Taylor Walton Coronavirus Update October 2020 - New Guidance issued on the Job Support Scheme for open and closed businesses
On 22 October 2020, the Government announced changes to the new Job Support Scheme for open businesses (JSS - open) and it also issued new guidance on the JSS- open and the Job Support Scheme for closed business (JSS-closed). Both schemes come into effect on 1 November 2020.
The new guidance can be viewed at: https://www.gov.uk/government/publications/the-job-support-scheme/the-job-support-scheme.
Below is a summary of the information which is currently available on the JSS-open and the JSS-closed. Further guidance is expected next week and we will update this note when further information is published.
Overview of Job Support Scheme for Open Businesses
The Government has stated that in recognition of the pressure businesses in some sectors and areas are facing, the changes which have been made to the JSS- open were intended to “lighten the burden of keeping on staff.”
Under the JSS-open, the employee will need to work a minimum of 20% of their usual hours (down from 33% as originally announced) and the employer will continue to pay them as normal for the hours worked. Alongside this, the employee will receive their normal pay for up to 66.67% of the hours not worked.
The 66.67% will be made up of contributions from the employer and from the Government. The employer will pay 5% of the employee’s salary for the hours not worked (down from 33% as originally announced), up to a maximum of £125 per month, with the discretion to pay more than this if they wish. The Government will pay the remainder of 61.67%, of the employee’s salary for the hours not worked, 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 £3,125 a month or less.
In order to claim under JSS-open, employers will have to calculate the employee’s reference salary and usual working hours in a similar way to the Flexible Furlough Scheme. Further details are set out below.
Overview of Job support Scheme for businesses ordered to close
Businesses who have been ordered to close due to Coronavirus restrictions by one or more of the four governments of the UK can obtain support under JSS – Closed.
Each employee who cannot work due to these restrictions 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. The employer has discretion to pay more than this if they wish. The Government hopes that by retaining staff in circumstances where redundancies may otherwise have been necessary will enable businesses to reopen as quickly as possible when circumstances allow.
In order to claim under JSS-closed, it will be necessary for the employer to calculate the employee’s reference salary but not the usual working hours. This is similar to the approach taken under ordinary Furlough Leave.
Viability of jobs
The Governments original announcements relating to the JSS stated that was intended to support “viable jobs” only. No further details about what amounted to a viable job was given.
The new guidance does not explicitly deal with this point but it does state that employers cannot claim for an employee who has been made redundant or is serving a contractual or statutory notice period during the period that a JSS grant is being claimed. This applies to JSS-open and JSS-closed. At present, it seems that grants will be claimed in arrears on a monthly basis.
This implies that employees who are participating in redundancy consultation may be covered provided that they are not subsequently selected for redundancy and served with notice during the period that the grant is being claimed for that employee.
For example, if the employer was consulting to reduce a team of 5 employees by one role, the 4 employees who are not selected for redundancy would appear to be eligible for JSS throughout the consultation period and thereafter as their jobs would be viable. The employee who is selected for redundancy and served with notice would not be eligible for JSS grants for the claim period in which they are serving their notice period or dismissed by reason of redundancy.
Making claims under either JSS does not appear to prevent the employer from commencing a redundancy consultation process. However, it will have an impact on whether they will be able to claim the grant in respect of certain employees.
It also appears that employees who have already agreed to reduce their hours in recent months may be eligible for support under the JSS although any reduction in hours already agreed may affect calculations relating to “usual hours”. Further details on calculation of usual hours are set out below.
Details applicable to JSS – open and JSS-closed
The JSS will be open from 1 November 2020 and run for 6 months, until 30 April 2021. The Government will review the terms of the scheme in January.
Employers will be able make their first claim from 8 December 2020 on GOV.UK, covering salary for pay periods ending and paid in November. Subsequent months will follow a similar pattern, with the final claims for April being made from early May. 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. Penalties will be in place for fraudulent claims.
Neither the employer nor the employee needs to have benefitted from the Coronavirus Job Retention Scheme to be eligible for the JSS. Employers claiming under JSS-open and JSS-closed may still claim the Job Retention Bonus in respect of the same employee if they are eligible. Grants claimed under the JSS can be used by employers to help meet the Lower Earnings Limit of the Job Retention Bonus.
The following matters apply to both schemes:
- Employers will be able to access JSS-open and JSS-closed provided they have enrolled for PAYE online and they have a UK, Channel Island or Isle of Man bank account.
- Eligible employers will be able to claim the JSS grant for employees who were on their PAYE payroll between 6 April 2019 and 11:59pm on 23 September 2020. This means an RTI Full Payment Submission notifying payment in respect of that employee must have been made to HMRC at some point from 6 April 2019 up to 11:59pm 23 September 2020.
- Employers can only claim for employees that were in their employment on 23 September 2020. If employees ceased employment after 23 of September 2020 and were subsequently rehired, then employers can claim for them.
- An individual is an employee for the purposes of the JSS if they are treated as an employee for Income Tax purposes. This includes, casual, temporary and zero hours workers.
- Employees will be able to undertake training voluntarily in non-working hours. Where time spent on training attracts a minimum wage entitlement in excess of the grant payment, employers will need to pay the additional wages.
- The Government will introduce parental pay legislation as soon as possible (covering maternity allowance, statutory maternity/, paternity, shared parental, adoption and parental bereavement pay) to avoid parents losing out on their entitlement to parental pay as a result of being put on the JSS during the relevant assessment period.
- The JSS grant will not cover National Insurance contributions (NICs). These contributions remain payable by the employer. Employers must deduct and pay to HMRC income tax and employee NICs on the full amount that is paid to the employee, including any amounts subsequently met by a JSS grant. Employers must also pay to HMRC any employer NICs due on the full amount that that is paid to the employee, including any amounts subsequently met by a JSS grant.
- Employers and Employees must still pay pension contributions in accordance with the applicable pension scheme terms, unless the employee has opted out or stopped saving into their pension. If applicable, Student Loan deductions and the Apprenticeship Levy must also still be paid. None of these payments are covered by the JSS grant.
- The Government expects that large employers (250 or more employees) and their corporate groups using either JSS-open or JSS-closed will not make capital distributions whilst claiming the JSS grant. This includes dividend, charge, free or other distribution and any equivalent payment that a partnership may make to its partners. The Government does not plan to make this expectation a contractual or legal condition of the JSS but 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.
- Employers must have paid the full amount claimed for an employee’s wages relating to unworked hours to the employee before each claim is made.
- Employers cannot enter into any commitment or transaction with the employee which would reduce wages below the amount claimed (for example a salary sacrifice scheme). This includes any administration charge, fees or other costs in connection with the employment. Where an employee had authorised their employer to make deductions from their net salary, these deductions can continue while the employee is working reduced hours provided that these deductions are not administration charges, fees or other costs in connection with the employment (for example, pension contributions and charitable giving).
- More details on employee eligibility for both schemes will be available in further guidance published by the end of October
JSS-open for large businesses – financial assessments
Employers with 250 or more employees as at 23 September 2020 must undertake a Financial Impact Test to be eligible to claim under JSS-open. This test does not apply to large businesses claiming under JSS-closed.
If the employer’s turnover has remained equal or has decreased compared to the previous year, then they will be eligible to claim. This test only needs to be taken once before the employer’s first claim under the JSS-open.
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.
The new guidance provides worked examples of how to complete the Financial Impact Test. Further guidance for large employers who are not VAT registered will be available by the end of October.
Any charity with 250 or more employees that is registered with a UK charity regulator or are exempt from such registration will not be required to carry out the test.
How to implement reduced working hours under JSS-open
To be eligible for the JSS-open grant, employers must have reached written agreement with their employee (or reached written collective agreement with a trade union where the relevant terms are determined by collective agreement) in relation to the working arrangements under JSS-open. This is described in the new guidance as a “temporary work agreement.”
The guidance states that when employers are making decisions, including deciding to whom they should offer reduced hours, equality and discrimination laws will apply in the usual way.
The temporary work agreements must be kept for a 5 year period. The employer must also retain records in relation to how many hours employees work and the number of usual hours they are not working. The temporary work agreements must be made available to HMRC on request.
HMRC will publish further guidance on what to include in the written temporary work agreement by the end of October. However, the fact that the guidance states that the employer must reach a “written agreement” with the employee may prevent the employer from imposing new working arrangements under JSS-open on employees. The requirement for “written agreement” may also mean that discussions about changes to an employee’s working hours and pay, which are then recorded in writing, may not be sufficient for the purposes of JSS-open.
Eligibility for JSS-closed
Employers are eligible to claim under JSS-closed if their business premises at one or more locations has been legally required to close as a direct result of coronavirus restrictions. This includes premises restricted to delivery or collection only services from their premises and those restricted to provision of food and/ or drink outdoors. Businesses premises required to close by local public health authorities as a result of specific workplace outbreaks are not eligible for this scheme.
Employers are only eligible to claim for periods during which the relevant coronavirus restrictions are in place. 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. They may then be able to claim JSS -open if they are eligible.
Eligible employers will be able to claim the JSS-closed grant for employees whose primary work place is at premises that have been legally required to close as a direct result of coronavirus restrictions. In addition, the employer must have instructed the employee to cease work for a minimum period of at least 7 consecutive calendar days.
Implementing arrangements under JSS-closed
The new guidance indicates that employees must agree to cease working for a minimum period of 7 consecutive days by way of a written agreement. However, the guidance then states that the employer must “notify the employee of the agreement in writing”. This seems to imply that employers may have more flexibility in documenting any arrangements under JSS-closed taking account of the fact that the business has been ordered to close and the employer may have no choice but the instruct employees to cease working, whether they agree or not. Further guidance on this matter is expected shortly.
The written agreement must also be kept for 5 years and made available to HMRC on request. Employers must comply with discrimination laws when implementing arrangements under JSS-closed.
The new guidance sets out details on calculating the reference salary for use under JSS-open. These are described in more detail below.
Further guidance in relation to the reference salary for JSS- closed will be available by the end of October.
Under JSS-open, the amount an employer should use for calculating an employees’ reference salary is made up of the regular payments they are obliged to make, including regular wages, non-discretionary payments for hours worked, including overtime, non-discretionary fees, non-discretionary commission payments and piece rate payments. The calculations should not include discretionary payments or bonuses, tips or benefits in kind.
This is similar to the approach taken in the Coronavirus Job Retention Scheme.
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 and the wages payable to the employee in the last pay period ending on or before 19 March 2020. This later date will be relevant for employees who have been on Furlough Leave since March.
For employees whose pay is variable the reference salary 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; or the average wages payable from 1 February 2020 (or the employee’s start date if later) until 23 September 2020.
Worked examples appear in the new guidance.
Calculations relating to usual hours will only be relevant to JSS-open. (Employees who cannot work due to coronavirus restrictions will receive 2/3 of their normal pay under JSS-closed on the basis set out above.).
For employees contracted for a fixed number of hours and whose pay does not vary according to the number of hours they work, usual hours are calculated based upon the greater of the hours that the employee was contracted for at the end of the last full pay period ending on or before 23 September 2020 and the hours that the employee was contracted for at the end of the last full pay period ending on or before 19 March 2020.
For employees whose number of hours varies and/or whose pay depends on the number of hours they work, 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 and the average number of hours worked from 1 February 2020 (or the employee’s start date if later) until 23 September 2020.
The new guidance provides worked examples of how to calculate usual hours and the approach taken is similar to that which applied under the Flexible Furlough Scheme. It is important for employers to correctly calculate usual hours as any mistakes may lead to the employee working less than 20% of their usual hours and becoming ineligible for the JSS-open grant.
Further guidance on the calculation of usual hours is expected by the end of October.
Taylor Walton’s employment team are available to assist employers with matters relating to the JSS including preparation of temporary working agreements. If you have any queries relating to the issues raised in this guidance note, please contact Alec Colson in the first instance on 07711 589574 or firstname.lastname@example.org.