On Thursday morning, the Chancellor announced the Government’s latest support measure for employers as a result of the pandemic. The Job Support Scheme (JSS) will come into effect on 1 November 2020 and will run for a period of six months, effectively replacing the Coronavirus Job Retention Scheme and “furlough” leave when they end on 31 October 2020.
The JSS has been introduced following sustained industry pressure for the Job Retention Scheme to be extended or replaced by similar support. There are however marked differences between the two schemes and the support they are intended to give.
We have summarised the key points from the Chancellor’s announcement and the information currently available from HMRC below. This is subject to change as further guidance is expected.
How will the new scheme work?
- All employers with a UK bank account and PAYE are eligible, regardless of whether they previously used the Job Retention Scheme. However, large businesses must meet a financial assessment test which proves that their turnover is lower as a result of Covid-19. HMRC will assess whether large businesses have made capital distributions, such as issuing dividend payments or making share buybacks, whilst claiming grant support. There will be no financial assessment for SMEs.
- Employees must work at least 33% of their usual hours and must be paid their full normal wage for the hours they work. This percentage will be reviewed after three months.
- The cost of time which employees spend not working will be split between the employer, the employee via wage reduction, and the Government via wage support.
- For every hour which an employee does not work, both the Government and the employer will each pay a third of the employee’s usual hourly wage.
- Essentially, this means that an employee who works for 33% of their usual hours, and therefore does not work for 67% of their usual hours, would be paid approximately 77% of their normal wages. This wage cost is borne as follows:
- 33% for the hours worked is paid by the employer.
- A third of the 67% hours not worked (approximately 22%) is paid by the employer.
- A third of the 67% hours not worked (approximately 22%) is paid by the employer and reimbursed via a grant payment under the JSS.
- The Government contribution is capped at £697.92 per month.
- Employer NICs or pension contributions remain payable but are not covered by the Government grant payments.
- Employees can be rotated on and off the scheme and do not have to work the same arrangement each month. However, each working arrangement must last for at least 7 days.
- Grant payments will be made in arrears and after employers have submitted an RTI return for the relevant pay period to HMRC. Employees must be on PAYE payroll and have an RTI submitted for them on or before 23 September 2020 to be eligible. These appears to be anti-abuse measures.
- Following reported wide-spread abuse of the Job Retention Scheme, HMRC have made clear that they “will” check claims under the JSS, and that grant payments must only be used as reimbursement for wage costs actually incurred.
- Employers must notify employees and agree arrangements for reduced hours in writing. If this necessitates contractual variations, they should be agreed with employees in writing. Copies of this agreement must be made available to HMRC on request.
Difference in approach from the Job Retention Scheme
- The stated intention of the JSS is to: “protect viable jobs in businesses who are facing lower demand over the winter months due to Covid-19, to help keep their employees attached to the workforce.”
- Crucially, employers cannot make redundancies or put employees on notice of redundancy and claim support for that period under the JSS.
- This indicates a clear difference in policy behind the new JSS. Where the JRS introduced furlough leave and was aimed at protecting employment generally, this replacement scheme is designed to protect “viable jobs” and encourage employers to bring employees back to undertake whatever work is available.
- Employers who cannot provide employees with at least 33% of their working hours and bear wage costs for a third of hours not worked will face difficult decisions, including whether unpaid layoff or redundancies are necessary.
- This reduction in grant support will undoubtedly have a marked impact in those sectors which made the most use of furlough leave and are still subject to public health restrictions and/or severe business continuity challenges.
Please contact Jack firstname.lastname@example.org or your usual Tughans contact, who can refer you to the employment team.
While great care has been taken in the preparation of the content of this article, it does not purport to be a comprehensive statement of the relevant law and full professional advice should be taken before any action is taken in reliance on any item covered.