The Chancellor, Rishi Sunak recently announced a new Job Support Scheme to assist employers in keeping staff in their jobs during his speech on the government’s winter economy plan. The Job Support Scheme has been updated twice since it was originally announced, firstly on 12 October 2020 and most recently on 22 October 2020 when a significant increase in the contributions payable by the government was confirmed.
The Job Support Scheme
In this update, I set out the main principles of the scheme and the changes that have been made and answer the key questions that employers will be asking ahead of the implementation of the Job Support Scheme in November 2020.
What is the Job Support Scheme?
The Job Support Scheme is the government’s latest support package to assist businesses with keeping their staff employed. It involves the government providing contributions to wages of employees who, due to decreased demand as a consequence of the Coronavirus pandemic, cannot be offered their full hours of work by their employers.
In short, the scheme helps employers keep staff in work on shorter hours, rather than making them redundant.
What changes have been made to the Job Support Scheme since it was announced?
There have been two changes that have already been made to the scheme.
In recent weeks the government has been imposing restrictions on areas of the country where cases of Coronavirus have flared up. As part of the process, affected areas are placed within a 3 tiered system of restrictions, with tier 3 imposing the most onerous of these, including the closure of certain businesses.
On 12 October 2020 the Job Support Scheme was extended to provide additional support to businesses forced to close under tier 3 restrictions. Under the Job Support Closed Scheme the government confirmed it will pay two thirds of employees’ salary (or 67%) up to a maximum of £2,100 a month in this scenario.
This change lead to calls from businesses (particularly those within the hospitality sector), who are subject to tier 2 restrictions, that they would actually be better off in tier 3 restrictions where they are forced to close, invoking rights to receive additional government support. This has added to the tensions as to what tier an area is placed in.
The government addressed these calls on 22 October 2020 by confirming that the Job Support Scheme will be extended for all businesses (regardless of their applicable tier). Following this change employers will now be expected to pay 5% of the cost of unworked hours instead of the 33% originally announced. The minimum hours that employees have to work to be eligible has also reduced from 33% to 20% so those working just 1 day a week will be eligible.
Following these changes there are in effect, two schemes running alongside each other: the JSS Open, which applies to all businesses and the JSS Closed, which applies to those businesses in tier 3 areas only.
Is the Job Support Scheme replacing the furlough scheme entirely?
Yes, the Chancellor was very clear on this point within his original statement. He confirms that the new Job Support Scheme is different to the furlough scheme in that it will seek to protect “viable jobs” rather than jobs that only exist within the furlough scheme. It would seem the Chancellor is confirming that only viable jobs can now be saved and jobs that, in reality, no longer exist, cannot be protected going forward.
When does it start and how long will it last?
With the furlough scheme ending as planned on 31 October 2020, the new Job Support Scheme will commence from 1 November 2020 and will run for 6 months, ending on 30 April 2021.
However, as with its predecessor (the furlough scheme) the government will continue to monitor the impact of the Coronavirus and the restrictions in place to combat it, which could lead to an extension in future.
How does the JSS open work?
In summary the latest arrangements under the Job Support Scheme are:
- an employee must work at least 20% of their normal contractual hours and their employer must pay for those hours worked. Effectively, this means a full-time employee only has to work 1 day of their contractual hours (this is different to the furlough scheme where an employee did not have to work any of their hours to be eligible);
- for the hours not worked, the government will make a contribution of 62% whilst the employer will only be obliged to make a contribution of 5% of the employee’s equivalent salary;
- the level of grant will be calculated based on an employee’s usual salary and capped at £1,541.75 per month (this cap is based on a reference salary of £3,125 per month); and
- employers will be required to pay national insurance and pension contributions.
Under these principles an employee can get a minimum of 73% of their full salary. It is clear that employers will not be obliged or expected to top up beyond their 5% contribution for those hours not worked, meaning an employee is likely to lose out on the excess 1/3 of their salary.
The government will also provide cash grants of up to £2,100 per month for businesses subject to tier 2 restrictions who may be adversely impacted by the restrictions, such grants are expected to be primarily available for businesses in the hospitality, accommodation and leisure sector. These grants will be applied retrospectively for those businesses that have already been subject to new restrictions.
These are significant changes to the initial plans for the Job Support Scheme announced last month which required an employee to work at least 1/3 of their contractual hours, with employers contributing a minimum of 55% of an employees salary compared to the government’s maximum contribution of 22%. The changed plans should help employers keep more people in their roles, although some employers may have already made decisions on the initial Job Support Scheme principles.
As with the initial plans, what is still unclear is whether employers can voluntarily top up their employees’ wages, if they wish to do so (as many have been doing under the furlough scheme). Interestingly, the preceding government fact sheet contained the following curious statement:
“our expectation is that employers cannot top up their employees’ wages above the two-thirds contribution to hours not worked at their own expense.”
It is currently unclear whether this statement means employers will be legally prevented from topping up an employee’s remaining pay for the hours not worked or whether the government is simply not expecting employers to do so when claiming through the scheme. It would seem more likely that the latter is true; the government simply does not believe an employer can afford to top up those hours, rather than explicitly barring employers from doing so. This is a technical point that will, hopefully, be addressed in the forthcoming guidance.
How does the JSS Closed work?
There is additional government support for businesses subject to tier 3 restrictions which legally require them to close. This initiative is predominately aimed at companies in the hospitality, accommodation and leisure sectors which cannot open due to the level of restrictions imposed.
In this situation the following principles apply:
- the government will cover 67% of employee wages up to a maximum of £2,100 per employee per month;
- employers will not have to contribute to employee wages; and
- smaller companies will not contribute to any employee costs, whilst larger companies only contributing around 5% of employee costs in the form of national insurance and pension contributions.
An additional government grant of up to £3000 per month will also be available for these business forced to shut under the tier 3 restrictions.
Who is eligible?
All small and medium sized enterprises (SMEs) are eligible. Larger businesses will also be eligible if, but only if, they can show that their turnover has fallen since the Coronavirus pandemic.
The new Job Support Scheme is open to all employers, and will not preclude businesses who had not previously taken up the grants offered under the furlough scheme.
The scheme runs alongside the Jobs Retention Bonus Scheme. This means employers can claim under the Job Support Scheme as well as claiming the £1000 bonus for every furloughed employee they keep on until the start of February 2021 offered under the Jobs Retention Bonus Scheme (provided they meet the eligibility requirements).
What was announced regarding self employed grants?
The Chancellor confirmed that the self-employed grant is being extended on similar terms and conditions to the new Job Support Scheme in order to assist self-employed individuals.
Under the extension to the scheme, an initial taxable grant will be provided to those who are currently eligible for Self Employment Income Support Scheme (SEISS) and are continuing to actively trade but face reduced demand due to Coronavirus. The initial lump sum will cover three months’ worth of profits for the period from November to the end of January next year. This is worth 40% of average monthly profits, up to a total of £3,750. This contribution has doubled since the original plans were unveiled in the winter economic outlook last month.
Moving forward, an additional second grant, which the government have stressed may be adjusted in response to changing circumstances, will be available for self-employed individuals to cover the period from February 2021 to the end of April – ensuring our support continues right through to next year.
Can I change an employee’s hours whilst they are on the Job Support Scheme?
Yes, employees can cycle on and off the scheme and therefore they do not have to be placed on the same working pattern each month i.e. they do not have to work the same number of hours each month.
However, each short-time working arrangement has to cover a minimum period of 7 days in order to make a claim. Therefore, it may be beneficial for employers to apply some degree of certainty as otherwise it may complicate the amount they claim each week.
Can I make employees redundant whilst they are on the Job Support Scheme?
No, the Job Support Scheme is different to the furlough scheme which allowed employers to still claim for an employee’s salary under the scheme whilst they worked their notice period. Under the Job Support Scheme, employers cannot make employees redundant or put them on notice of redundancy during a period within which their employer is claiming a grant for their employment. This means employers cannot fund notice pay through the scheme, any notice pay would have to be paid by the employer in full regardless of the hours the employee was working. It follows that, if employers wish to make an employer redundant, they must remove them from the Job Support Scheme before they have given the employee notice of redundancy.
Do I need an agreement and an employee’s consent to place them on the Job Support Scheme?
The government has now confirmed that employers will need to agree the temporary working arrangement for shorter hours in writing with employees they intend to place on the Job Support Scheme. This was the position under the furlough scheme, as well as where employers wanted to bring back an employee on a flexible furlough arrangement.
Any arrangement under the Job Support Scheme will be considered a “new” agreement and will be a separate agreement from the initial furlough communications between employer and employee (if the employee in question was on furlough).
On this basis, it would be advisable for employers to telephone the employee to set out their intentions for a Job Support Scheme arrangement before following up with a new letter to the employee, setting out (at the very least) the basic details of the arrangement such as which hours the employee is now required to work and which hours an employee will not be required to work.
However, employers should bear in mind that further government guidance on the Job Support Scheme will be published nearer to the commencement of the scheme. We therefore recommend employers should await the release of any government guidance before making any formal arrangements or decisions. We will provide further updates as and when further guidance is released.
If you have any questions or would like any assistance in respect of the new Job Support Scheme please please get in touch with a member of the Employment team.
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This blog was co-written by Fred Chandler, Trainee Solicitor and Claire Merritt, Partner