New changes to the Job Support Scheme – an open and shut case?
23 October 2020
The Chancellor has significantly expanded the Job Support Scheme after objections from businesses, particularly those in tier two areas, that they are facing massively reduced demand but less support from the government than tier three businesses legally forced to close. 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.
The original Job Support Scheme (JSS), designed to replace the furlough scheme when it ends on 31 October 2020, 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.
The government later announced there would be an extension to the JSS for businesses required to close entirely due to tighter local or national restrictions. This announcement came around the time the government introduced its new “three tier” COVID alert levels for England, under which there are different levels of “local lockdown”. Under this extension to the scheme, the government said it would pay two-thirds of employees’ wages (subject to a cap of £2,100 a month) if businesses were required to close their premises.
Following an outcry from many businesses, particularly those in the hospitality and leisure sector based in “tier two” areas that will face significantly reduced demand but will not be legally required to close, the Chancellor has moved again and expanded the support available under the JSS to businesses that remain open. The government is now calling this scheme the “JSS Open” and the scheme for closed businesses, “JSS Closed”. They will start from 1 November and are currently intended to last for six months.
The announcement of enhanced support reflects the impact of the new three-tiered set of restrictions on businesses and the government’s desire to help preserve viable businesses and avoid large-scale redundancies.
Changes to the JSS Open scheme
Under the revised JSS Open scheme, the minimum number of hours employees must work has been reduced from 33% to 20%, for which employers must pay salary as normal.
The amount the employer must contribute in lieu of wages for unworked hours is also reduced from 33% to 5% (capped at £125 per month).
And the government will now contribute 61.67% of pay for hours not worked, up to a cap of £1,541.75. This increases the maximum government payment from the £697.92 previously announced.
Overall, employees benefiting from JSS Open will receive at least 73% of their normal pay, where their usual monthly wages do not exceed £3,125 – and employers can top this up further if they choose.
This is more generous than the JSS as originally announced on 24 September 2020, but less so than the original Coronavirus Job Retention Scheme (i.e. the furlough scheme), which initially subsidised up to 80% of wages, up to a maximum of £2,500 a month (although in the last two months employers have had to make increasing contributions and the subsidy has been reduced).
Our FAQs set out what we know so far about how the scheme will work. But there are still significant omissions in the government’s guidance and areas where more clarity is urgently needed. The policy paper says that further guidance will be available by the end of October, which is far too late for businesses wanting to access the scheme from the beginning of November. Nonetheless we do now have some welcome clarity on a few points:
Financial impact test for large employers
JSS Open is not limited to any particular sectors or settings: it’s available to any employers with eligible employees, a UK bank account and a UK PAYE scheme. But it can only be used by “large employers” if they meet a financial impact test demonstrating their income has stayed flat or been adversely affected by coronavirus. SMEs will not have to meet any financial test.
We now know (finally) that “large employer” means those with 250 or more employees on their payroll on 23 September 2020. They will be able to show the required adverse impact by showing their turnover has remained equal or fallen compared to the previous year, based on VAT returns.
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.
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. See our article on the job retention bonus scheme for details of how the bonus works. 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.
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.
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.
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