It’s been a month since the Job Support Scheme (JSS) was first announced, and just a week until the original furlough scheme ends and the JSS is due to start. The JSS has already been expanded once to provide support to businesses legally required to close as result of restrictions (which we reported on here). Now, in the midst of criticism that the package on offer was not enough to prevent large-scale redundancies, the Chancellor has changed the scheme again and announced greater financial support for those struggling because of decreased demand caused by coronavirus.
The government has also published a Policy Paper on the Job Support Scheme, giving further details on eligibility criteria, conditions and timescales for making claims under the JSS.
In this blog, we compare the support now being offered by the different strands of the JSS and look at the details involved.
How the different schemes compare
The original JSS required employees to work and be paid for at least 33 per cent of their usual hours. For any hours not worked, employees would be paid for two-thirds of those hours, with employers and the government both contributing a third of that, or 22 per cent each. Our summary of the original JSS can be found here.
This scheme has now effectively been replaced and instead divided into two different schemes which will apply depending on the situation of the employer:
- JSS Open – This scheme is new and is significantly more generous to employers than the original scheme it is replacing. It is aimed at employers who are facing decreased demand as a result of coronavirus. To be eligible employees are only required to work 20 per cent of their normal hours, for which employers should pay them their normal pay in full. For hours not worked, the cost will effectively be split three ways: the government will contribute 61.67 per cent of normal pay; employers will contribute 5 per cent; and the remainder will be unpaid. Government and employer contributions will both be subject to a cap. See below for further details.
- JSS Closed – This is the new name for the expansion of the JSS announced by the government a few weeks ago. The details of the scheme have not changed: the government will pay a grant of two-thirds of the normal pay of each eligible employee who is unable to work because their employer is legally required to close as a direct result of coronavirus restrictions. There is no requirement for employees to do any work and employers are not required to contribute towards wage costs. Further details can be found in our Q&A on JSS Closed.
Criteria for JSS as a whole
The government’s new Policy Paper on the JSS provides employers with more details about JSS Open and JSS Closed, including conditions that apply to employers claiming under either strand. Here is a summary of the main points that are relevant to both:
- The JSS will open on 1 November 2020 and run for 6 months, until 30 April 2021.
- Employers will be able to make claims online from 8 December 2020. Grants will be payable in arrears, and so the first claim will cover salary for pay periods ending and paid in November. A similar pattern will then continue monthly until the end of the scheme. The grant must only be used to reimburse the employer for sums they have already paid to the employee.
- Employers can only claim for employees who were on their PAYE payroll between 6 April and 23 September (inclusive). Employers can claim for employees who left employment after 23 September but were subsequently rehired. Employees do not need to have been furloughed under the Coronavirus Job Retention Scheme to be eligible.
- An individual will be an employee for the purposes of this scheme if they are treated as such for income tax purposes, and can be on any type of contract, eg including zero hours or temporary contracts.
- Employers should discuss any temporary working arrangements under the JSS with staff (including instructions to cease working) and make any changes to their employment contract by written agreement.
- The JSS grant will not cover the cost of National Insurance Contributions or pension contributions. These remain payable by the employer.
- A claim cannot be made for an employee who is redundant or serving a contractual or statutory notice period during the claim period.
- The government expects that large employers (with 250 or more employees) will not be making capital distributions (eg dividend payments) whilst claiming under the JSS.
- Employers claiming under either JSS Open or Closed may still claim the Job Retention Bonus, provided the relevant eligibility criteria are met. Further details on this can be found here.
- An employer can claim grants under JSS Open and JSS Closed at the same time for different employees, but, not surprisingly, cannot claim for a single employee under both schemes at the same time.
Additional criteria will apply depending on whether the employer is claiming a JSS Open grant or a JSS Closed grant.
The details of the JSS Closed scheme have not been changed by the latest government announcement, and remain the same as those set out in our blog on the expansion of the JSS (although further details on how to carry out salary calculations are expected at the end of the month).
The rest of this blog therefore looks at the detail of the new JSS Open scheme.
Details of JSS Open
The aim of JSS Open is to support employers who can continue to operate safely, but face reduced demand as a result of coronavirus and so may need extra support to retain employees on shorter hours, rather than make them redundant.
- The JSS Open grant will work as follows:
Employees Employers The Government Have to work a minimum of 20 per cent of their usual hours.
Will receive at least 73 per cent of their usual wages, where these do not exceed the reference salary (see below).
27 per cent of their usual hours will be unpaid.
Pay employees their usual wage for hours worked (at least 20 per cent). No grant is available for this time.
Pay 5 per cent of non-worked hours, capped at £125 per month.
Pay National Insurance Contributions and pension contributions in full.
Can choose to top up an employee’s wages at their own discretion.
Will provide a grant of 61.67 per cent of non-worked hours, capped at £1,541.75 per month.
- The caps on payments for non-worked hours mentioned above are based on a monthly “reference salary” of £3,125. Like the original furlough scheme, when calculating an employee’s salary, employers should include regular payments which they are obliged to make (such as regular wages and non-discretionary payments, like overtime). The Policy Paper sets out details of what should be included, as well as example calculations.
- The Policy Paper also contains examples of how to work out an employee’s usual working hours under JSS Open, depending on whether their hours are fixed or variable – again, this follows a similar methodology to the original furlough scheme. Example calculations are also included in the JSS Open Factsheet.
- Employees will be able to come on and off JSS Open, but any period of short time working under the scheme must be for a minimum of seven consecutive days.
- Although JSS Open will be available to employers in all coronavirus tiers, there is a financial impact test for large employers (with 250 or more employees) who will only qualify for a grant if they can show that their income has been impacted due to coronavirus. JSS Open will only be available to large employers whose turnover has remained level or decreased compared to the previous year. This is different to JSS Closed, where no financial impact test is required and the only criteria is that business premises have been legally required to close. The government’s Policy Paper sets out examples of how to work out the financial impact test.
The original JSS was highly criticised for not going far enough to protect jobs, particularly because the level of the employer contribution for hours not-worked did not seem to make it cost effective to continue the employment of staff on short-time hours. The introduction of JSS Open marks a significant step change, with a reduction in minimum employer contributions from 55 per cent overall to 25 per cent. Although sadly this change may have come too late for some employees, already made redundant in anticipation of the end of the furlough scheme, this could nevertheless have a considerable impact on job retention.
Employers will be able to claim under either JSS scheme from 8 December 2020. We are told that further guidance on the steps that employers will need to take to calculate and make a JSS claim will be published by the end of October. So watch this space for more details.
If you require further information about anything covered in this blog, please contact Kathleen Heycock, Amy 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