As is the way with employment law, there has been an update to the JSS following on from our previous article.
There are now two schemes, a JSS open and JSS closed. The latter of these being for those businesses which have been told they need to shut due to lockdown restrictions.
The JSS is only available to small or medium sized employers (SME’s) although some large employers (over 250 employees) may be able to utilise the JSS subject to financial assessment. There is no financial assessment test for SME’s. The large employer assessment is set out here.
We recommend you fully review the government’s policy document here before proceeding.
Under JSS open, employees need to work at least 20% of their normal hours (not the previous 33%). They will then still receive full normal pay for any hours worked, and two thirds of the normal pay for those hours not worked. For the two thirds, the government will pay 61.67% (subject to a cap), and employers will pay 5% plus NI and pension contributions on the full amount. The government will pay the remainder of 61.67% for unworked hours, based on the ‘reference salary’ up to a maximum of £1,541.75 per month. This will ensure employees continue to receive at least 73% of their normal wages, where they earn £3125 a month or less.
Employers can claim the grant above in arrears from 8 December 2020. Neither the employer or the employee need to have benefitted under the previous CJRS furlough scheme.
To be eligible an employee must have been employed by the employer as at 23 September 2020, although those who ceased employment after 23 September 2020 can be rehired and the employer can claim for them.
Employers can top up employee wages above the level of minimum contributions at their own expense if they wish, which might help incentivise employees to participate in the scheme.
Employers cannot claim for an employee who has been made redundant or is serving a contractual or statutory notice period during the claim period, as the grant is for “viable jobs” only. It should be noted that large employers (250+ employees) and their “corporate groups” are expected not to make capital distributions (such as dividends) whilst claiming a grant, although this is indicated as a moral rather than legal or contractual obligation in the policy documentation.
The payments made under the JSS will be subject to tax and National Insurance contributions, as well as pension contributions. The grant will not contribute to the cost of National Insurance or pension contributions.
The grant monies will only reimburse sums already paid to the employee- the employer must have paid the full amount claimed for the employee’s wages to the employee.
The above terms will be reviewed by the government in January 2021, and the minimum hours of 20% may then be increased, and the government’s grant may be reduced, meaning the employer may have to pay a higher amount in the future.
The scheme is open to all employees, not just those who have previously been furloughed. The number of hours that staff would work under the job support scheme would be decided in consultation with the employer subject to the current 20% minimum working hours and could vary from time to time.
Employees will be able to ‘cycle on and off the scheme’ and will not have to work the same pattern each month, but each JSS short-time working arrangement must cover at least seven days.
The benefit to the employee of the scheme is that whilst they will work less hours, they will be paid for two thirds of the unworked period subject to the government cap. The benefit to the employer is that it provides support to them to retain staff during a temporary downturn due to Covid-19 and to pay less than the normal contractual pay for the employee.
The JSS is currently expected to end at the end of April 2021, and this is therefore a temporary scheme.
Fraudulent claims will have to be repaid with penalties applies of up to 100% of the amount overclaimed, and offenders will be “named and shamed” by HMRC. HMRC also intend to publish the names of all employers using the JSS.
The reference salary calculations for the JSS are set out in the policy document here.
The reference salary is broadly the same as for the furlough scheme and will include regular payments such as regular wages, non-discretionary payment for hours worked (e.g. overtime), non-discretionary commission. The reference salary shall exclude tips, discretionary bonus/ commission, non-cash payments, and non-monetary benefits (e.g. company car).
The reference salary for an employee on a “fixed salary” is the greater of:
For employees who are paid a fixed salary, the Reference Salary is the greater of:
- the wages payable to the employee in the last pay period ending on or before 23 September 2020
- 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
Reference salary for employees with ‘variable pay’ 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
- the average wages payable from 1 February 2020 (or the employee’s start date if later) until 23 September 2020
There are detailed rules for working out the “normal hours” for those who work “fixed hours” and those who work “variable hours” set out here.
The government fact sheet (https://www.gov.uk/government/publications/the-job-support-scheme/the-job-support-scheme) states that 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”. It is assumed that this means that an agreement to document the JSS arrangement will need to be entered into before the beginning of the period to which the JSS claim relates, and be made in writing or confirmed in writing by the employer.
Under the JSS closed, the position is still that the employee will receive two thirds of their normal wages, funded by the government (subject to a cap), the employer will then have to pay the NI and pension contributions on that amount.
Please note, all advice and opinion offered in this article are subject to change in line with the latest government advice.