The Chancellor of the Exchequer yesterday announced a further revamp of the Job Support Scheme (JSS), the financial support scheme for employers that will come into force on 1 November, when existing furlough arrangements come to an end. Confusingly, there will now be two separate arrangements, with differing terms – JSS Open and JSS Closed. JSS Open will apply to certain (although not all) businesses which remain operational but which are only able to provide part-time work opportunities for staff. JSS Closed will apply to businesses that are forced to close as a result of Covid-19 restrictions.
In its original form (see here for further details), it was intended that employers would only be eligible to claim payments under the JSS for employees working at least one third of their normal working hours. For the hours not worked, the employer and the Government would each pay one third of the wages (with the employee bearing the additional third - as foregone pay). The employer would also have been required to pay employer NICs and compulsory pension contributions. The intended cost for employers would have been materially greater than under the current furlough scheme – amounting to more than 55% of the normal wage bill for an employee on a third of their hours. Many employers were concerned that the cost of these arrangements would be unaffordable and they would need to make redundancies instead of keeping people on.
The Government has now revised its approach in the face of the second wave of Covid-19, and the cost for the employer of operating JSS will now be materially reduced. However, although JSS Open and Closed will be available to all SMEs, JSS Open cannot be accessed by all large employers.
The key features of JSS Open and JSS Closed are summarised below.
The first change announced by the Chancellor (on 9 October) was the introduction of JSS Closed. This applies to businesses that are required to close under Covid-19 restrictions imposed by any of the four governments in the UK.
Under JSS Closed, the Government will support the wage costs of employees who have been instructed to cease work in closed premises (although not where the closure arises as a result of a specific workplace Covid-19 outbreak).
Each employee who cannot work due to these restrictions will receive two thirds of their normal pay, paid by the employer and funded by the Government, subject to a maximum of £2,083.33 per month. The employer will therefore be reimbursed for the full amount of any JSS Closed payments (although it will be required to pay employer NICs and compulsory pension contributions on the amounts paid). The employer will be free to top up the portion of normal pay funded by the Government.
To give effect to revised working arrangements applicable during JSS Closed periods, employers whose premises are closed will be required to make changes to employees’ employment contracts by written agreement (or written collective agreement, where relevant), and maintain records relating to the terms of these arrangements for each employee.
The Government has indicated that further guidance on the conditions for eligibility for JSS Closed will be published by the end of October.
The Chancellor has now also announced revised arrangements in the form of JSS Open for businesses that can operate safely but are facing lower demand, enabling employees to be retained on shorter hours.
What changes have now been announced under JSS Open?
The principal differences from the original JSS proposals are as follows:
- employers will now be able to claim under JSS Open for employees working at least 20% of their normal hours rather than 33%, as originally envisaged;
- while employers will still be required to pay employees for hours worked as normal, they will only be required to pay for 5% of the unworked hours. The expectation is that the employee will continue to forego pay for a third of the unworked hours. The Government will make up the difference – meaning that it will meet the cost of almost 62% of pay for unworked hours;
- however the Government subsidy will continue to be capped. The cap will be set at £1,541.75 per month (which the Government has suggested equates to a cap on wages of £3,125 per month/£37,500 per year);
- subject to the cap, employees will therefore receive at least 73% of their normal pay for working a minimum of 20% of their working hours.
As with JSS Closed, employers will be required to make changes to employees’ employment contracts by written agreement (or written collective agreement, where relevant), and maintain records relating to the terms of these arrangements for each employee.
A worked example to show how JSS Open will work
As an example, if employee A, who would have earned £2,000 a month for working their normal hours instead works part-time from November for 20% of those hours (in respect of which they are being paid as normal), the effect of the revised JSS will be as follows (the numbers below are rounded to the nearest pound):
- A will be paid £400 by his employer (being his pay for the work he is doing);
- A will also be paid a further £80 by his employer (being 5% of the pay referable to his unworked normal hours);
- A will be paid £987 by the Government (this amount will be paid by the employer but will be funded by the Government);
- A will be required to forego the remaining £533.
On this example, the employer will bear £480 of the £1,467 payable to the employee (under the original JSS proposal, the employer contribution would have been £933). In addition, the employer will be required to pay employer NICs and minimum pension contributions on the full amount paid to the employee.
The cost burden for the employer is therefore materially reduced when compared to the Chancellor’s initial proposals.
Conditions for employers wishing to claim under JSS Open
Not all companies will be eligible to participate in JSS Open. Although there will be no restrictions on the participation of SMEs, large employers (any employer with 250 or more employees) will have to meet a financial impact test. Under the financial impact test a large employer will only be able to benefit from JSS Open if their turnover has stayed level or is lower now than compared to last year.
The financial impact test will be measured by reference to VAT returns. Large employers submitting quarterly VAT returns will be required to compare the total sales figures on their VAT return filed between 31 August and 7 November 2020 with the total sales figure from the same quarter in 2019. Those employers filing monthly VAT returns will be expected to compare the three consecutive months which are due to be filed and paid by 7 November 2020 with the same period in 2019. Large employers who are part of a VAT group will be expected to use the turnover figures for the VAT group.
Further conditions for employers wishing to claim under JSS Closed or JSS Open
Employers cannot claim for an employee who has been made redundant or is serving a contractual or statutory notice period during a relevant claim period.
Large employers and their corporate groups are not expected to make capital distributions to shareholders while they are claiming grants under JSS Closed or JSS Open. This will include a dividend, charge, distribution or equivalent payment by a partnership to its partners. The Government has confirmed that it does not intend to impose a formal legally binding condition in relation to the non-payment of shareholder distributions but “encourages business to reflect on their responsibilities”.
Can employers claim under both JSS Open and JSS Closed?
Yes, it will be possible for employers to claim grants under both JSS Open and JSS Closed at the same time, provided the relevant eligibility criteria are satisfied. Clearly, simultaneous claims cannot be made in respect of the same employee.
Duration of JSS Open and JSS Closed
JSS Open and JSS Closed will become operational from 1 November 2020, when current furlough arrangements end, and is scheduled to run for 6 months, until the end of April 2021. The terms of the JSS arrangements will be reviewed in January.
Further guidance is scheduled to be published on JSS Open and JSS Closed by the end of October. If you have any questions on how JSS may apply to you, please contact your usual Freshfields contact.