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Just two weeks after the government unveiled a new Job Support Scheme (JSS), the Chancellor Rishi Sunak has announced an expansion of that scheme. In anticipation of what the Chancellor called “a difficult winter”, the stated purpose of the JSS expansion (the Expansion Scheme) is to provide support to businesses which are required by law to close as a direct result of Coronavirus restrictions. 

The government has published a factsheet on the Expansion Scheme for Closed Business Premises. As with the JSS, further guidance is promised in the coming weeks, but here is a summary of what we know so far about the Expansion Scheme.

For more information on the JSS, see our blog on the details of the JSS and what it might mean for employers.

1. What is the purpose of the scheme?

  • One of the main eligibility requirements of the JSS, is that employees must work at least 33 per cent of their usual hours. One criticism levelled at this is that it makes no provision for employees who are unable to work because their employers are closed as a result of coronavirus restrictions.

  • However, with the closure of Scottish pubs, a potential "northern lockdown", and the reported introduction of a three-tier lockdown, under which hospitality and leisure businesses could be forced to close, the government has been under increasing pressure to provide financial assistance to businesses affected by these restrictions.

  • In response to this, the Expansion Scheme has been introduced to provide support to businesses which are legally required to close as a direct result of Coronavirus restrictions imposed by the government.

2. What are the dates of the Expansion Scheme?

  • The Expansion Scheme follows the same structure as the JSS. It will operate from 1 November 2020 (when the current furlough scheme ends) and will last for six months, until the end of April 2021.

  • Employers will be able to claim on a monthly basis in arrears, with the first payments due to be made in December 2020.

  • The government intends to review the Expansion Scheme in January 2021.

3. How much will be payable under the Expansion Scheme?

  • The government will pay a grant of two-thirds of the normal pay of each eligible employee (up to a limit of £2,100 per month).

  • The whole of the grant must be used to meet employees’ wage and pay costs.

  • The grant will be taxable and will be paid monthly in arrears.

4. What contributions will employers need to make?

  • Unlike the JSS, and the last few months of the furlough scheme, employers will not be required to contribute to the cost of employees’ salaries. However, employers will be required to cover employer National Insurance Contributions and automatic enrolment pension contributions, where applicable.

5. Which employers will be eligible?

  • In order to benefit from the Expansion Scheme, the following must apply:

    - The business must be legally required to close its premises as a result of restrictions set by one of the four governments in the UK. This includes premises restricted to delivery or collection only services from their premises (eg restaurants which normally offer table service but are only able to operate as a take-away).

    - Employees must cease work for a minimum of seven consecutive days.

  • It is not sufficient therefore, for a business to choose to shut (eg because of the impact or risk of coronavirus); it will only apply if that business is instructed to close its operations.

  • The Expansion Scheme will not apply where a business is required to close by local public health authorities as a result of a specific workplace outbreak.

  • The government’s expectation is that large companies using the Expansion Scheme will not be making capital distributions (eg dividend payments) whilst accessing the grant.

6. Which employees will be eligible?

  • The Expansion Scheme can only be used for employees who cannot work (whether paid or unpaid) for their employer as a result of coronavirus restrictions.

  • Employees must have ceased to work in order to be eligible (eg they cannot continue to work in some capacity or alternative location).

  • Although not mentioned in the Expansion Scheme factsheet, the government’s press release about the Expansion Scheme suggests that, in order to be eligible, employees must be employed, and an RTI submission made in respect of them, on or before 23 September 2020.

  • Significantly, employees cannot be made redundant or put on notice of redundancy during the period for which the employer is claiming the Expansion Scheme grant for that employee.

7. How does the Expansion Scheme interact with other government schemes?

  • Neither the employer nor the employee need to have previously used the furlough scheme in order to be eligible for the Expansion Scheme. It is therefore possible that employers will be able to claim a grant under the JSS or Expansion scheme for employees who were previously ineligible for the Coronavirus Job Retention Scheme (for example who joined a company prior to the qualifying date for the furlough scheme).

  • Once an employer’s business is permitted to reopen, that employer will no longer be able to claim under the Expansion Scheme. However, it will be able to claim under the JSS if it meets the criteria for that scheme (see here for more information).

  • Employers will still be able to claim the Job Retention Bonus, even if they claim a grant under the Expansion Scheme, and grants claimed under the JSS or Expansion Scheme can be used to help meet the minimum income threshold and other payment criteria for the Job Retention Bonus. Further details about the Job Retention Bonus can be found here.

  • In addition, the government is also increasing the cash grants available to businesses in England which are shut in local lockdowns. For more information, see here.

Commentary

The Chancellor is describing the Expansion Scheme as a "safety net" for businesses who are temporarily required to close their doors. The fact that no contributions to wage costs are required from employers means that it is certainly on one level more generous than the JSS, and so will hopefully be a lifeline for some businesses who would otherwise not survive a local lockdown. 

However, there is no denying that it does not go as far as the furlough scheme, and many are describing it as “insufficient”, with the Mayors of several northern cities urging MPs to reject the scheme. There are concerns that employers will still need to cover the cost of national insurance and pension contributions which, combined with the fact that there is six-week gap before any payments are made under the Expansion Scheme, may be a cost too far for businesses receiving no income. There is also no support for companies which are reliant on businesses that are instructed to close, but which will not benefit under the scheme themselves, for example, suppliers. 

The Expansion Scheme is also not as generous for employees as the current furlough scheme – employees will receive 67 per cent of their normal wage versus 80 per cent. Since many employees likely to be affect by business closures are in low paid jobs, there is a concern that this could leave many struggling to cope.

Given these criticisms, and the fact that local lockdowns are increasingly likely as the number of coronavirus cases continue to rise, it is likely that we have not seen the end of this debate. 

If you require further information about anything covered in this blog, please contact Rachel LewisAmy Wren, or your usual contact at the firm on +44 (0)20 3375 7000.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, October 2020

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