Please note, the Coronavirus Job Retention (Furlough) Scheme has been extended until April 2021 and this note is no longer being updated. Please refer to our new note for guidance on the extended scheme from November onwards.
On 24 September, the Chancellor of the Exchequer announced that a new Coronavirus Job Support Scheme (the 'JSS') would replace the Coronavirus Job Retention Scheme (the 'CJRS') when it comes to an end at the end of October.
The JSS is being introduced to protect jobs in businesses which can operate safely but are facing lower demand over the winter months due to COVID-19 and to enable these businesses to retain employees on shorter hours, preserving valuable employment relationships, protecting incomes and avoiding potential redundancies.
The Chancellor subsequently announced on 9 October that the JSS would be expanded to cover extra support to those businesses that are legally required to close as a result of coronavirus restrictions set by one or more of the UK government and/or the devolved administrations in Scotland, Wales and Northern Ireland. This part of the JSS has now been classified by the government as the Job Support Scheme Closed (JSS Closed) – on the basis that it is only applicable to those businesses that are legally required to close as a result of coronavirus restrictions.
On 22 October, the Chancellor made a further announcement confirming that the government was increasing the scale of support available to employers through the JSS in order to protect more jobs. The key changes are that the minimum hours required for employees to work (for employers who have not been required to close) has been reduced from 33 per cent to 20 per cent of their usual hours and the employer contribution for non-worked hours has reduced from 33 per cent to five per cent. This part of the JSS has been classified by the government as the Job Support Scheme Open (JSS Open) – on the basis that it is applicable to those businesses that can continue to operate safely but face reduced demand as a result of the pandemic.
The Chancellor’s latest announcement was followed up with an updated JSS factsheet and a JSS policy paper (see links at the end of this briefing). The JSS policy paper states that further guidance on the steps that employers need to take to calculate and make a claim to the JSS will be published by the end of October and also that the government will review the terms of the scheme in January. The new policy paper sets out eligibility criteria and conditions for the whole JSS scheme and specific eligibility criteria for the JSS Open and primary criteria for the JSS Closed.
Whilst the most recent guidance provides some welcome clarification, it does still leave a number of questions unanswered. It is not yet as detailed as the guidance provided for the CJRS and leaves employers in a difficult position, having to take steps to get agreement from employees to enter into JSS arrangements whilst at the same time, not knowing exactly what those arrangements look like. It is also not yet clear whether the government intends to bring forward legislation to implement the JSS albeit we expect a related Treasury Direction will be issued in due course. Below we summarise the key aspects of the JSS (both Open and Closed) and highlight some continued areas of uncertainty.
When will the Job Support Scheme come into effect?
The CJRS will come to an end on 31 October and will be immediately replaced by the JSS. The JSS will run from 1 November 2020 until the end of April 2021.
Which organisations are able to apply?
All employers with a UK, Channel Island or Isle of Man bank account and who have enrolled for PAYE online can claim the grant and neither the employer nor the employee needs to have previously used the CJRS. The new scheme is not limited to any particular sectors or types of business as some had predicted it might be.
Fully publicly funded organisations (even if they are not in the public sector) are not expected to use the JSS, as has been the case with the CJRS. Organisations can use the JSS if they are not fully funded by public grants, for the proportion of their revenue disrupted due to coronavirus.
Additional eligibility criteria apply depending on whether an employer is claiming a JSS Open or a JSS Closed grant.
To be eligible for a JSS Open grant, large businesses will have to meet a financial impact test, so the scheme is only available to those whose turnover has stayed level or is lower now than before as a result of experiencing difficulties from COVID-19. See further detail below.
There will be no financial impact test for small and medium enterprises (SMEs) or qualifying charities (regardless of whether or not the charity has 250 or more employees) so unlike the CJRS, such businesses will not need to assess whether or not their operations have been severely affected by COVID-19.
Employers are eligible to claim JSS Closed support if their business premises at one or more locations has been legally required to close as a direct result of coronavirus restrictions set by one or more of the four governments of the UK. This includes premises restricted to delivery or collection only services from their premises and those restricted to provision of food and/or drink outdoors. Employers will not be able to claim JSS Closed to cover periods after restrictions have lifted and the business premises is legally allowed to reopen. In these circumstances it is envisaged that the employer would look for continuing support under the JSS Open.
What is the Financial Impact Test?
For the purposes of the JSS Open, large employers are defined as a legal entity with 250 or more employees across their payrolls on 23 September 2020. The position as to group company numbers is not yet entirely clear and whilst there are references to ‘across payrolls’ and VAT groups, the use of distinct legal entities as the key test arguably means they do not need to be aggregated.
Large employers need to complete a Financial Impact Test to evidence that their income has been impacted due to coronavirus – in other words, if the employer’s turnover has remained equal or has decreased compared to the previous year, then they will qualify. The test only needs to be taken once before an employer’s first claim for the JSS Open.
The Financial Impact Test has been kept relatively simple and is based on VAT returns. The current guidance sets out various examples depending on how an employer files their VAT returns.
Large employers who are VAT registered and submit quarterly VAT returns, should compare the total sales figure on their VAT return, which is due to be filed and paid between 31 August 2020 and 7 November 2020, with the total sales figure from the same quarter in 2019.
Large employers who submit monthly VAT returns should compare the three consecutive months which are due to be filed and paid by 7 November 2020 with the same period in 2019.
Large employers who file less frequently should compare the three consecutive months which are due to be filed and paid by 7 November 2020 with the same period in 2019 but will need to have submitted a VAT return between 31 August 2020 and 7 November 2020 to be eligible.
Large employers who are part of a VAT group will use the turnover figures for the VAT group for this calculation.
Further guidance will be issued for larger employers who are not VAT registered by the end of October.
The policy paper also makes clear that the government expects that large employers and their corporate groups using the scheme will not make capital distributions whilst claiming the JSS grant, including dividends, charges, free or other distribution or any equivalent payment that a partnership may make to its partners. The policy paper states that the government does not plan to make this expectation a contractual or legal condition but that it encourages business to reflect on their responsibilities and that taxpayers should be able to rely on public money only being claimed where it is clearly needed.
Who is eligible under the Job Support Scheme?
Employees must be on an employer’s PAYE payroll between 6 April 2019 to 23 September 2020. This means a Real Time Information (RTI) submission notifying payment to that employee to HMRC must have been made at some point from 6 April 2019 up to 11:59pm on 23 September 2020. Employees need not have been furloughed under the CJRS. It is not entirely clear whether this means that an employee must have been on an employer’s payroll throughout this period given the ‘between’ wording but we expect it to mean at any point during this period, subject to the conditions below.
Importantly, employers can only claim for employees that were in their employment on 23 September 2020. However, if employees ceased employment after 23 September 2020 and were subsequently rehired, then employers can still claim for them.
The policy paper confirms that an individual is an employee for the purposes of the JSS if they are treated as an employee for Income Tax purposes and that employees can be on any type of contract, including zero hours or temporary contracts. Agency workers are regarded as employees of an employment agency for the purposes of the JSS, provided they are employees for Income Tax purposes.
Importantly, the policy paper also makes clear that employers cannot claim for an employee who has been made redundant or is serving a contractual or statutory notice period during the claim period. It does appear, however, that employers would be able to move an employee out of the JSS and stop claiming the grant for them if there was a need to make them redundant before the scheme ends. This change in approach is likely to have been taken to avoid similar situations to those under the CJRS where a number of employers used furlough periods to help fund their obligation to pay out redundant employees’ notice periods.
Neither the latest factsheet nor the policy paper include any specific detail on how the JSS will apply to fixed term workers, those on unpaid leave or those who have recently TUPE transferred or how the JSS will dovetail with periods of sickness absence/ self-isolation and/or vulnerable employees. We expect these issues to be covered in the subsequent guidance and to follow similar principles, where possible, to those applied under the CJRS.
To be eligible for the JSS Open, some, or all, of an employer’s employees must be working reduced hours and employees forming part of any grant application must still be working for at least 20 per cent of their usual hours. This figure has been reduced from 33 per cent as was set out in the original JSS announcement and means that those employees working just one day a week will be eligible. Importantly, the policy paper confirms that employees can do training in working hours while being claimed for under the JSS. Hours that employees spend training are paid for by the employer at their full rate of pay and importantly, can count towards 20 per cent of their usual hours.
Whilst the reduced minimum requirement of working 20 per cent of usual hours is likely to mean that many more employers will now use the scheme, it will still inevitably mean that some businesses with no or little work for employees to currently perform (for example, many businesses in the sport and entertainment industry) will need to consider redundancies, even if those jobs may be more viable in the longer term.
Eligible employers will be able to claim the JSS Closed grant for employees whose primary work place is at the premises that have been legally required to close as a direct result of coronavirus restrictions and who the employer has instructed to and who cease work for a minimum period of at least seven consecutive calendar days.
The policy paper makes clear that it does not include a comprehensive list of JSS eligibility requirements and further guidance will be published by the end of October.
How will the Job Support Scheme work?
Employers will be able to use the scheme at any time during the period 1 November 2020 to 30 April 2021.
As set out above, in order to be eligible for the JSS Open, employees must be working at least 20 per cent of their normal hours and be paid as normal for those hours by their employer. This is different to the CJRS which allows employers to claim support for employees who are fully furloughed and performing no employment duties at all.
For every hour not worked by the employee, they will be paid a total of two-thirds of their usual hourly wage, up to the cap. Employers will be required to pay five per cent of unworked hours, capped at £125 per month and NICs and automatic enrolment pension contributions in full as a contribution. Employers can top up their employees’ wages above the five per cent employer contribution at their own discretion but are not obliged to do so.
The government will contribute 61.67 per cent of non-worked hours, capped at £1,541.75 per month (the employer and government caps being based on a monthly reference salary of £3,125). How much the government contributes will be dependent on the proportion of hours actually worked by the employee.
Employees will be able to cycle on and off the JSS Open and 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.
Under the JSS Closed, an employee who cannot work due to the coronavirus restrictions imposed will receive two thirds of their normal pay, paid by their employer and fully funded by the government, to a maximum of £2,083.33 per month, although an employer has discretion to pay more than this if they wish.
Grant payments will be made in arrears, reimbursing the employer for the government’s contribution. As such, a claim can only be submitted in respect of a given pay period, after payment to the employee has been made and that payment has been reported to HMRC via an RTI return.
What can an employer claim for?
As per the CJRS, the JSS policy paper provides that employers can claim for any ‘regular’ payments the employer is obliged to pay their employees (subject to the cap). Details of what constitutes ‘regular payments’ varied in the different iterations of the CJRS guidance and the JSS guidance broadly follows the final iteration of the CJRS guidance. The JSS policy paper includes the following information and states that when calculating the employee’s wages for the purposes of JSS Open grants (further guidance on reference salary for JSS Closed is still outstanding), the employer should use ‘regular payments’ which the employer is ‘obliged’ to make including:
- regular wages
- non-discretionary overtime
- non-discretionary fees
- non-discretionary commission payments
- piece rate payments
The policy paper also stipulates that employers cannot include the following:
- payments made at the discretion of the employer or client (where there is no contractual obligation to pay) including tips (including those distributed through troncs), discretionary bonuses and discretionary commission payments
- non-cash payments
- non-monetary benefits (eg benefits in kind).
Benefits provided through salary sacrifice schemes (including pension contributions) should also not be included. Employers should continue to maintain these benefits during any period they are claiming under the JSS, to avoid breach of contract claims, unless the employee agrees otherwise as part of the JSS arrangements. HMRC has previously agreed that COVID-19 counts as a ‘life event’ which could warrant changes to salary sacrifice arrangements subject to contractual arrangements between employer and employee being updated accordingly.
Claims under the JSS Open are subject to a maximum reference salary of £3,125 per calendar month.
The policy paper confirms that further details of calculations employers will need to do to work out their claim will be available in the guidance published at the end of October. We expect this guidance to be similar to that issued for the CJRS, relating to the approach employers should take towards non-discretionary payments including non-discretionary overtime payments, namely that employers should only include payments that they are contractually obliged to pay and to which the employee has an enforceable right and that if variable payments are specified in a contract and those payments are always made, then they may be non-discretionary and therefore should be included in the calculation.
As per the CJRS, the policy paper differentiates between fixed-rate employees (essentially those paid an annual salary although the definition will ultimately be more nuanced) and those whose hours of work vary. The reference salary for employees with fixed pay is 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 (and this may be the same salary calculated under the CJRS).
For those with variable pay, the employer can claim for the higher 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.
We hope that updated guidance confirms that, like the CJRS, employers should choose the calculation they think best fits the way an employee is paid and that HMRC will not decline or seek repayment of any grant based solely on the particular choice of pay calculation, as long as a reasonable choice of approach is made.
The updated factsheet makes clear that for employees who have been previously furloughed, their underlying usual pay and/or hours should be used to calculate usual wages, not the amount they were paid whilst on furlough. We expect similar provisions to be introduced for those employees returning from statutory leave. The government has also stated that it will be introducing legislation to avoid parents losing out on their entitlement to parental pay (eg maternity or paternity pay) as a result of being put on the JSS during the relevant assessment period.
All payments made to employees under the JSS will be taxed in the usual way.
All of the grant received must be paid to the employee in the form of money. Employers may not net off any of the grant to pay for the provision of benefits or a salary sacrifice scheme nor must they reduce the wages by way of administration charges, fees or other costs.
The Apprenticeship Levy and Student Loans should continue to be paid in the usual way – the JSS does not cover these.
An employee under the JSS will have continuity of service preserved and will retain their statutory rights so they will continue to accrue statutory holiday. It remains open to employers to seek to agree the suspension of accrual of non-statutory holidays and other benefits. Some benefits, like life insurance or permanent health insurance have annual payment dates and, if payment has already been made, employers may choose to preserve these throughout the duration of the JSS. Other benefits represent an ongoing cost which some organisations may not be able to bear at the current time, so may seek to agree with employees that they are suspended whilst the scheme is in operation.
Calculating an employee’s usual hours for JSS Open grant purposes
As per the CJRS, there are different calculations for working out an employee’s usual hours depending on whether they are fixed or variable.
For employees with fixed hours and whose pay does not vary according to the number of hours they work, the usual hours are calculated based upon the greater of:
- the hours 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 (again this may be the same number of hours as used under any CJRS calculation). There is also a note in the policy paper that if employees moved to part time working, this may be varied and full details will be provided in the forthcoming guidance.
For variable hours employees, 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 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.
In both cases the calculation should include hours paid as annual leave and statutory leave.
For employees who are part of a flexible work time arrangement, employers should:
- not count as hours worked any hours that the employee worked but was not paid for because they accrued paid time off which they could take later; or
- count as hours worked any hours that the employee took as paid time off ('flexi-leave') which they had accrued by working additional hours at some other time.
Full rules (and worked sample calculations) will be covered in guidance at the end of October but the various indicative example calculations included in the policy paper indicate that similar calculations to that under the CJRS will be required using calendar days for the repeating work pattern and pay period.
Can employees under the scheme do other work during hours not worked for their employer?
Unlike the CJRS guidance, the JSS policy paper does not contain express provisions confirming that employees may not provide any services or generate any revenue for their employer or for a linked or associated organisation during unworked hours claimed for under the scheme. The guidance simply states that employees will be able to undertake training voluntarily in non-working hours and that where time spent on training attracts a minimum wage entitlement in excess of the grant payment, employers will need to pay the additional wages. We expect subsequent guidance to confirm whether training must not amount to providing a service to the employer or the employer’s business activities or contributing to those business activities or generating income or profit for the employer. It is likely that the approach here will be consistent with the CJRS (and perhaps also confirm the position on volunteer work, the statutory duties of directors, and employee and union representatives under the JSS being able to carry out their duties and activities in relation to individual and collective representation of employees).
The policy paper is also silent on whether or not employees under the JSS can do other work during hours not worked for their employer - unlike the CJRS guidance which made clear that furloughed employees could take up work for another employer whilst on furlough provided their contract of employment allowed them to do so. We again expect that subsequent guidance on the JSS will confirm this positon, so employers who anticipate that employees under the JSS will take up work elsewhere, should make sure this is addressed in the JSS agreement with the employee so that any new role does not hinder the employer when asking an employee to return to normal working hours.
It is also possible that there may be differences between what work or training is permissible under the JSS Open and the JSS Closed.
Can employees under the JSS take holiday?
The latest factsheet and policy paper make no direct reference to the interplay between holiday and time worked or unworked under the JSS.
We expect subsequent guidance to confirm that employees can take holiday whilst under the JSS scheme and that when an employee is on holiday, they should be paid their normal rate of holiday pay (as required by the Working Time Regulations). As such, we envisage that employers will still be able to claim the JSS grant whilst the employee is on holiday but they will need to top up as appropriate. We also envisage it potentially being possible to count any hours taken as holiday during the claim period as unworked JSS hours rather than working hours. Further information on the interplay between holiday and COVID-19 can be found in our briefing on changes to holiday as a result of COVID-19.
Selecting which employees will come under the JSS
The updated factsheet and policy paper do not contain specific detail on this point but in reality, it will be for the employer to decide who to put onto the JSS. In some cases the job role will determine who is selected but, if an employer needs to choose between employees, it should be careful not to discriminate when selecting, for example, by choosing to put women onto the JSS Open on the assumption that they cannot work as readily because of childcare responsibilities. In our view, employers may be able to justify giving preference to employees in vulnerable groups because, whilst potentially discriminatory, given the circumstances, this is likely to be objectively justifiable. It may be appropriate to consider asking for volunteers in the first instance – whilst making no guarantees that they will be selected.
Agreeing JSS arrangements
Unfortunately, the updated factsheet and policy paper are not consistent as to how employers should seek and confirm agreement with employees as to any JSS arrangements.
The updated factsheet states in one part that employers must have agreed the temporary working arrangement for shorter hours in writing with employees (or trade union) but in another, that employers must agree the arrangements with their staff, make any changes to the employment contract by agreement and notify the employee in writing (akin to the final position adopted under the CJRS).
The policy paper sets out that to be eligible for a JSS Open grant, employers should discuss with staff and must have ‘reached written agreement’ with their employee (or reached written collective agreement with a trade union if appropriate) that they have been offered a temporary working agreement lasting at least seven consecutive days. The guidance in relation to any JSS Closed grant is similar, confirming that written agreement must have been reached that an employee has been instructed to and agrees to stop working for a minimum of seven consecutive calendar days. Unlike the wording for the JSS Open grant, the JSS Closed wording then states that the employee must be notified of the agreement in writing. Despite the JSS coming into force on 1 November, the policy paper also notes that HMRC will publish further guidance on what to include in the written agreement (at least for JSS Open grants) by the end of October.
Given that the policy paper later confirms that claims should commence from the later of the date that the employee starts working reduced hours or the date when working reduced hours is confirmed in writing and not when the decision is made to put someone on to the JSS, employers should be discussing and seeking to agree JSS arrangements with their affected employees as soon as possible. Until the position on what constitutes valid agreement is clarified (and our view is that a similar approach will be taken to that ultimately taken under the CJRS), it would be sensible to ensure written agreements are obtained, clearly evidencing an employee’s consent to the temporary working arrangements.
Notwithstanding the uncertainty surrounding the JSS, an employee’s consent will still be required to vary employees’ terms of employment as part of any JSS arrangements, or employers risk claims for unlawful deductions from wages, unfair dismissal, breach of contract and/or redundancy payments. Employers should continue to be wary of assuming that an employee who fails to reply to any JSS letter seeking consent to the variation of terms has accepted that variation, particularly given the Matter of Carluccio’s Limited case from earlier this year (for further detail see our CJRS Briefing).
We expect employees and trade unions to take a constructive approach to the JSS (as they did with furlough) but prudent employers will still need to consider what their plan would be if employees do not consent either because they just don’t reply to the letter seeking to vary their contractual terms or because they actively refuse. Will they seek to impose any JSS arrangements or potentially make redundancies? In either case employers will have to be mindful of potential collective consultation and notification obligations.
Any commitments made by the employer to employees in any JSS agreement should also be made subject to future changes in guidance given the current uncertainty. Employers should further reserve the right to revisit levels of payment and benefits preserved if the terms of the scheme or the circumstances in general change as well as reserving the right to require employees to work different hours or return to their normal contractual hours depending on what work becomes available before the scheme ends.
JSS agreements must be made available to HMRC on request. Employers must maintain records relating to the terms of the temporary working agreements for each employee, and:
- make sure that the agreement is consistent with employment, equality and discrimination laws;
- keep a written record of the agreement for five years; and (for JSS Open temporary work arrangements)
- keep records of how many hours employees work and the number of usual hours they are not working.
The Job Retention Bonus Scheme
Employers will be able to claim under both the new JSS and the Job Retention Bonus Scheme ('JRBS') if they meet the relevant eligibility criteria. Please see our separate update on the Job Retention Bonus Scheme JRBS Briefing. The new policy paper also makes clear that grants claimed under the JSS can also be used by employers to pay an employee’s wages and help meet the Lower Earnings Limit of the Job Retention Bonus.
HMRC Checks
The guidance makes clear that HMRC will check claims and that payments may be withheld or need to be paid back if HMRC suspects a claim to be ineligible or a claim is found to be fraudulent or based on incorrect information. Grants must only be used for wage costs actually incurred.
The full amount of any grant must be repaid if a claim is found to be fraudulent whilst penalties of up to 100 per cent of the amount over claimed may be applied where deemed appropriate.
Not only does the policy paper set out that HMRC intends to publish the names of employers who have used the scheme but it also states that HMRC will consider publishing the details of employers who are charged with a penalty because of a deliberately incorrect JSS grant claim.
The factsheet and policy paper also confirm that employees will be able to check if their employer has made a claim relating to them via their Personal Tax Account and that the public can report fraud to HMRC if they have evidence to suggest an employer is abusing the scheme.
Similar provisions were introduced throughout the duration of the CJRS as HMRC became increasingly concerned about fraudulent claims and it is clear they will look to actively police the use of the JSS right from its inception on 1 November.
Next steps
Employers wishing to access the JSS will need to move fast with the current CJRS scheme ending on 31 October. Employers will need to decide whether the scheme is viable for them given likely levels of work over coming months and/or whether other workforce measures (including potential redundancies or other alternative employer led short time working schemes minus the government grant) may be required, working out the associated costs for each potential option.
If employers are considering using the scheme, they will also need to consider whether they will top up (and to what level), which employees they will offer access to the scheme to and how they will come to that decision and how they will go about obtaining and documenting the relevant employee consents. This process may be complex and it may be sensible to seek legal advice.
We have been advising many employers on the issues arising out of both the CJRS and the JSS. If we can help your organisation, please contact Luke Bowery or any other member of our employment team.
Links to the current government guidance on the Job Support scheme:
Disclaimer
This briefing gives general information only and is not intended to be an exhaustive statement of the law. Although we have taken care over the information, you should not rely on it as legal advice. We do not accept any liability to anyone who does rely on its content.