The Chancellor announces changes to the Job Support Scheme

The Chancellor announces changes to the Job Support Scheme

On 24 September 2020, the Chancellor, Rishi Sunak, unveiled a package of new measures designed to support the economy and save jobs during the ongoing Covid-19 pandemic.

Key amongst these is the Job Support Scheme {‘JSS’) which replaces the Coronavirus Job Retention Scheme (aka the ‘furlough’ scheme) which is due to end on 31 October 2020.

What is the Job Support Scheme (‘JSS’)?

The JSS will come into force on 1 November 2020 and will run for 6 months until 30 April 2021. The scheme marks a shift in government policy from ‘retaining’ jobs under the furlough scheme to ‘supporting’ jobs under the JSS. The Chancellor has made clear that he cannot ‘save every job’ and that the scheme is intended to only support those jobs which are considered ‘viable’.

When originally announced, access to the JSS was contingent on employees working a minimum of 33% of their hours, (for which they would receive their usual pay), with the payment for the remaining unworked hours being split equally between the employer, government and employee (the government’s contribution was subject to a cap). On 9 October 2020, the scheme was extended to provide greater financial support to businesses forced to close due to tier 3 local lockdown measures and then, on 22 October 2020, the support provided to ‘open businesses’ (ie those not subject to tier 3 restrictions), was fundamentally revised and replaced with a new financial support package.

Under the JSS, businesses are currently entitled to the following levels of support:

  1. JSS closed – For businesses legally required to close for a minimum of 7 days under tier 3 local lockdown restrictions, the government will pay up to 67% of an employee’s normal pay (capped at £2,083.33 per month) based on normal contracted hours for the duration of the lockdown. No contribution to salary is expected from the company but it will be required to cover NI and pension contributions for the employees.
  • JSS open – For businesses that are open but are experiencing ‘considerable difficulty’, support will be provided for each member of staff who works a minimum of 20% of their usual hours (for which they will receive their normal pay) over a 7 day period. Companies will be responsible for paying 5% of unworked hours, up to a maximum of £125 per month (plus NIC and pension contributions on the full amount), with the government contributing 61.67% of wages capped at £1541.75 per month. This will ensure that employees receive at least 73% of their wages, where they earn £3,125 a month or less.

The government has provided an example of how this may work in practice: “a typical full-time employee in the hospitality industry paid an average of £1,100 per month. Under the JSS for open businesses, they will still take home at least £807 a month. All the employer needs to pay is a total of £283 a month or just £70 a week; the government will pay the rest.”

The scheme is flexible, therefore employees can be placed on and taken off JSS and the working pattern can vary each month subject to it being in place for a minimum of seven days. However, employers cannot claim both JSS open and JSS closed in respect of a single employee for the same day.

It was also announced, that employers would be able to top up the wage if they wish, which was not the case when the JSS was first announced.

As with the furlough scheme, the changes must be agreed with staff and recorded in writing with written agreements available for inspection by HMRC if requested.

Further details are expected in due course.

What is meant by the employee’s ‘normal’ salary?

If the employee has a fixed salary, then the normal salary will be the greater of:

  • the wages payable to the employee in the last pay period ending on or before 23 September 2020; or
  • the wages payable to the employee in the last pay period ending on or before 19 March 2020, this may be the same salary calculated under the CJRS scheme

If the employee’s salary varies, their normal salary is the greater of:

  • the wages earned in the same calendar period in the tax year 2019 to 2020;
  • the average wages payable in the tax year 2019 to 2020; or
  • the average wages payable from 1 February 2020 (or the employee’s start date if later) until 23 September 2020

What is meant by an employee’s ‘normal’ hours?

If the employee works fixed hours, then their normal hours will be the greater of:

  • the hours that the employee was contracted for at the end of the last full pay period ending on or before 23 September 2020; or
  • the hours that the employee was contracted for at the end of the last full pay period ending on or before 19 March 2020, this may be the same number of hours calculated under the furlough scheme (NB. if employees moved to part time working, this may be varied – full details will be included in forthcoming Guidance)

If the employee’s hours vary, then their normal hours will be the greater of:

  • the number of hours worked in the same calendar period in the tax year 2019 to 2020;
  • the average number of hours worked in the tax year 2019 to 2020; or
  • the average number of hours worked from 1 February 2020 (or the employee’s start date if later) until 23 September 2020

Who is eligible for the scheme?

The scheme is open to all small and medium businesses, however, large businesses (250+ employees) must undertake a Financial Impact Test in order to show that their turnover has remained the same or fallen during the Covid-19 crisis.

Businesses will be able to access the JSS even if they have not previously used the furlough scheme.

To be eligible for JSS, employees must have been on PAYE as of 23 September 2020 and must work a minimum of 20% of their normal hours. If employees ceased employment after 23 of September 2020 and were subsequently rehired, then employers can claim for them.

Employees do not have to have been previously furloughed and can be on any type of contract, including zero hours or temporary contracts.

For more information on the JSS, click here.

How do you apply for the scheme?

The government has not yet provided information on how to apply for the scheme, however, it is expected that the process will be similar to the one used for the furlough scheme. Further information is expected in the next few days.

Grants will be payable in arrears therefore a claim can only be submitted for a given pay period after payment to the employee has been made. The first claim can be made from 8 December 2020, 5 weeks after the scheme opens.

What support is there for the self-employed?

The Chancellor announced an extension to the self-employed grant. It is available to those who have experienced reduced demand due to the coronavirus but who are continuing to trade or are temporarily unable to trade. It will be available to anyone who met the eligibility criteria for the previous self-employed income support scheme (‘SEISS’) grants and will be paid in two lump sum installments. The first grant will cover the period November 2020 to January 2021, and the second will cover February 2021 until 30 April 2021. The first grant will be calculated on 40% of three months’ average trading profits capped at £3750. The size of the second grant will be reviewed and set in due course. The grants are taxable.

The self-employed will also be able to defer their tax bill until January 2022.

Further announcements made by the Chancellor

Additional measures were announced aimed at helping businesses make it through the Covid crisis and save and create jobs. Including:

  • Local Authority funding – the government will provide additional funding to support businesses in high-alert level areas which are not legally closed, but which are severely impacted by the restrictions on socialising. The funding will be based on the number of hospitality, hotel, B&B, and leisure businesses in the area with grants ranging from £934 per month (for businesses with a rateable equivalent to £15,000 or under) to £2,100 per month (for businesses with a rateable value of £51,000). Local Authorities will also receive a 5% top up amount to these implied grant amounts to cover other businesses that might be affected by the local restrictions, but which do not neatly fit into these categories. It will be for each Local Authority to decide which businesses are eligible for grant funding in their local areas, and what precise funding to allocate to each business. Businesses in Very High alert level areas will qualify for greater support of up to £3,000 per month through business support packages provided to Local Authorities.

If you would like further information on what the new schemes might mean for you, please contact Debbie Sadler on 01494 478 671 or at djs@blasermills.co.uk