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Chancellor announces new Job Support Scheme

  • United Kingdom
  • Employment law

24-09-2020

Almost exactly six months from the introduction of the Coronavirus Job Retention Scheme (CJRS) in March 2020, the Government has today announced that it is introducing a new wage subsidy scheme, the Job Support Scheme (“JSS”), to commence once CJRS ends on 31 October 2020. The Government has been resolute that CJRS, introduced at a time of national lockdown, must end. However, the resurgence of Covid-19 and its continued, significant impact on employment, has led to an acceptance that financial support from Government for businesses and their workers continues to be needed -albeit on a new, evolved basis.

The Job Support Scheme in overview

Much of the fine detail of how JSS will operate is awaited and will be critical to business decisions, going forwards. However, broadly, the scheme is aimed at employers for whom employees are able to undertake some work (a minimum of 1/3 of their usual hours). The Government, with the employer, will top up a percentage of the (up to) 2/3 shortfall in working hours, subject to a cap of £697.92 per month. Larger businesses may participate but only upon demonstrating they have been adversely impacted by COVID-19 (e.g. loss of turnover).

A Government Factsheet is available

Start Date

JSS will commence from 1 November 2020 and will run for a period of 6 months.

Which employers can access JSS?

The JSS is open to all employers with a UK bank account and a UK PAYE scheme. However, while all small and medium-sized enterprises (SMEs) will be eligible, large businesses (“large business” being ordinarily determined by thresholds for turnover, balance sheet total and the average number of employees in a relevant financial period but likely to exclude public sector entities) will be required to demonstrate that their business has been adversely affected by COVID-19. According to the Government, it “expects that large employers will not be making capital distributions (such as dividends or share buybacks), while using the scheme”.

The threshold definition for an SME will be set out in further guidance. As an indication of what it may look like, the IR35 legislation uses the following criterion for a small company (2 or more to be met):
Turnover - Not more than £10.2 million
Balance sheet total - Not more than 5.1 million
Number of employees - Not more than 50

There are, apparently, no additional restrictions (as some had urged), such as a requirement to retain staff for the duration of the scheme (save that they must not be made redundant or under notice of redundancy to benefit), to provide or commit to certain levels of training and investment, research and development spending, not to have above a certain amount of liquid cash etc.

Businesses are eligible even if they have not previously used the CJRS. This means that employers can access the JSS for ‘new staff (i.e., those hired since March but before 24 September). Despite speculation to the contrary, it appears that employers retaining furloughed staff on shorter hours under the new JSS can also claim the CJRS Retention Bonus next year.

Which employees are eligible?

Re-iterating that no Government scheme can save all jobs, the Chancellor acknowledged the limitations of JSS and its focus upon preserving what are deemed “viable jobs”. Within that context, there was no reference to access to the scheme being limited to particular job sectors or to specific roles. Accordingly, subject to any subsequent clarifications, JSS is likely to be accessible to any employees working within small, medium and some larger companies, provided they have been engaged before 24 September 2020 and continue to work at least 1/3 of their usual contracted hours (presumably, for variable hours employees or workers, this will be an average over a period or the same hours as in the equivalent month in 2019/20). This includes employees who have not previously been furloughed. Employees cannot be made redundant or put on notice of redundancy during the period within which their employer is claiming the grant for that employee.

The Government has said that, although during the first three months of JSS the employee must work at least 33% of their usual hours, after this period, it will consider whether to increase this minimum hours threshold.

It is relevant to note too that employees will be able to cycle on and off the scheme and do not have to be working the same pattern each month, but each short-time working arrangement must cover a minimum period of seven days.

Employees are to be informed directly by HMRC of the claim made in respect of them – clearly a measure aimed at limiting fraud which to a degree the CJRS has been subject to.

How much can be claimed under JSS?

As the new JSS is intended to support only "viable" jobs, eligibility will depend upon an employee working, and being paid by their employer, for a minimum of 33% of their usual hours. For the remaining usual hours which are not worked (ie up to 2/3 usual hours), the employer and the Government will each pay one third of the employee’s usual pay, with the Government contribution capped at £697.92 per month.

In other words, in addition to wage costs during 1/3 or more worked hours, employers may be additionally liable for 1/3 of the remaining wage cost during unworked hours (or 5/9 of usual pay). As a result, where the Government’s contribution has not been capped, employees using the scheme will stand to receive at least 77% of their usual pay.

For those wondering how this figure of 77% is arrived at, the calculation is as follows: the employee works 1/3 usual hours (fully paid by the employer); for the 2/3 hours not being worked, wages for 1/3 of this will be covered by their employer and another 1/3 by the Government’s contribution, leaving the remaining 1/3 unpaid i.e. 1/3 + (1/3 x 2/3 = 2/9) + (1/3 x 2/3 = 2/9) = 7/9 or 0.7777... = 77%. So, in effect, the Government’s support will be for a maximum of 22% of the employee’s usual wages, with the employer picking up 55% and the employee incurring a potential reduction in wages of the remaining 23%.

The JSS grant will not cover Class 1 employer NICs or pension contributions, although these contributions will remain payable by the employer.

Importantly, employees who have previously been furloughed will have their underlying usual pay and/or hours used to calculate usual wages, not the amount they were paid whilst on furlough.

Practical steps for employers now

Just as the CJRS required, it is important to stress that, unless employers have a contractual right to reduce working hours, new contractual terms will need to be negotiated and agreed with staff (or where relevant, recognised unions). Appropriately drafted Furlough letters may already achieve this (or at least provide the starting point) but, once further details of JSS are available, we will be assisting clients with such communications. The requirement for at least of a third of normal hours is a significant change – there must be a material amount of work available to do. Therefore, employers in the sectors which remain virtually or totally shut down will not be able to access the scheme for many, if any, of their staff. Employers with reduced hours to do will have to consider whether they would prefer to have a smaller compliment working more or less full hours or to share the ‘pain’ across teams. Of course, this is two sided and employees may leave if they can obtain more hours pay elsewhere (accepting the increasing pressure in the job market).

Comment

In the face of an ending of CJRS, there is no doubting that this latest intervention from Government will be welcomed. As the Chancellor was at pains to express, there is no easy response to the pandemic, which now appears to be an enduring factor of life. The JSS emanates from Government perception of an appropriate balance between protecting the economy and UK jobs. The degree to which this intervention will achieve its objective will be appraised in the months to come. For now, the fine detail of how the scheme will operate is urgently awaited by employers to better-inform the extremely difficult commercial decisions so many are facing.

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