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Coronavirus Job Support Scheme: Five Questions Answered

15/10/2020

Following the announcement by the Chancellor of the new COVID-19 Job Support Scheme (JSS) last month to help businesses facing reduced demand, the Government has now produced further guidance on how the scheme will work in practice.

The Chancellor also announced last week a furlough-type extension to the JSS for businesses that are forced to close under new lockdown measures. Further details can be found in the Job Support Scheme Expansion for Closed Business Premises Factsheet provided by The Government.

The JSS is set to go live on 1 November 2020 and it is currently intended that the scheme will run until April 2021.

Here are five key questions that employers should consider ahead of the scheme’s roll out:

1. What is the Job Support Scheme?

The JSS will enable businesses experiencing reduced demand due to Covid-19 to share their wage burden with the Government. Companies will continue to pay employees for time worked, but the burden of hours not worked will be split with the Government via a wage support grant (and with the employee via a wage reduction).

The Government will pay up to a third of hours not worked (up to a cap of £697.92 per month), with another third coming from the employer. In theory, it is expected that most employees on the scheme will earn a minimum of 77% of their normal wage in return for working 1/3 of their normal pre-Covid hours.

Under an extension to the JSS, businesses required to close premises altogether as part of local or national restrictions will be able to apply for Government grants covering up to two-thirds (67%) of salaries for employees that are unable to work as a result, capped at £2,100 a month.

2. Who can make a claim?

According to Government guidance, all employers with a UK bank account and UK PAYE schemes can claim either form of grant.

2.1 Businesses with reduced demand

Larger businesses will additionally be subject to a financial assessment in which they will need to show a reduction in turnover due to Covid-19. There will be no such financial assessment for SMEs.

Large employers are also likely to need to refrain from making capital distributions, such as dividend payments or share buybacks, whilst subscribing to the grant.

Employees themselves will need to be on an employer’s PAYE payroll on or before 23 September 2020. This means a Real Time Information (RTI) submission notifying payment to that employee to HMRC must have been made on or before 23 September 2020.

The employee will be required to work at least 33% of their usual hours (though, after three months, the Government will consider increasing this threshold).

2.2 Businesses forced to close

Businesses seeking to claim the two-thirds grant must have been legally required to close their premises (or restrict them to delivery or collection only services) for a minimum of 7 consecutive days. Note that businesses required to close as a result of specific workplace outbreaks by local public health authorities are not eligible for the scheme.

Again, the employees concerned will need to be on an employer’s PAYE payroll on or before 23 September 2020 (with a Real Time Information (RTI) submission notifying payment to that employee to HMRC having been made on or before 23 September 2020) in order to qualify.

3. What does the grant cover?

3.1 Businesses with reduced demand

For every hour the employee does not work, both the Government and the employer will pay a third each of the usual hourly wage for that employee (with the Government contribution capped at £697.92 per month).

Employers will initially need to stump up the money for both their own and the Government’s contribution. The Government will then reimburse the employer in arrears. Note that the grant will not cover Class 1 employer NICs or pension contributions, so employers will need to meet these costs themselves.

What amounts to an employee’s “usual wages” will be calculated along similar lines as for the Coronavirus Job Retention Scheme (though full details are yet to be made available). However, we do know that for employees who have previously been furloughed, their underlying usual pay will be used for the purposes of calculating usual wages and not the amount they were paid whilst on furlough.

Unlike the furlough scheme, 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.

3.2 Businesses forced to close

The Job Support Scheme will pay a grant to the employer, in arrears, of up to two-thirds of each eligible employee’s usual wages, up to a maximum of £2,100 per month.

Again, it is likely that an employee’s “usual wages” will be calculated along similar lines as for the Coronavirus Job Retention Scheme.

The whole of the grant must be used to meet employee costs in the form of wages and relevant payroll taxes.

The grant will not cover Class 1 employer NICs or pension contributions, which will remain payable by the employer. Employers may elect to top up employee pay at their own cost.

4. How to claim the Job Support Scheme grant

Claims for either form of grant should be made online via gov.uk from December 2020. Claims must be submitted only in respect of a given pay period, after payment to the employee has been made and after that payment has been reported to HMRC via an RTI return. This is because the grants can only be used as reimbursement for wage costs actually incurred.

5. How should the arrangement be documented?

The Government guidance says that employers must:

  • (i) Agree the new arrangements with their staff;
  • (ii) Make any changes to the employment contract by agreement; and
  • (iii) Notify the employee in writing.

The agreement must be made available to HMRC on request.

Other useful links regarding the Job Support Scheme:

*The information set out in this article is correct at the date of publication (15 October, 2020). The effect of coronavirus on businesses is a fast-changing area and so it is important to obtain legal advice to ensure you are properly protected. Visit our Coronavirus (COVID-19) Hub for more Leading Insights.

Contact us

If you have any questions regarding the impact of the Coronavirus upon your business or are seeking up-to-date legal advice on employment matters, contact Deborah West on 01202 294 566 or email DeborahWest@steeleraymond.co.uk. Alternatively, contact a member of our Employment team in Bournemouth.

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