On 24 September, Chancellor Rishi Sunak unveiled a new chapter in the government’s efforts to protect jobs in the UK: the Job Support Scheme (JSS).
However, as with all new legislation introduced as part of the COVID-19 response, there are many moving parts, and consequently many questions still to be answered.
In our recent webinar, The Job Support Scheme: A lifeline for employers?, our Employment Law Director, James Tamm, attempted to provide some clarity based on what we know so far. Here are some of the fundamental questions employers have about how this new iteration of the furlough scheme works.
What is the Job Support Scheme and how does it work?
The JSS is a scheme to protect “viable” jobs in businesses where demand will be depressed in the winter months due to COVID-19. This will allow employers to keep people employed by paying for any and all the time they work, with the burden of hours they’ve not worked split between the employer and the government.
The employer and the government will pay two-thirds of the hours not worked, split equally between them, with the government contribution subject to a cap. To be eligible, employees must work a minimum of 33% of their hours and in that case they would earn 77% of their normal wages.
Employers who use the scheme will also still be able to claim the Job Retention Bonus, a one-off payment of £1,000 per furloughed employee, as long as the employee remains employed and is brought off furlough before the end of January 2021.
The scheme will be open from 1 November 2020, and will run for six months.
To be eligible, employers must have a UK bank account and a UK PAYE system. There is no requirement to have previously made a claim under the furlough scheme.
For small and medium employers, there are no further entry requirements. The position is different for “large” businesses, who can only use the scheme if they pass a financial assessment test. The scheme will only be available to large employers whose turnover has been adversely affected by COVID-19.
There’s also an expectation that large employers will not be making any capital distributions whilst using the scheme, for example dividend payouts to shareholders.
What we don’t know at this stage is what constitutes a “large” employer, or what sort of downturn in turnover will be required for them to be eligible.
Meanwhile, in order for employees to eligible, they will need to be on the employer’s payroll on or before 23 September. They must also work at least 33% of their usual hours.
Working one-third of usual hours will demonstrate that the job is “viable”. However, the scheme offers no support to those who can’t work at all.
Employers should note that there is no requirement for the new scheme to be used with employees who were previously furloughed.
The guidance also makes it clear that employees can come on and off the scheme as the months progress. In addition, working patterns can change, provided that they don’t drop below the minimum threshold.
However, each short-term working arrangement must cover a minimum period of seven days.
What does the grant cover?
Though the employer and the government will pay two-thirds of the hours not worked between them, the government’s contribution will be capped at £697.72 per month. It’s also important to note that the money is paid by the government in arrears.
The government’s contribution is towards wages only. It does not cover National Insurance contributions or pension contributions, which the employer will remain liable for.
No detail has been provided yet as to how an employee’s usual wages will be calculated, but we expect it to be along the same lines as the furlough scheme. What we do know is that the calculation will be for normal, contractual salary amounts.
Finally, the guidance says that the employers cannot top up pay to 100% and still use the scheme – another big difference from furlough.
What are reduced hours?
The employee must be working at least one-third of their usual hours to qualify for this scheme. For time worked, the employer should pay, in full, their normal contractual wage. For time not worked, the employee will be paid two-thirds of their remaining usual wage.
It’s important to note that employees can not be made redundant or put on notice of redundancy during the period within which the employer is claiming the grant. This is another big departure from the furlough scheme.
In practice, this means that if you put an employee on the scheme during November, you could not serve notice of redundancy on them until December. And if you did that, you couldn’t claim any Job Support Scheme grant for the month of December.
It’s not clear at this stage whether you can consult about redundancy whilst claiming the grant.
How do you claim?
From December, employers will be able to make a claim through a portal on GOV.UK.
Employers must agree new short-term working arrangements with their staff. It’s likely to involve a change of contract, which needs to be done by agreement, and the employee needs to be notified in writing.
HMRC can then request a copy of this if required.
What are the potential issues?
Despite its aims, the new Job Support Scheme is not quite the lifeline employers had hoped. In fact, the highest amount anyone can claim under the scheme still constitutes a 66% reduction compared to the furlough scheme.
What’s more, the scheme arguably makes little sense for employers, as it requires them to pay someone 55% of their salary for them to work 33% of the time.
Another big concern is around the concept of a “viable job”. Once again, this does not address the sectors that are experiencing depressed demand.
A similar issue surrounds those who are clinically extremely vulnerable. Many of those people have remained furloughed in the hope that the situation may have improved enough to encourage them to return to work by the end of November. However, given the recent surge in cases, the virus will be even more prevalent by then and there’s nothing to support these individuals under this new scheme.
There’s also an issue with timing. Given the requirement to consult for at least 45 days for a proposal to make 100-plus redundancies, the Chancellor’s announcement came too late, as those processes will have started in the middle of October to coincide with the end of the furlough scheme.
Part of a fair consultation process involves considering alternatives to redundancy, and this would certainly include utilising the Job Support Scheme. This may well mean having to pause the consultation process.
Finally, given that the scheme pays out in arrears, this may hamper an employer who needs to make redundancies at short notice. They may be forced into paying employees inflated salaries without any way to recover this should the need for urgent job losses arise.
For employers, now is a good time to start assessing which members of your workforce you can claim for, how many hours need to be worked, and if it’s even economically viable to utilise the scheme.
Think about how you would bring about the change in hours. It’s likely that most employees will be willing to agree to reduced hours as an alternative to redundancy, but if you have individuals who refuse, you could be forced to look at dismissal and re-engagement. If so, this might involve some collective consultation, which will be another time factor to build into your plans.