Our team: Mike Tremeer
After several months of winding down, the financial support offered to employers under the Coronavirus Job Retention Scheme (CJRS) will end on 31 October 2020. Over recent months the Government has been urged by some to extend the CJRS with fears raised that its withdrawal would result in large-scale redundancies and significant unemployment.
The Government has chosen not to extend the CJRS. But, as part of its Winter Economy Plan, it did announce in late September a new scheme that will be available from 1 November 2020 to 30 April 2021. Called the Job Support Scheme (JSS), it is intended “to protect viable businesses who are facing lower demand over the winter months due to Covid-19”.
Our comments on the CJRS can be found here. In this article we explore the JSS and how it will work in practice.
Which employers are eligible for the JSS?
All UK employers are eligible, but “large” employers will be required to meet a financial assessment test.
Only large employers whose turnover is lower now than it was before Covid-19 will be entitled to claim the financial support. Large in this context is expected to mean that the company employs more than 250 employees, or that its annual turnover or balance sheet total exceeds threshold amounts. Final details in this regard are expected to be confirmed in further Government guidance and a Treasury Direction.
It is clear that the JSS is more targeted than the CJRS; the Government guidance states that it does not expect that large employers with cash available to make dividend payments to shareholders or buy back its own shares will be eligible for support under the JSS.
Which employees are eligible?
Support under the JSS is available for all employees who were on the employer’s payroll on or before 23 September 2020. There is no requirement that the employee was placed on furlough previously under the CJRS.
The JSS is considerably more flexible than the CJRS was in its early months; employees can be placed on and off the scheme and work different hours each month. The one limit is that each shorter-time working pattern (discussed more below) must last for at least seven days, as opposed to the 21 day minimum furlough period that applied initially under the CJRS.
However, employers cannot claim support under the JSS in relation to any employee that is made redundant or “put on notice of redundancy”. The precise meaning of this is currently unclear but this is a departure from the CJRS – which allowed employers to claim support during an employee’s notice period even if they had been made redundant. That will not be allowed under the JSS and it is unknown whether the JSS will be available for employees if they are placed at risk of redundancy and whilst a redundancy consultation process is taking place.
How does the JSS work in practice?
Under the JSS, employees must work a minimum of 33% of their normal working hours (for the first three months of the JSS – that minimum hours threshold is likely to be increased in February 2021). Employers must pay employees their usual pay in respect of those hours worked.
The pay due to the employee for the unworked hours is then effectively shared between the employer, the Government and the employee. Employers must pay the employee their usual wage for two thirds of the unworked hours, but can then claim the Government’s contribution of one third of that pay in arrears. The Government’s contribution in this regard is capped at £697.92 per month and the employer is responsible for all national insurance contributions and auto enrolment pension contributions that are due.
Take an employee whose normal, full-time, monthly salary is £2,000. If they work 50% of their normal hours, they will receive £1,000 from their employer for hours worked. They will then receive an additional £666 from their employer being two thirds of their usual pay for normal hours not worked – but the employer will be entitled to claim £333 back from the Government. In this case, the employee will work 50% of their normal hours but receive 83% of their normal pay.
However, using the same example, employers will receive only 50% of the normal work from the employee but pay 66% of the normal wage. In addition, they will incur other charges such as employer national insurance contributions and employer pension auto enrolment contributions which cannot be claimed from the Government.
That prospect is likely to be unappealing for many employers, and this ratio becomes worse for employees that work less than 50% of their usual hours – for an employee that works only 33% of their normal hours, an employer must pay 55% of their normal pay.
How to implement the JSS
As under the CJRS, implementing a change to an employee’s working hours and pay (both fundamental terms of their contract of employment) must be agreed with the employee in writing.
The documentation placing an employee on short time working under the JSS should set out:
If only part of the workforce will be placed on short time working under the JSS, thought should be given as to how to select those employees (if necessary). A redundancy-style scoring exercise is likely to be required.
Employees can be cycled on and off reduced hours working under the JSS if desired, provided that each reduced hours working pattern applies for at least seven days.
What if a business or place of work has to close due to a local lockdown?
On Friday 9 October 2020, Rishi Sunak confirmed that the JSS would be extended to further protect the jobs of employees that work for a business that is required to close due to a local lockdown. This appears designed to protect those in the hospitality sector – i.e. those working in restaurants, bars, cinemas and hotels etc – and to be a response to those in the sector that accused the Government of not doing enough in this regard.
Employees falling in to this category will receive two thirds of their normal salary from the Government, up to a maximum of £2,100 per month. Further details on this development are awaited.
Does the JSS affect the job retention bonus?
No. The job retention bonus is a separate scheme which allows employers to claim a payment of £1,000 for each employee that is brought back from furlough and whose employment continues until 31January 2021.
To be eligible, the employee must be paid at least £520 on average in each month during November and December 2020 and January 2021. Employers are able to use the JSS and will remain eligible to receive this bonus.
The JSS will be of appeal to those employers in the hospitality, leisure and retail sectors who will be expecting slow trading over the winter months. With many employees unlikely to return to a central place of work until the New Year at least, demand is likely to continue to be suppressed for some time yet for many businesses.
Those hoping to retain a skilled workforce, and avoid having to recruit at short notice when activity picks up and when talent might not be available in a competitive market, could see the (relatively) short-term costs they incur under the JSS to be a wise investment.
To protect that investment, employers should consider legal issues relating to the JSS carefully and put in place effective written agreements with employees.
For more details or to discuss further, please contact a member of the Fladgate LLP employment team.