In response to some fierce criticism, notably from local government officials in Tier 3 lockdown areas, Chancellor Rishi Sunak announced on 22 October that his previous Job Support Scheme (JSS) did not go far enough to support businesses that were facing tougher trading conditions owing to COVID-19. Here, Fiona Holloway, Associate Partner at Claritas Tax looks at what you need to know about the two ‘new and improved’ JSS schemes.
The “JSS Open” is the second phase in UK government support measures for organisations during the COVID-19 pandemic. Under the scheme, the employer will continue to pay its employees for time worked, but the burden of hours not worked will be split between the employer and the Government (through wage support) and the employee (through a wage reduction), and the employee will keep their job.
In simple terms, if a business is not forced to close owing to restrictions, from 1 November onwards, employees will have to undertake a minimum number of paid hours in order for the employer to access the scheme. This is in contrast to the flexible furlough, which ran until 31 October whereby employees could work a number of paid hours, and the new JSS Closed scheme (see below) where there is no requirement for paid work.
Our understanding is that the JSS Open will begin on 1 November 2020 and run for six months, until April 2021. The JSS Open covers all nations of the UK.
The JSS Open will give support to those businesses which, while having enough work to continue to employ their workers, are facing reduced demand. The employer must continue to pay workers for hours worked, but support through the new JSS Open is available for the cost of the hours not worked. For every hour not worked, the employee will be paid up to two-thirds of their usual salary.
When originally announced, the JSS Open envisaged employers paying a third of their employees’ wages for hours not worked, and required employees to be working 33% of their normal hours. The government will now provide up to 61.67% of wages for hours not worked, up to a maximum £1541.75 per month, more than doubling the maximum payment of £697.92 under the previously announced rules.
The government announcement on 22 October calculates that the employer will contribute 5% of non-worked hours up to a cap of £125 per month. Employers can top up employees’ wages above the 5% cap at their own discretion. We think that the 5% calculation takes into account the receipt of the Job Retention Bonus. Employers will continue to be eligible for the £1,000 Job Retention Bonus (if they meet the conditions) as previously.
The minimum hours worked requirement has now been reduced to 20%. This means that employees working just one day a week may be eligible. Each short-time working period must run for a minimum of seven consecutive days.
Funds contributed by the government will be in the form of a grant which will be taxable.
Neither the employer nor the employee needs to have previously used the Coronavirus Job Retention Scheme (CJRS).
The Job Support Scheme which applies to businesses legally required to close remains unchanged. This is referred to as “Job Support Scheme Closed” and further details are set out below.
JSS grants do not cover employers’ National Insurance Contributions or pension contributions. Employers must pay these costs as usual. We assume that this will be calculated on the amount paid to the employee through the payroll, but we are waiting for more guidance.
The claims portal on gov.uk will open on 8 December 2020. Each claim will be submitted for a given pay period. Each claim must be made after the employee has been paid and that payment has been reported to HMRC through RTI. Grants reimbursing employers for the government’s contribution will be paid in arrears on a monthly basis.
Any employer with a UK bank account and UK PAYE scheme can claim the grant.
Large businesses will have to meet a financial assessment test, which is to be based on turnover. Turnover must be lower now than it was before COVID-19 caused difficulties for the business. We do not yet know exactly how this test will operate. There will be no financial assessment test for small and medium sized enterprises. There is an expectation that large employers that claim the JSS grant will not be able to make dividend payments or make share buybacks. Details on how these rules will work is expected to be provided in further guidance.
Eligible employees must have been on payroll and have been included in a full payment submission made on or before 23 September 2020. This means that some newer employees who were not previously eligible for the furlough scheme can be entered into the JSS.
Employers must agree the new short time working arrangements with their staff, make any changes to the employment contract by agreement, and notify the employee in writing. This agreement must be made available to HMRC on request.
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.
Please see below for a link to the relevant government factsheet:
The “JSS Closed” scheme will be available to businesses that, as a result of restrictions set by one or more of the four governments in the UK, are legally required to close their premises. This includes premises restricted to delivery or collection only services from their premises.
The scheme will pay a grant to the employer calculated on the number of eligible employees who have been instructed to cease work (and do cease work) at the relevant premises.
Employers will only be able to use the scheme for employees who cannot work (paid or unpaid) for that employer. Employees must be instructed to and actually cease work for a minimum of 7 consecutive (or calendar) days. An employee can return to work at a later date.
Claims must not overlap and must be made monthly in arrears. These payments will be taxable, and employers will be required to cover employer NICs and automatic enrolment pension contributions in full, but are not required to make any further contributions to wage costs. However, employers can top up employee pay if they wish.
Neither the employer nor the employee needs to have previously used the Coronavirus Job Retention Scheme to use the JSS Closed scheme.
Similar to the JSS Open, where employees receive two-thirds of their wages for time not worked, the grant per eligible employee available from the UK government is two-thirds of their normal pay up to a limit of £2,100 per month. Further details on how normal pay is calculated will be set out later in guidance.
Claims can be made in respect of periods from 1 November 2020. When premises re-open, employers can claim under the JSS Open (see above).
In line with the JSS Open scheme, employers will be able to claim the Job Retention Bonus for employees provided they are eligible and were previously part of the CJRS. The employer must use the scheme to cover their employees’ wages and pay relevant payroll taxes.
Payments will be made in arrears, reimbursing the employer for the government’s contribution. Employers will be able to make a claim on a monthly basis online through gov.uk from 8 December 2020.
Employers must agree the new scheme with the relevant staff, make any changes to the employment contract by agreement, and notify the employee in writing. This agreement must be made available to HMRC on request.
Please see below for a link to the relevant government factsheet
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15 February 2021
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