Coronavirus Job Support Scheme – FAQs for UK employers
The government’s new Job Support Scheme replaces the furlough scheme and starts on 1 November 2020. It comprises two wage support schemes – a scheme to support businesses required to close as a result of coronavirus restrictions and a scheme to support businesses that can stay open but are facing lower demand. These FAQs cover eligibility, how the Job Support Schemes work, what you need to agree with employees and alternative resourcing options for employers.
The Job Support Scheme for businesses that can remain open (JSS Open) will provide ongoing wage support for people in work, provided that the employer meets certain access conditions, the employee is working a proportion of their usual hours, and the employer also provides additional wage support. Through the Job Support Scheme for businesses that are required to close (JSS Closed) the government will provide ongoing wage support for people who are unable to work because of the restrictions imposed on their employers. Both JSS Open and JSS Closed will start on 1 November and continue until the end of April 2021. The furlough scheme will come to an end on 31 October 2020 as planned.
The latest position regarding the Job Support Scheme is as follows:
- The government published a Winter Economy Plan on 24 September which provided a brief outline of what it is now calling JSS Open and a factsheet that explained its key components.
- The factsheet has now been updated to reflect the most recently announced changes which reduce both the proportion of usual hours an employee must work from 33% to 20% and the percentage of additional wage support required from employers for hours not worked from 33% to 5%.
- On 9 October, the Chancellor announced an extension to the JSS aimed at supporting businesses which are legally required to close their premises as part of local or national restrictions. The extension will sit alongside JSS Open and the Job Retention Bonus. A separate short factsheet has been published explaining how JSS Closed will work.
- On 22 October, the government released a policy paper containing further details about how both job schemes will work.
- Further guidance is to be released at the end of October 2020.
Eligibility for the JSS explained
Is the scheme only open to employers in defined sectors?
No, the JSS is not limited to any sectors or settings. It is open to all employers with eligible employees, a UK bank account and a UK PAYE scheme (with the exception of fully publicly funded bodies).
Importantly, the JSS Open will only be available to larger employers (with 250 or more employees) if they meet a financial impact test. SMEs will not have to meet any financial test.
The JSS Closed seems to apply to all employers, without any financial impact test. However, they will be expected not to make capital distributions while claiming the grant.
Do we need to prove that our trading conditions have been impacted?
Not if you are an SME or if you are required to close your premises and therefore claiming under the JSS Closed.
If you are a large employer, however, claiming under the JSS Open you will need to complete a financial impact test which is completed once before your first claim. Provided you can demonstrate that your turnover has stayed level or has decreased compared to the previous year, you will qualify.
What’s the definition of a larger employer for these purposes?
A large employer is defined as a legal entity with 250 or more employees across its payrolls as of 23 September 2020. Charities (registered or those exempt from registration) with 250 or more employees do not count as a large employer for the purposes of the scheme.
How do we do a financial impact test?
This depends on how often you file VAT returns.
Quarterly VAT returns: Compare the total sales figure on the return (box 6) between 31 August 2020 and 7 November 2020 with the same quarter in 2019.
Monthly VAT returns: Compare the three consecutive months (due to be filed and paid by 7 November) with the same period in 2019.
Infrequent VAT returns: Compare the three consecutive months (due to be filed and paid by 7 November) with the same period in 2019. However, the company must have submitted a VAT return between 31 August 2020 and 7 November 2020 to be eligible.
Turnover figures for the whole VAT group should be used where a large employer is part of a VAT group.
Large employers who are not VAT registered can expect guidance by the end of October.
What if some parts of our business have been impacted but not others?
If you are an SME, you won’t need to pass any financial impact test and you can access the JSS Open even if the pandemic has only had an impact on a small part of your business. Similarly, if you are required to close your premises then you will be able to apply under the JSS Closed without passing any financial impact test.
The policy paper on the JSS states that further guidance on the conditions for eligibility for JSS Closed will be published by the end of October.
If you are a larger business claiming under the JSS Open, you’ll need to pass a financial impact test (see above).
Which employees can we put on the scheme?
To be eligible for the JSS, employees must have been on your 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. Grants can only be made in respect of employees who were in employment on 23 September 2020. It will however be possible to claim in respect of an employee whose employment ended after 23 September and who has since been rehired – perhaps directed at employers who recently made staff redundant having concluded they would not be able to sustain their employment based on the previous (less generous) version of the JSS Open, but who may now conclude that they can do so after all. Under the JSS Open, the employee must work at least 20% of their usual hours. The government’s factsheet says that the minimum hours threshold might be increased in February 2021.
Under the JSS Closed, the employee must have stopped work altogether.
The policy paper also confirms that an employer can use both the JSS Open and Closed schemes at the same time, provided they are claiming for different employees. This will presumably help employers one part of whose business is the subject of compulsory closure and another part of whose business isn’t but has nevertheless been adversely affected.
Does the employee need to have been furloughed to be put on the JSS?
No. The JSS is open to employers even if they have not previously used the furlough scheme and employees do not necessarily have to have been furloughed in order to be put into the JSS. This is the case for both the JSS Open and the JSS Closed.
This means that, unlike the furlough scheme, the JSS is open to employees who have continued to work throughout the pandemic but on reduced hours. (The furlough scheme has allowed for part-time work since 1 July 2020 but is only available to employees who were fully furloughed with no work at all for at least three weeks before 1 July.) Unlike the furlough scheme, the JSS is also open to employees who started work after March 2020 (although they need to have been on your payroll by 23 September 2020 – see above).
What if there’s just no work at all for some employees but we are not legally required to close?
The minimum hours requirement is a key component of the JSS Open. If you don’t have enough workto provide even 20% of an employee’s usual hours, you will not be able to put them into the scheme.
This has led to criticism of the scheme from industries such as live entertainment and sport, where jobs may be perfectly viable in the long run but in the short term due to Covid restrictions there is simply no work. Other possible resourcing arrangements are covered below.
We have some work but we don’t think we can guarantee 20% of usual hours every week – can we still use the JSS Open?
It is currently unclear if employees must be working at least 20% of their hours every week or if this is an average over a month or longer period. However, the factsheet says that employees will be able to cycle on and off the scheme and do not need to be working the same pattern each month – although each short-time working arrangement must cover a minimum period of seven days. This suggests that you may be able to move employees out of the JSS Open for periods in which they are not working 20% of their usual hours (although you would need to agree with your employees what will happen in those periods). We await further guidance.
Do training hours count towards 20% of an employee’s usual hours?
Yes. The policy paper has confirmed that any hours spent in training and paid for by the employer at full pay will count towards 20% of their usual hours.
If we put employees into the scheme, do we need to promise that we won’t make them redundant for six months?
No, it does not appear that there will be any ban on making redundancies for the whole six months of the scheme. The policy paper and factsheet say that 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”. This suggests that you would be able to move an employee out of the JSS and stop claiming the grant for them if you needed to make them redundant before the scheme closed. (See “How the JSS Open works in practice” for further discussion of what this may mean in practical terms.)
Can we claim the £1,000 job retention bonus while also claiming under the JSS?
Yes.You can claim your £1,000 bonus for bringing a furloughed employee back to work in addition to claiming ongoing support for that employee under the JSS. To qualify for the bonus, the employee would need to remain continuously employed through to the end of January 2021 and earn at least £1,560 (gross) during that period. Grants from the JSS will count towards meeting the lower earnings limit.
Is it true that we can’t pay dividends to shareholders while claiming under the JSS?
The details released so far state that the government “expects” that large employers will not make capital distributions (such as dividends or equivalent for partnerships) while using the scheme. The policy paper confirms that it is not the intention of the government to make this a binding condition of the scheme but instead “encourage business to reflect on their responsibilities and that tax payers should be able to rely on public money only being claimed where it is clearly needed.”
HMRC plan to publicise the list of employers claiming grants under the JSS and press scrutiny can be expected as a result.
What about Covid-vulnerable employees who say it’s not safe for them to come back to the workplace?
It is not clear how many employees there are who are currently on full furlough who feel unable to return because they are Covid-vulnerable or someone they live with is Covid-vulnerable. It seems that the 20% minimum hours requirement is a must for the JSS Open, which will be an issue for these employees if they cannot work from home. This may generate disputes about whether it is safe for those employees to come back to work, but many may feel they have little choice.
Employers should make sure that the workplace is Covid-secure and they have carried out a thorough risk assessment that addresses the risks to such employees. If you have taken all reasonably practicable steps to reduce the risk to an acceptable level and the employee is still unwilling to return, you could consider a period of unpaid leave as an alternative to the JSS Open, or redundancy. Potentially, you could take the view that this is not a redundancy situation but rather a failure by the employee to obey reasonable instructions, although there may be some risks with taking that approach depending upon the employee’s circumstances.
How the JSS Open works in practice
What does the grant cover?
For every hour not worked by the employee, they will be paid a total of two-thirds of usual hourly wage, up to a cap.
Who pays what under the scheme?
Our infographic provides an at-a-glance summary of how the JSS Open will work. The idea is that employees working at least 20% of their usual hours can have their pay topped up.
The unworked time is essentially split into three. The employer pays for 5% of the unworked time (up to a cap), the government pays for 61.67% of the unworked time (up to a cap) and the remaining unworked time is unpaid unless the employer chooses to top it up (see below). These caps are based on a monthly reference salary of £3,125 per month.
This means that an employee working the minimum 20% of their normal hours would receive 73% of their usual pay (where their usual wages do not exceed the monthly reference salary). Out of this 73%, 20% would be pay for hours actually worked, 4% would be employer top-up and 49% would be government top-up.
The government contribution is capped at a maximum of £1,541.75 per month. It is not clear if the cap will be reduced if the employee is working more than 20% of their normal hours. The employer contribution is capped at £125 per month, although employers can decide to top up employee wages above the 5% contribution – see below.
The government contribution is considerably less than it was under the furlough scheme when it first opened, when the government supported 80% of an employee’s wage costs up to a maximum of £2,500 each month.
What about National Insurance Contributions and employer pension contributions?
The grant will not cover Class 1 Employer NICS or pension contributions, although these contributions will remain payable by the employer.
The employer will need to pay these contributions in respect of both the government top-up and the employer top-up, as well as in respect of pay for hours actually worked.
Does the top-up mean that we are paying extra for reduced work?
Yes. Employers need to pay an additional 5% towards unworked hours. There will also be pension and national insurance payments on top of this – see above.
The idea behind the JSS Open, however, is that it is a way to keep jobs going and to retain valuable skills and people over the next six months – in the hope that employees will be able to return to more normal hours by the time the scheme closes. By reducing the employer’s wage support contribution for unworked hours from 33% to 5% the government will be hoping that employers will decide to meet the additional cost of retaining employees rather than incurring the costs of making redundancies and then potentially having to re-hire and train new employees in the future.
We can’t afford the top-up – what are the options?
The employer top-up is a key component of the scheme, so if you will not be able to afford this you will need to look at other options – for example, agreeing a reduced working week without the extra financial support, or redundancies. We look at alternative options in more detail below.
Can we offer extra voluntary top-ups?
Yes. The new policy paper and updated factsheets confirm that employers can top up wages above the 5% contribution if they wish to do so. Employers can top-up in respect of both JSS Open and JSS Closed schemes. This moves on from the original factsheet for the JSS Open which seemed to imply that employees could only be put into the scheme if they agreed to take a wage reduction.
What payments should we include in an employee’s ‘reference salary’?
Similar to the furlough scheme, an employee’s ‘reference salary’ consists of the regular payments they are obliged to receive:
- Regular wages;
- Non-discretionary pay for hours worked;
- Non-discretionary commission payments;
- Non-discretionary fees; and
- Piece rate payments
Payments not included are those made without a contractual obligation or by discretion such as tips, discretionary bonuses and commission payments, non-cash payments and non-monetary benefits in kind.
How do we calculate an employee’s ‘reference salary’?
It depends whether they receive fixed or variable pay.
Fixed: The greater of the wages paid in the last pay period ending on or before 23 September 2020 or the last pay period ending on or before 19 March 2020.
Variable: The greater of the wages earned in the same calendar period in the tax year 2019-2020, the average wages payable in the 19/20 tax year or the average wages payable from 1 February 2020 (or start date if later) until 23 September 2020.
What are ‘usual hours’ for employees who work fixed hours?
Usual hours for an employee who has a set number of hours are calculated based on the greater of the hours that they were contracted for at the end of the last full pay period ending on or before 23 September 2020 or the hours contracted for at the end of the last full pay period ending on or before 19 March 2020.
Full details of sample calculations will be published in guidance at the end of October.
What are ‘usual hours’ for employees who work variable hours?
An employee works variable hours for the purposes of calculations under the JSS where they don’t have a contract with fixed hours, or their pay varies depending on the number of hours worked.
Usual hours are calculated based on the number of hours worked in the same calendar period in the 19/20 tax year, the average number of hours worked in the 19/20 tax year or the average number of hours worked from 1 February 2020 (or start date if later) until 23 September 2020.
The calculation cannot be altered if the employee is expecting to work more or fewer hours in the future. In addition, flexi-time or time in lieu cannot be counted as part of the calculation.
Full rules will be covered in guidance due at the end of October.
Can we agree a different working pattern each week?
Yes, it appears so. The factsheet for the JSS Open says that employees “do not have to be working the same pattern each month, but each short-time working arrangement must cover a minimum period of seven days”. This suggests that you can claim for a different amount of unworked hours each week, subject to the employee working at least 20% of their usual hours.
Can we change employee roles to fit what work we do have or can give to employees?
None of the guidance published to date has covered this point but we do not expect to see this prohibited given the scheme aims to keep people in employment, albeit in viable jobs. You would need to agree any role change (even temporary) with employees.
Can we agree reduced pay for employees working 20% of their usual hours?
Yes provided at least minimum wage rates are paid for all hours worked or treated as worked. Employers should also note that they cannot enter into any agreement with the employee which would reduce their wages below the amount claimed for them.
How the JSS Closed works in practice
What if there’s a local or national lockdown and the employee can’t work at all?
Under the JSS Closed, for businesses who are legally required to close their premises as part of local or national restrictions the government will pay 67% of employee wages, up to a maximum of £2,083.33 a month (employers will need to cover NICs and pension contributions). Businesses will only be eligible to claim the grant while they are subject to restrictions.
The government has said there will be further eligibility conditions for JSS Closed that have not yet been announced. We expect detailed guidance to be published in relation to JSS Closed at the end of October.
What does it mean to be legally required to close?
JSS Closed covers businesses that are legally required to close their premises as a result of restrictions by one of the four UK national governments. This includes premises that have been limited to delivery or collection only services and those restricted to provision of food and/or drink outdoors. But it does not include businesses that are required to close for some other reason (such as those required to close by local public health authorities as a result of specific workplace outbreaks) and will not cover businesses if they decide to close because their trade is significantly affected or they experience very reduced demand.
What if part of our premises are required to close (e.g. a hotel gym) but other parts remain open?
The position is not entirely clear and we expect detailed guidance to be published at the end of October, but it appears likely that a partial required closure will be covered, as the government states that employers can claim under both the JSS Closed and JSS Open for different employees.
Which employees will be eligible?
Employees whose primary workplace is at the premises that have been legally required to close will be eligible. There will be further eligibility criteria which will be published by the end of October.
How long must the employee cease work?
Employees must be instructed to and cease work for a minimum of seven consecutive days.
What if employees can do other work or work from home?
Employers can only use the scheme for employees who cannot work (paid or unpaid) for that employer. This suggests that if you can transfer them to other work or require them to work from home, you should do so rather than claiming under the scheme.
What do employees receive under the JSS Closed scheme?
The grant available from the government covers two-thirds of their “normal pay” up to a cap of £2,083.33 per month. This will be paid by their employer, who can reclaim it from the government. Employers must deduct and pay income tax and employee NICs on any amount paid to the employee.
The government will set out further details on how normal pay is calculated in guidance to be published by the end of October.
What about National Insurance Contributions and employer pension contributions?
The grant will not cover Class 1 Employer NICS or automatic enrolment pension contributions, although these contributions will remain payable by the employer.
Can we offer extra voluntary top-ups?
Yes. The new policy paper and updated factsheets confirm that employers can top up wages in respect of both JSS Open and JSS Closed schemes if they wish to do so.
Can we still use the Job Support Scheme when restrictions are lifted?
When premises re-open, employers can claim under the JSS Open, if eligible. They will no longer be able to claim under JSS Closed.
Other issues to consider when claiming under the JSS
What if the employee takes holiday?
This is unclear but we would expect it to be dealt with in the guidance due at the end of the month. For example, we don’t yet know whether holidays will “count” towards the 20% minimum working hours required under the JSS Open or if they will be treated as unworked hours. Employers may need to top up holiday pay in some cases to ensure that employees are receiving the correct statutory entitlement.
What if the employee is sick or under official instruction to self-isolate?
The employee would be entitled to statutory sick pay (SSP) in these circumstances, but it is not clear how time off sick will be treated under the JSS
Can we start redundancy consultation or put employees at risk of redundancy?
The policy paper states that no claims (for either JSS Open or JSS Closed) can be made for employees who have been made redundant or are serving a notice period during the claim period. This indicates that you will be able to start redundancy consultation and put employees at risk of redundancy while claiming for them under either JSS, provided that you do not issue notice of termination of employment due to redundancy (see below). Employers who have already issued redundancy notices to staff, but now consider that they may be able to retain them under the terms of the more generous JSS Open, may be able to consider revoking notices by agreement with the employee.
Can we issue notice of redundancy or make employees redundant?
It seems that you will be able to do this, but you will need to move them out of the scheme first. The factsheet says that 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 under the JSS. This suggests that you can issue notices of redundancy or make employees redundant so long as you move them out of the scheme first. We await further guidance, but you may need to move them out of the scheme before the beginning of the pay period in which you issue notice of redundancy.
How would we calculate redundancy pay for an employee in the JSS?
This is unclear. The government recently legislated to ensure that furloughed employees have their statutory redundancy payments calculated on the basis of their pre-pandemic pay, rather than the pay they received while in the furlough scheme. It seems likely that the government will extend the new rules to cover employees in the JSS but this has not been confirmed.
Can employees take another part-time job during the hours we don’t need them to work for us?
Furloughed employees have always been allowed to work elsewhere during their furloughed hours (subject to their contractual obligations to their main employer). It is not clear if a similar principle will apply to the JSS, but it seems likely.
How do we claim?
Employers will be able to make a claim under the JSS online from 8 December 2020. Grant payments will be made monthly in arrears, reimbursing the employer for the government’s contribution. This means that a claim can only be submitted in respect of a given pay period after payment has been made and that payment has been reported to HMRC via an RTI return. For many employers, this could create cashflow headaches in these very straitened times, although the government’s array of business support grants and loans may help. More detailed guidance about this process will be published by the end of October.
In what circumstances would we have to repay the grant?
The factsheet says that HMRC will check claims, and payments may be withheld or need to be paid back if a claim is found to be fraudulent or based on incorrect information.
Grants can only be used as reimbursement for wage costs actually incurred so, if you have not paid the government top-up to the employee as wages, you would also be liable to repay it. HMRC have confirmed that employees will be able to see if a claim has been made relating to them via their personal tax account.
What needs to be agreed with employees to put them in the JSS
What agreements do we need in place?
In order to be eligible for the grant, you will need to agree any new arrangements with 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 and must be retained for at least five years. What should the agreement cover?
The policy paper states that HMRC will publish guidance on the contents of the agreement by the end of October.
In our view, the agreement will need to cover the reduced hours that the employee will be working, the extra top-up pay they will receive through the scheme, and what happens in respect of the unworked hours that are not covered by the top-up. It should also cover the arrangements for moving the employee out of the JSS if necessary. If you are using the JSS Closed, you will need to agree that the employee will stop work together for the period you are claiming for.
Employers may want to wait until the guidance is released and we have further details before finalising any arrangements with employees, although this needs to be balanced against the extremely short remaining window of time that is available before the scheme comes into effect on 1 November, and at the very least it is likely to be sensible to open negotiations with staff (and unions, where applicable) without delay if you have not done so already. Employers who anticipate using the JSS Open on a large scale, or who are already in the course of redundancy consultations in relation to which the scheme may be viewed as an alternative, may feel they have little choice but to move more swiftly.
Alternative resourcing options for employers outside the JSS
If you have some work, but not enough to keep everyone on their pre-pandemic hours, one option is to select some staff for redundancy while keeping others employed on their full hours. There is an argument that it is unfair to make employees redundant when a government-supported JSS is available as an alternative. However, the fairness of a redundancy dismissal depends on all the circumstances at the time, including the employer’s resources. It will not necessarily be unfair to make employees redundant instead of using the JSS, particularly given the additional costs incurred by the employer in making use of the scheme.
Reduced hours working outside of the scheme
Another option is to agree a reduced working week with employees that does not involve putting them into the JSS. For example, it would be possible to agree with an employee that they will work for a 20% of their original normal hours and be paid for those but without seeking recourse to any further top-ups under the JSS. Any proportion of working hours could be agreed under such an arrangement and it would not require a minimum of 20%. The employer could even offer a top-up.
From the employee’s perspective, however, this is a much less attractive arrangement. Unless your underlying agreement with the employee allows for reduced hours or sets no minimum normal hours, this sort of agreement will need to be negotiated with the employee.
It is possible that some employees will prefer a period of unpaid leave to redundancy or reduced hours working – for example, if they are Covid-vulnerable and do not want to go to the workplace at the moment. This might even be a reasonable adjustment if the employee is disabled within the meaning of the Equality Act 2010. For a more detailed discussion of this issue, see our FAQs on staffing decisions when reopening workplaces.