The new Job Support Scheme: what is it and will it be enough?
Employers must fund at least 55% of normal wages if claiming under the new scheme.
With the “cliff edge” of the close of the Coronavirus Job Retention Scheme (CJRS) fast-approaching, the Chancellor’s announcement on 24 September 2020 of a new scheme to subsidise short-time working will come as a relief to many. However, it is predictably much less generous than the CJRS and it may not be enough to avoid significant redundancies in the coming months. In this article we look at the initial guidance provided by the Government on the new Job Support Scheme (JSS) and consider the impact it may have on employers’ plans.
The JSS will subsidise employment costs where organisations are functioning at a lower level of demand because of the impact of Covid-19. Its intention is to support “viable” jobs by keeping employees attached to their employers over the Winter.
How will the new Job Support Scheme work?
After some initial confusion, the Government has now issued a fairly clear Job Support Scheme Factsheet. This provides some detail on how the JSS will work. Detailed guidance is expected in the next few weeks.
The key points are as follows:
- The employee must work at least 33% of their normal (pre-furlough) hours and the employer will pay the employee full pay for these hours;
- The remaining unworked hours are then split three ways:
- 1/3 of these unworked hours are unpaid;
- 1/3 of these unworked hours are paid by the employer at the normal rate;
- 1/3* of these unworked hours are funded through the JSS.
- The employee will receive at least 77%* of normal pay from the employer;
- *These figures are subject to a cap of £697.92 on the Government contribution;
- The employer’s contribution to the employee’s salary will be at least 55% of normal pay;
- Employers must also pay employer National Insurance Contributions and pension contributions;
- Each short time working arrangement must be at least 7 days and employer can move employees on and off the JSS subject to this minimum period.
The JSS will begin on 1 November 2020 and will run until 30 April 2021. After the first three months of the JSS, the Government will review and may increase the minimum level of working hours required to qualify for the grant.
Which employees can be claimed for under the Job Support Scheme?
Further detail is awaited on specific eligibility requirements. However, the factsheet published to date confirms that employers will only be able to apply for grants in respect of staff who are on payroll on or before 23 September 2020 (meaning that a Real Time Information submission to HMRC notifying payment to the employee must have been made on or before that date).
Importantly, there is no requirement for the employer to have applied for grants under the CJRS in respect of any employee.
Employers cannot put an employee on notice of redundancy or make them redundant during the period within which they are claiming a JSS grant for that employee. However, the guidance published to date implies that employers can make some employees redundant while receiving grants in respect of other non-redundant employees.
Which employers can use the Job Support Scheme?
Large businesses will have to meet a financial assessment test which measures the impact of Covid-19 on turnover before being able to make applications under the JSS. Small and medium-sized enterprises (SMEs) are not required to meet such criteria. (An SME is likely to be defined as an organisation which meets two out of the following three criteria: turnover of less than £25m, fewer than 250 employees, and gross assets of less than £12.5m.)
The Government has expressed an “expectation” that companies will not make capital distributions such as paying dividends to shareholders while they are benefiting from the JSS.
Key steps for employers
As with furlough under the CJRS, normal employment law principles apply to the change of contractual terms. Employers and employees will therefore need to agree in advance to the change in working hours and pay. Employers should therefore consult with employees, come to an agreement, and set out in writing the agreement which is reached with the employee. Where trade unions are recognised, employers should ensure that relevant recognition agreement procedures are followed in collectively agreeing the changes to terms. The Factsheet states that HMRC may request a copy of the documentation setting out agreed changes.
HMRC have been taking steps against employers who improperly claimed support (whether by error or fraudulently) under the CJRS (see our latest article on furlough fraud here). Employers are put on notice that fraudulent claims under the JSS will also lead to enforcement action. The Government has already flagged its intention that employees will receive direct notification of the employer’s JSS claim from HMRC, possibly to encourage employees to report employers who are misusing the scheme.
Will the Job Support Scheme be enough?
This will be the key question for many employers who will need now to calculate whether they can afford to keep an employee working reduced hours while funding more than 55% of their employment costs. In many cases, it may make financial sense to make some employees redundant while asking others to continue working full time, or to work reduced hours supported by the JSS.
Commentary suggests that the Government intends for JSS to dovetail with the Job Retention Bonus to provide additional financial support. Our earlier article “How can employers ensure they qualify for the £1,000 Job Retention Bonus?” is available on our website (here). It should be noted that employers will not qualify for the bonus in respect of an employee who earns on average less than £520 a month between 1 November 2020 and 31 January 2021. We await confirmation of whether this minimum will include the element of pay supported by the Government under the JSS.
Some employers will of course consider the broader impact of losing or retaining employees in this calculation. The Government’s hope seems to be that the value of having skilled and experienced staff ready to “hit the ground running” as soon as restrictions have lifted will tip the balance in favour of retention and away from redundancy.
An alternative to redundancy?
Employers who are now considering redundancy or already consulting on redundancy should not ignore the announcement of this new scheme. Employers have a duty to consider alternatives to redundancy throughout the process. Where employees are already on notice of redundancy, employers should assess the feasibility of using the JSS to reduce the number of those affected by redundancy. Even where dismissal has already taken place and the employee has appealed against that decision, the employer should give serious thought to whether the JSS changes the redundancy situation.
Unfortunately, it may be that the JSS will not be enough to change redundancy decisions, but employers should now revise their business case to incorporate an assessment of the projected impact of JSS funding. This will help employers to make informed decisions about any redundancy dismissals and will be a key document in defending any future unfair dismissal claims.
If you would like to discuss any aspect of this article further, please contact Alacoque Marvin or any other member of the Employment team on 0113 244 6100.
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The information in this article is necessarily of a general nature. Specific advice should be sought for specific situations. If you have any queries or need any legal advice please feel free to contact Wrigleys Solicitors.