James Tamm, Director of Legal Services at employment law and HR support firm Ellis Whittam, explains what we currently know about the government’s new Job Support Scheme.
On 24 September 2020, the government announced further measures to assist employers and employees in the form of a Job Support Scheme (“the scheme”). This will replace the Coronavirus Job Retention Scheme, which is due to come to an end on 31 October 2020.
Below, I have set out what we know so far – correct as of 25 September 2020 – reflecting the information in the Treasury’s Factsheet dated 24 September 2020. Further guidance is expected shortly.
1. What is it?
The focus of the scheme is stated to be to protect “viable” jobs.
The company will continue to pay its employee for time worked, but the burden of paying for hours not worked will be split between the employer and the government (through wage support) and the employee (through a wage reduction), and the employee will keep their job.
The government will pay a third of hours not worked up to a cap, with the employer also contributing a third. This will ensure employees earn a minimum of 77% of their normal wages, where the government contribution has not been capped.
The scheme will open on 1 November 2020 and run for six months, until April 2021.
2. Who is eligible?
All employers with a UK bank account and UK PAYE schemes can claim the grant. Neither the employer nor the employee needs to have previously used the Coronavirus Job Retention Scheme.
Large businesses will have to meet a financial assessment test, so the scheme is only available to those whose turnover is lower now than before experiencing difficulties from COVID-19. Details of these requirements to follow. There will be no financial assessment test for small and medium enterprises (SMEs).
It is the Treasury’s expectation that large employers using the Job Support Scheme will not be making capital distributions, such as dividend payments or share buybacks, whilst accessing the grant. Further details will be set out in guidance.
Employees must be on an employer’s 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.
For the first three months of the scheme, the employee must work at least 33% of their usual hours. After three months, the government will consider whether to increase this minimum hours threshold.
Employees will be able to move on and off the scheme 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.
3. What does the grant cover?
For every hour not worked by the employee, both the government and employer will pay a third each of the usual hourly wage for that employee. The government contribution will be capped at £697.92 a month.
Grant payments will be made in arrears, reimbursing the employer for the government’s contribution. The grant will not cover Class 1 employer NICs or pension contributions, although these contributions will remain payable by the employer.
“Usual wages” calculations will allegedly follow a similar methodology as for the Coronavirus Job Retention Scheme. Full details will be set out in guidance shortly. Employees who have previously been furloughed will have their underlying usual pay and/or hours used to calculate usual wages, not the amount they were paid whilst on furlough.
Employers must pay employees their contracted wages for hours worked, and the government and employer contributions for hours not worked. It has been suggested that employers cannot top up their employees’ wages above the two-thirds contribution to hours not worked at their own expense. As mentioned, further guidance to follow.
4. What does it mean to be on reduced hours?
The employee must be working at least 33% of their usual hours.
For the time worked, employees must be paid their normal contracted wage.
For time not worked, the employee will be paid up to two-thirds of their usual wage, subject to the government’s contribution being capped.
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. We await further details regarding this element since it is a shift away from the rules of the Job Retention Scheme.
5. How can an employer claim?
The scheme will be open from 1 November 2020 to the end of April 2021. Employers will be able to make a claim online through GOV.UK from December 2020. They will be paid on a monthly basis.
Grants will be payable in arrears, meaning that 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.
6. HMRC checks
HMRC will check claims. 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.
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. This agreement must be made available to HMRC on request. This appears to be similar to the rules regarding the Job Retention Scheme.
The following is an example from the Treasury’s Fact Sheet:
Beth normally works five days a week and earns £350 a week. Her company is suffering reduced sales due to coronavirus. Rather than making Beth redundant, the company puts Beth on the Job Support Scheme, working two days a week (40% of her usual hours).
Her employer pays Beth £140 for the days she works.
And for the time she is not working (three days or 60%, worth £210), she will also earn 2/3, or £140, bringing her total earnings to £280, 80% of her normal wage.
The government will give a grant worth £70 (1/3 of hours not worked, equivalent to 20% of her normal wages) to Beth’s employer.
|Hours Employee Worked||33% 40% 50% 60% 70%|
|Hours Employee Not Working||67% 60% 50% 40% 30%|
|Employee Earnings (% of normal)||78% 80% 83% 87% 90%|
|Gov’t Grant (% of normal wages)||22% 20% 17% 13% 10%|
|Employer Cost (% normal wages)||55% 60% 67% 73% 80%|
Further updated guidance and employer support resources will be available on the Coronavirus Advice Hub on the Ellis Whittam website.