Chancellor of the Exchequer Rishi Sunak has significantly expanded the Job Support Scheme (JSS) after objections from businesses, particularly those in Tier 2 areas, that they are facing massively reduced demand but less support from the government than Tier 3 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 employers have little time to take the steps needed to take advantage of the scheme before it takes effect on 1 November 2020.
The original JSS (for further details please see "New Job Support Scheme to replace furlough scheme announced"), 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 that:
- they worked at least one-third of their usual hours; and
- their employer contributed an additional one-third of their usual pay for hours not worked.
The government later announced that the JSS would be extended for businesses required to close entirely due to tighter local or national restrictions. This announcement came around the time that the government introduced its new three-tier COVID-19 alert levels for England, under which there are different levels of local lockdown. Under this extension to the scheme, the government stated that it would pay two-thirds of employees' wages (subject to a cap of £2,100 per 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 2 areas that face significantly reduced demand but are not legally required to close, the chancellor has 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 the JSS Closed. The schemes will start from 1 November 2020 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.
Under the revised JSS Open scheme, the minimum number of hours that employees must work has been reduced from 33% to 20%, for which employers must pay the employee's salary as normal.
The amount that employers must contribute in lieu of wages for unworked hours has also been reduced from 33% to 5% (capped at £125 per month).
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 the JSS Open scheme will receive at least 73% of their normal pay, where their usual monthly wages do not exceed £3,125. Employers can choose to top this up further.
This is more generous than the JSS as originally announced on 24 September 2020, but less so than the original Coronavirus Job Retention Scheme (ie, the furlough scheme), which initially subsidised up to 80% of wages, up to a maximum of £2,500 a month (although in the past two months, employers have had to make increasing contributions and the subsidy has been reduced).
The government has published a factsheet and a policy paper which provide further details on both the JSS Open and the JSS Closed schemes.
While much is known about how the scheme will work,(1) there are still significant omissions in the government's guidance and areas in which more clarity is urgently needed. The policy paper states that further guidance will be available by the end of October 2020, which is too late for businesses wanting to access the scheme from the beginning of November 2020. Nonetheless, there is some welcome clarity on a few points.
Financial impact test for large employers
The JSS Open scheme is not limited to any sectors or settings; it is available to any employers with:
- eligible employees;
- a UK bank account; and
- a UK pay-as-you-earn scheme.
However, the JSS Open scheme can be used by 'large employers' only if they meet a financial impact test demonstrating that their income has stayed flat or been adversely affected by COVID-19. Small and medium-sized enterprises will not have to meet any financial test.
The government has now stated that 'large employers' means those that had 250 or more employees on their payroll on 23 September 2020. Such employers can show the required adverse impact if their turnover has remained equal or fallen compared with the previous year, based on value added tax returns.
The government has now stated that employers using the scheme can top up employees' pay if they wish, something that 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 towards 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.(2) To qualify for the bonus, the employee must:
- remain continuously employed until the end of January 2021; and
- earn a minimum of £1,560 (gross) between 6 November 2020 and 5 February 2021. The JSS grant can count towards that minimum income threshold.
Employers can claim under both schemes for different employees
The government states that employers can claim under both the JSS Open and the JSS Closed schemes at the same time, but not in relation to the same employees. This seems to be aimed at employers that have had one part of their business subject to a compulsory closure and another part not (eg, bars or gyms in a hotel).
Despite some further information, there are still a number of outstanding issues.
Must employees work their normal work?
Employees can undertake training during their 20% working hours. However, if they are not undertaking training, must they be performing their normal work? Now that the government contribution is more generous, 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.
Further conditions for employee eligibility
The policy paper states that more details regarding employee eligibility will be available in further guidance before the end of October 2020.
Further guidance on calculations
The calculations given in the policy paper for the JSS Open scheme are "indicative" and further details of the necessary calculations will likely be released at the end of October 2020. Details of how 'reference salary' and 'usual hours' should be calculated for the JSS Closed scheme are also awaited.
What goes into the JSS Open scheme employee agreement?
Employers must have a written agreement in place with affected employees. The policy paper states that further guidance on what to include in this agreement will be forthcoming by the end of October 2020.
Employers that 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 have no time to lose if they are to put arrangements in place before 1 November 2020 and would be well advised to instigate discussions with employees and, where applicable, recognised unions without delay.
In this context, employers 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 entitled to be paid only for the hours that 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 that 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. Employees cannot be made redundant or put on notice of redundancy during the period in which their employer is claiming a JSS grant for that employee. Therefore, employers will 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 employers of using the JSS will be lower.
Employers should consider whether they have enough time before 1 November 2020 to make the necessary arrangements. For those that think they will not 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 while they finalise planning.
Endnotes
(1) For further information please see "Coronavirus Job Support Scheme – FAQs for employers".
(2) For further information please see "Government to pay bonus for retaining furloughed workers".
