On 22 October 2020, the UK Government announced further changes to the Job Support Scheme (JSS) which will replace the existing Coronavirus Job Retention Scheme (CJRS), also known as the furlough scheme, when that scheme comes to an end on 31 October 2020. It also published a Policy Paper providing more detailed guidance on how the JSS will work.

The JSS was originally announced on 24 September 2020 as being designed to support jobs which are still “viable” i.e. a situation where an employer is able to keep an employee on rather than making them redundant but where, due to reduced demand as a result of COVID-19, the employee is working shorter hours than normal. The JSS will run for six months from 1 November 2020 until 30 April 2021. Employers will also be able to claim the Government’s £1,000 Job Retention Bonus, which is intended to encourage employers to keep staff on the payroll, where they meet the relevant eligibility criteria. Interestingly, no reference is made in the factsheet or Policy Paper to any requirement to demonstrate that an employer making a claim under the JSS is supporting jobs that remain viable. It remains to be seen whether that principle is reflected in the further guidance which is to follow.

JSS extended for businesses which are required to close

On 9 October 2020 the Government announced that the JSS would be expanded to support businesses which are legally required to close in geographical areas under the strictest coronavirus related restrictions. For eligible businesses the Government will pay two thirds (or 67 percent) of each employee’s salary, up to a maximum of £2,083.33 per month with employers paying only National Insurance Contributions and pension contributions. Employers will have discretion to top up this pay if they wish. Businesses will only be eligible to claim while they are subject to the relevant coronavirus related restrictions, and employees must be off work for a minimum of seven consecutive days. This scheme has now been branded the Job Support Scheme Closed or JSS Closed. This will sit alongside the JSS for businesses which stay open and the Job Retention Bonus.

Changes announced to the JSS for businesses which will stay open

The key changes are:

• The minimum proportion of their usual hours which an employee is required to work in order to qualify under the JSS is reduced from 33 percent to 20 percent.
• The employer contribution to wages for employees’ “non-worked” hours is reduced from 33 percent to five percent.
• The Government will now contribute 61.67 percent of an employee’s normal pay in respect of an employee’s usual hours not worked up to a cap of £1,541.75 per month (increased from £697.92 per month). The employer’s contribution of five percent of normal pay for unworked hours will be capped at £125 per month. These caps equate to a maximum salary of £3,125 per month so employees to whom the JSS applies will earn a minimum of at least 73 percent of their normal pay where they earn £3,125 per month or less.
• Employers will be able to top up employees’ wages above the five percent contribution at their own discretion.
• The changes announced will be reviewed “in the New Year” – previously the Government said that the minimum hours requirement would be reviewed after three months (i.e. at the beginning of February 2021).

Detailed guidance – the policy paper

Whilst further detailed guidance is to follow, for example in relation to the calculations which employers will need to perform when making a claim, the Government’s Policy Paper of 22 October 2020 sets out some further detail about how the JSS, both Open and Closed, will operate. Key points to note are as follows:

Eligibility for the JSS (Open and Closed)

• Whilst the JSS commences on 1 November 2020, an employer will be able to make claims under both the JSS Open and Closed from 8 December 2020 onwards, in arrears, with final claims for April 2021 being made in May 2021.
• An employer will be eligible for both the JSS Open and Closed if it is enrolled for PAYE online and has a UK, Channel Islands or Isle of Man bank account.
• An employer can claim under the JSS Open and JSS Closed at the same time for different employees. An employer cannot claim for a single employee under both schemes at the same time.
• An employer may claim for employees who were on its PAYE payroll between 6 April 2019 and 23 September 2020. (This means that a Real Time Information (RTI) submission notifying payment to that employee must have been made to HM Revenue & Customs (HMRC) at some time during that period).
• Employers can only claim for employees who were in employment on 23 September 2020. If an employees ceased employment after 23 September 2020 but is subsequently rehired then a claim can still be made in respect of that individual.
• An individual is an employee for the purposes of both the JSS Open and Closed if they are treated as such for income tax purposes. Employees are eligible regardless of the type of contract they are engaged on – so those on zero hours and temporary contracts are covered.
• A claim can be made under the JSS in respect of an eligible employee whether or not that employee was furloughed under the CJRS.
• The Government is going to introduce legislation “as soon as possible” to ensure that employees who are on statutory family related leave (such as maternity or adoption leave) are not prejudiced in respect of the pay related to that leave as a result of being placed on either the JSS Open or JSS Closed during the period by reference to which their entitlement to statutory pay is calculated.

JSS Open – further details

• In order to be eligible under the JSS Open, some or all of an employer’s employees must be working reduced (but not less than 20 percent of) their usual hours.
• Employers with more than 250 employees on 23 September 2020 will need to satisfy a Financial Impact Test to show that they have been adversely affected by coronavirus. If the employer’s turnover has remained the same or has fallen compared with the previous year then it will qualify. This will be demonstrated by comparing figures in VAT returns with corresponding figures for the previous year. The Policy Paper contains detailed examples of how this Financial Impact test will operate. Guidance as to the application of this test to large employers who are not VAT registered will be available by the end of October 2020. Smaller employers will not need to satisfy this test.
• Claims can be made in respect of employees who are working at least 20 percent of their usual hours.
• Employees can undergo training during their non-working hours while their employer is claiming for them under the JSS Open. Any such hours will count towards the calculation of total hours worked and should be paid at the full rate of usual pay.
• Employees must receive at least the applicable national minimum wage rate for all hours worked or treated as worked for the purposes of JSS Open.
• To be eligible to make a claim, employers must reach a written agreement with the relevant employees or conclude a written collective agreement with a recognised trade union with regard to the temporary working arrangements being put in place. This temporary working agreement must cover at least seven consecutive days and employers must make sure that it is consistent with employment, equality and discrimination laws.
• The employer must keep a written record of any agreement reached for five years and must record how many hours employees work and the number of usual hours which they are not working. This information must be made available to HMRC on request.
• Further guidance on what should be included in this written agreement will be published by the end of October 2020.

JSS Closed – further details

• An employer is eligible to make a claim under the JSS Closed if its business premises at one or more locations have been legally required to close as a direct result of coronavirus restrictions set by one or more of the four Governments of the UK.
• Employers are only eligible to claim for periods during which the relevant coronavirus restrictions are in place. Once the restrictions have been lifted and the business is legally allowed to reopen, the employer may, if it is eligible, be able to claim under the JSS Open instead.
• Eligible employers will be able to claim under the JSS Closed for employees whose primary place of work is at the premises that have been legally required to close as described above and who the employer has instructed to and who cease work for a minimum period of at least seven consecutive calendar days.
• Changes to employees’ contracts of employment should be discussed with and agreed in writing with employees or with a recognised trade union. Equality and discrimination laws apply as usual during this process. The agreement must be recorded in writing and notified to the employee, kept for five years and made available to HMRC on request.
• Further detail as to the applicable eligibility requirements for the JSS Closed will be issued by the end of October 2020.

Conditions of claiming under both the JSS Open and JSS Closed

• An employer cannot make a claim under the JSS in respect of an employee who has been made redundant or who is serving a contractual or statutory notice period during the claim period. It is not clear whether this means that a claim cannot be made where an employee is serving notice in a situation other than redundancy.
• The Government expects that large employers – 250 or more employees – and their corporate groups will not be making capital distributions, such as dividends, whilst claiming under the JSS. This is not anticipated to be a contractual or legal condition of the JSS but rather to be an encouragement to businesses to reflect on their responsibilities and only bring claims where clearly needed.
• The JSS will not cover pension or national insurance contributions which will remain payable by the employer – by reference to the total payment to the employee including the Government grant under the relevant JSS.
• Employers must have paid the full amount claimed under the relevant JSS to the employee before a claim is made. Employers cannot make any agreement, such as a salary sacrifice agreement, with the employee which would reduce the wages paid to the employee to below the amount claimed under the JSS.
• HMRC will check claims and will expect overpayments or payments made as a result of a fraudulent claims to be repaid. HMRC intend to publish the names of employers using the scheme, and the public will be able to report suspected abuse of the scheme to HMRC.
• Employers claiming under more than one of the available schemes (JSS or CJRS) will need to make each claim separately. So for example a pay period may cover the end of the CJRS and the beginning of the JSS – if so, the claim under each scheme should be calculated and paid separately.

Calculation of Reference Salary under the JSS Open

• A claim can be made in respect of the period commencing from the later of the date on which the employee starts working reduced hours and the date on which the agreement to work reduced hours is confirmed in writing. As noted above, claims are subject to a maximum Reference Salary of £3,125 per month.
• When calculating the applicable Reference Salary, employers should include regular payments which they are obliged to make to the employee including regular wages, and additional non-discretionary payments such as overtime, fees and commission. They should not include discretionary payments such as bonuses, tips, non-cash payments or benefits.
• For employees paid a fixed salary, the Reference Salary is the greater of the wages paid in the last pay period ending on or before either 23 September 2020 or 19 March 2020.
• For employees with variable pay the Reference Salary is the greater of the wages earned in the same calendar period in the tax year 2019/2020, the average wages paid in the tax year 2019/2020, and the average wages paid from 1 February 2020 (or from a later employment start date).

Calculation of Usual Hours

• For employees with fixed hours, their usual hours will be the greater of those which the employee was contracted to work at the end of the last full pay period ending on or before either 23 September 2020 or 19 March 2020.
• For employees with variable hours, the number of usual hours is calculated based on the higher of the number of hours worked in the same calendar period in the tax year 2019/2020, the average number of hours worked in the tax year 2019/2020 and the average number of hours worked from 1 February 2020 (or the employee’s employment start date if later) until 23 September 2020. Employees with variable hours are those whose number of hours varies and/or whose pay depends on the number of hours they work.

Next steps

In light of the changes announced to the JSS, employers may wish to reassess whether they can or wish to take advantage of the JSS and whether the changes announced will affect any ongoing or contemplated redundancy exercises, conscious that they will also need to consider the further detailed guidance as and when it is published. Employers will also need to consider carefully the further detailed guidance which is due to be published to ensure that any arrangements put in place comply with the requirements of the JSS.