NOTE: read the new article regarding Extended Furlough Scheme, https://www.hrsolutions-uk.com/extended-furlough-scheme/ which was published on 2nd November 2020.
What is the Job Support Scheme (JSS)?
The Job Support Scheme (JSS) will see the Government directly supporting the wages of people in work, giving businesses the option to keep employees in jobs on shorter hours rather than making them redundant. It will also provide financial help to employers who become prohibited to operate because of Covid-19 restrictions.
How will it work?
For those working reduced hours
For the hours that an employee does not work, the Government will pay 61.67% of the hours not worked (capped at £1,541.75) and the employer will pay 5% of the hours not worked (capped at £125) per month. What this means is that the burden of responsibility for wages relating to unworked hours is shared three ways, Government, Employer, Employee.
For the employee, they must take a pay cut, they will essentially receive up to two-thirds of their usual wage; for the Employer, they will pay for the hours worked as well as contribute towards the hours not worked and for the Government, they will pay a larger contribution of the hours not worked as described above.
There is a reference salary that has been identified by the Government of £3,125 and by using this it can ensure that employees receive a minimum of at least 73% of their normal pay. The caps that are described above are based on this monthly reference salary.
Those business prohibited from operating
For those employers who are required to close because of covid-19 restrictions, the Government will pay two-thirds of employee salaries up to a maximum of £2,100 per month.
Who will qualify?
For those working reduced hours
To qualify for the Scheme, the employee must work at least 20% of their usual hours for the first three months. Thereafter, the Government will review whether to increase the minimum hours threshold.
It will not matter whether the employee has been previously furloughed. This is a separate scheme and open to all employees who are on the PAYE on or before 23 September 2020.
For larger organisations (with employees of over 250), eligibility will be determined by their turnover, but for SMEs, there will be no financial test.
The financial impact test for larger organisations will be to evidence their turnover has been impacted by showing that it has either remained equal to the previous year or has decreased.
Employees can be on any type of contract, including zero hours contract or temporary contracts.
Furthermore, organisations from both public and private sector that receive public funds for staff wages should not use the JSS to pay their staff. However, if organisations are not fully funded by public grants, they may be able to use the scheme.
For business closures
An employer will be eligible to claim for the JSS when their business closes in the following way:
• The primary workplace of the employee has been required to close legally as a direct result of Covid-19
• The employer has been instructed and has ceased work for a minimum period of 7 consecutive calendar days.
Further guidance on business closures is due to be published by the end of October.
Any practical considerations?
Tax and Pension Contributions
Deductions for tax and national insurance and any pension contributions will be deducted in the normal way, and the employer continues to make pension contributions.
Dividend Payments/Share Buybacks
There is an expectation that for large organisations using the scheme, they will not be making capital distributions (dividend payments, share buybacks) whilst using the scheme.
Reoccurring periods of reduced hours
Employees will be able to go on and off the scheme, which gives the employer flexibility in managing workload and business needs at this challenging time. The employee does not have to be working the same working pattern each month; however, each arrangement must be for a minimum of seven days.
Notice of Redundancy
There will also be a requirement that employers will not be able to make the employee redundant or serve notice of redundancy during the period for which the grant is being claimed.
Rate of Pay
Employees who have previously been furloughed will have their pay calculated based on the rate of pay before they were furloughed.
Employees will be entitled to take a period of annual leave under the scheme, and the company is also able to require the employee to take annual leave, following the serving of appropriate notice (for example; the length of notice to be given must be double the length of leave you wish the employee to take). However, we are awaiting clarity on how pay is to be treated during periods of annual leave when an employee is working reduced hours under this scheme.
It would be entirely reasonable to extend a new employee’s probation period whilst they are on JSS.
Under the scheme, employees can undertake voluntary training during the hours they are not working. This will be at the minimum wage level, so an employer will be required to top up the pay if during the training it falls below the NMW.
Emergency legislation will be brought in as soon as possible to ensure that working parents in receipt of parental pay do not lose out under the scheme.
Processing a claim
As with all other grants and loans, claims will be made online via the Government website. Whilst the scheme is available from 1 November 2020, claims cannot be made until 8 December 2020. The grants will be paid in arrears monthly.
Records must be maintained of the agreement for a period of 5 years and must show how many hours employees work and the number of usual hours that they are not working.
As with the Coronavirus Job Retention Scheme (Furlough), the HMRC will check claims to ensure there is no fraudulent use of the scheme.
Changes to the Contract of Employment
As with Furlough, placing the employee on the JSS must be agreed with the employee and the agreed changes to the employment contract must be put in writing. HMRC reserve the right to request a copy of the written agreement as part of their checks.
You can see the Government’s fact sheet at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/928761/JSS_Open_factsheet.pdf.
Further details on the JSS including forced business closures can be found at https://www.gov.uk/government/publications/the-job-support-scheme/the-job-support-scheme.