suggest that the obligation to collectively consult does not arise in relation to the COVID-19 support schemes and TULRCA has not been amended.
Where the employer intends to vary the contracts of 20 or more employees, and it intends to dismiss employees who do not consent to the change in their terms within a period of 90 days or less, those employees will be classed as dismissed by reason of redundancy for the purposes of section 188 of TULRCA
Employers may choose to make redundancies instead of participate in the JSS for particular employees. However, employers should be able to show that they have considered the JSS as an alternative to redundancy for each type of role they consider redundant, and document their reasons why it would not be suitable in the particular circumstances of the case.
National Insurance and Pension Contributions
The Job Support Scheme grant payable by the Government does not cover Class 1 National Insurance Contributions or employer pension contributions. An employer should make its contributions based on the whole sum payable to the employee by the employer (both in respect of worked and unworked hours).
7. What don’t we know yet?
Guidance is still pending from the Government in relation to how the JSS applies to employees who are on sick leave or annual leave. Depending on the guidance issued this may incur greater costs for employers.
Issues may arise in respect of employees previously classed as extremely vulnerable if they are advised to shield again in the future and cannot work from home, or those who are required under legislation to self-isolate.