After months of negotiations, the UK and European Union came to a withdrawal agreement on Christmas Eve, just before the end of the Brexit transition period…
(Information updated on 28 September)
The Chancellor announced on 24 September further support for jobs, with a new Job Support Scheme (JSS) to be introduced from 1 November which will run for six months.
The JSS has been designed to avoid the cliff edge in job losses when the job retention scheme (CJRS) comes to an end on 31 October. While we await further detail on the JSS, I have set out below the details we have and some initial thoughts on the scheme and key unanswered questions.
What is the Job Support Scheme and how will it work?
Unlike the CJRS, the JSS is intended to support jobs which will be viable in the long term. It has been designed to support employees who are temporarily working shorter hours because of the recently announced government measures to control the spread of coronavirus. Support will be provided to employers via a government grant towards an employee’s wages.
Conditions of the Scheme
To be entitled to support under the JSS, the employee must continue to work at least a third of their usual hours, with the reduced hours of work covering a minimum seven day period to qualify. This requirement is designed to demonstrate that the job is viable.
The scheme will be open to all employers, but if large employers wish to make a grant claim, they will need to demonstrate that they have been adversely impacted by Covid-19.
It is worth noting that the Chancellor stated in his statement to the House of Commons, that large employers should have experienced a fall in turnover to be able to claim – we wait to see whether this makes its way into the detailed guidance.
Large companies will also be unable to make dividend distributions or undertake share buybacks while making a claim under the scheme.
The availability of the scheme is not limited to those employees who have been included on a CJRS claim by their employer. From the guidance currently available, the employee does not need to be included on an FPS submission to HMRC by 19 March 2020 and the scheme can be used for all employees who have been included on an FPS submission by 23 September 2020.
It has been confirmed that employers making a claim under the JSS will still be entitled to claim the job retention bonus.
Employers will not be able to make a claim for JSS where the employee is made redundant or put on notice of redundancy – whether this extends to notice periods where there is no redundancy (such as the employee terminating the employment themselves) remains to be clarified.
To qualify for the scheme, employers will need to enter into new short-term working arrangements of the scheme, which presumably will need to be distinct from the furlough and flexible furlough arrangements employers may have entered into with their employees.
The below table illustrates the amount of work performed by the employee, the corresponding JSS grant available and the employer contribution to the wage costs. Please note however that the grant does not cover the employer pension or national insurance contributions, so these costs continue to need to be met by the employer separately.
|% of usual pay employee receives||78%||80%%||83%||87%||90%|
|JSS Grant from the Government||22%||20%||16%||13%||10%|
|Employer cost of the usual pay||56%||60%||67%||74%||80%|
Where an employee and employer meet scheme requirements, the employer is able to claim a grant under the JSS of up to £697.92 per month, per employee. As a result, assuming the employee only works the minimum one third of their usual hours, the JSS scheme caps its support for employees at just under £37,700, as demonstrated by the below example of the maximum support available.
|Example breakdown of figures||£|
|Normal annual salary||£37,687.68|
|Normal monthly salary||£3,140.64|
|1/3 time actual worked||£1,046.88|
|2/3 time not worked||£2,093.76|
|Employer JSS contribution||£697.92|
|Government JSS contribution||£697.92|
|Employee earnings under JSS||£2,442.72|
|Percentage of normal pay received||77.8%|
Concerns and unanswered questions
We’ve yet to see any detailed guidance on the JSS yet, but from the information we do have, there are a number of concerns and questions employers will need answers to before deciding whether the JSS will work for them.
Employer contribution to the JSS – based on the above maximum grant calculation, to take advantage of the scheme, an employer would be required to fund 56% of usual wages (£1,744.80) in return for getting only a third of the employee’s usual output. While we have seen an employer contribution required in recent months for the CJRS, this represents a significant step up in employer contribution and may put off employers making a claim.
Linked to this point, the information provided so far is that the grant is designed to support wages, with no mention of support for any employer national insurance costs or pension contribution. If no support is available, then employers will be required to fund these costs on both their own contribution to the employee’s wages and also the amounts due on payments funded by the JSS.
Payments in arrears – The information released so far suggests claims will need to be made in arrears, meaning employers will have to fund the grant initially and JSS grant payments will only be paid monthly. This may put some employers off claiming the grant, where they are already struggling with cash flow, particularly those with weekly or fortnightly payrolls.
We know from our experiences of the CJRS scheme, that payments in arrears was the original approach adopted for the CJRS, before the guidance was updated to allow claims to be made 14 days ahead of the payroll date. Hopefully, the detailed guidance will provide for something similar for the JSS grant.
What are the minimum hours? – The key requirement of the scheme is that the employee must work at least a third of their normal working hours, but what is not clear is how this will be measured. The current information available suggests this will be measured using a ‘usual hours’ approach, which we are familiar with from the flexible furlough hour’s calculation of the CJRS.
The JSS could be linked to the hours an employee is contracted to perform normally, but this wouldn’t help determine minimum hours had been worked for zero-hour contract employees, or employee who have no fixed pattern of hours i.e. company directors.
As and when we receive any further information, we will update this blog so please refer back for more information.