On Thursday 24 September the Chancellor of the Exchequer Rishi Sunak announced a new Job Support Scheme as part of a package of measures to support employment when the furlough (Coronavirus Job Retention Scheme - "CJRS") comes to an end at the end of October.
UPDATE: On 5 November, the Chancellor announced an extension of the furlough scheme to the end of March 2021 for all parts of the UK. The Government’s contribution to employees’ wages will be 80% for hours not worked up to a cap of £2,500 per month but this will be reviewed in January. The Job Support Scheme is postponed. For more details see our article.
However, in a surprising development on 22 October, the Chancellor announced significant changes to the scheme, even before it has commenced. This is in recognition of the considerable difficulties facing businesses in some sectors and against the backdrop of more regional and local coronavirus restrictions. As the Chancellor stated:
“I’ve always said that we must be ready to adapt our financial support as the situation evolves, and that is what we are doing today.”
It is important to point out that today’s developments relate only to those businesses that are open but that are facing lower demand.
There is an expansion of the scheme specifically for those businesses that are required to close their premises due to coronavirus restrictions set by one or more of the four governments of the UK. We have written a separate article about this here.
Many businesses, sectors, business groups and trade unions had been pushing for an extension to the furlough scheme, or at least a targeted response to sectors who have been particularly badly hit by the restrictions and the COVID-19 pandemic. This was especially so as the required start of any 45-day consultation period for 100 or more proposed redundancies passed earlier in September for redundancies made on or before the end of the furlough scheme, and the 30-day consultation period for 20-99 redundancies loomed. Despite numerous confirmations by Government that the furlough scheme would definitely end on 31 October, it was perhaps no surprise that something else had to be put in place with the further restrictions on businesses and individuals that were announced on 22 September and more recently.
Whilst further guidance is to be published shortly (and not changed too many times we hope!) here is what we know about the new Job Support Scheme in its amended format:
What is the new Job Support Scheme and who is eligible?
- It is designed to support “viable” jobs, not prevent inevitable redundancies. Employees cannot be made redundant or put on notice of redundancy during the period the employer is claiming the grant;
- It is dependent on the employee working at least 20% of their usual hours, (prior to today’s announcement it was 33%) paid for by the employer on their usual contracted wage;
- It is available in respect of employees whether or not they were furloughed under the CJRS scheme;
- Whilst all employers are potentially eligible, large businesses, with 250 or more employees, will have to meet a financial impact test and the scheme is only available to those whose turnover has stayed level or is lower now than before experiencing difficulties from COVID-19. There will be no financial impact test for small and medium sized enterprises (SMEs). Large employers will be expected not to make capital distributions such as dividend payments while claiming the grant. Employees need to have been on the payroll on 23 September 2020 (i.e. an RTI submission made to HMRC on or before 23 September 2020);
- It opens on 1 November 2020 and will run until end April 2021. It will not affect eligibility for the separate Job Retention Bonus for those staff who have been previously furloughed and kept on until the start of February 2021.
How does the Job Support Scheme work?
- As stated, the employee must be working at least 20 % of their usual hours, paid for by the employer on their usual contracted wage. This will then be “topped up” to a maximum of two thirds of their usual wage in respect of any hours not worked;
- Employers will pay 5% of non-worked hours, capped at £125 per month, and NICs and automatic enrolment pension contributions in full as a contribution. Employers can top up employee’s wages above the 5% contribution at their own discretion. This contribution of 5% is a very significant reduction from the 33% in the original scheme.
- The Government will contribute 61.67% of non-worked hours, capped at £1,541.75 per month. This is a significant increase from the original Government contribution of £697.92 a month.
- These caps are based on a monthly reference salary of £3,125. This will ensure employees earn a minimum of at least 73% of their normal wages, where their usual wages do not exceed the reference salary.
- For any employees who were furloughed, “usual pay” will be based on their “underlying” pre-furlough pay and/or hours, not any reduced pay. Calculating usual pay will be similar to the furlough scheme but further guidance will be published;
- Employees do not have to be on the same working pattern each month and can come on and off the scheme. However, each short-time working arrangement must cover a minimum of seven days.
What do we have to do to make use of the scheme?
Further guidance will be published shortly. Claims under the scheme can be made online from 8 December 2020 and will be paid monthly in arrears.
However, we do know that employers will need to agree any short-time working arrangements with staff, make any changes to the contract by agreement, and notify the employee in writing. This means that organisations can start to prepare now template agreements and potentially enter into consultation with employees where they foresee the need to make these changes to terms and conditions. Agreements will need to be available for HMRC to see on request.Where there is flexibility in working patterns, this could be harder to agree in writing where demand for work is not foreseeable. This could mean either an overarching agreement where the employee agrees to the minimum and to be notified of any change in working pattern, or, if the employee is not prepared to agree to that, a new agreement for every change in working pattern (minimum of seven days).
Unlike the furlough scheme, HMRC intend to publish the names of employers who have used the job support scheme.
Whilst the original announcement about the job support scheme was welcomed both by the Trades Union Congress (TUC) and the Confederation of British Industry (CBI), there was widespread concern that the minimum cost to employers previously of 55% of wages plus NIC and pension contributions would hit many businesses hard and in some cases, employers may have chosen to make one employee redundant rather than keep both on. This is especially true of venues which have had to shut down entirely, such as nightclubs and many parts of the live entertainment industry, as well as those whose operations have been severely curtailed such as the hospitality and travel industries (although the 15% VAT cut for these sectors will give some comfort). However, today’s announcement, with its significant reduction in the minimum number of hours to be worked by employees and very significant reduction in the employer contribution should alleviate that problem. For some employers the combination of the Job Support Scheme and the Job Retention Bonus could minimise the financial impact at least initially. It remains to be seen to what extent the new, amended scheme and the bonus will save jobs, and perhaps in anticipation, the CBI, TUC and the Advisory, Conciliation and Arbitration Service (Acas) have just published a joint statement on conducting redundancies here.
Both the TUC and CBI expressed disappointment that it was not linked to training or careers/skills development. Whilst HMRC makes clear that checks will be made, the Institute for Fiscal Studies has questioned how it will know how many hours are really being worked. Presumably repayment obligations and penalties will work in the same way as they currently do for the furlough scheme (please see our recent article on Furlough Fraud).
Finally, new regulations came into force in England on 28 September 2020, prohibiting an employer from knowingly permitting a worker to attend anywhere other than where they are self-isolating, including those who are self-isolating because they live with someone who has tested positive for COVID-19. The fine for employers starts at £1,000. Employees who are required to self-isolate are also now obliged to tell their employer if they are due to undertake work at any place other than where they are self-isolating. The Welsh Government has similarly announced strengthened regulations and support for employees and employers who are required to self-isolate.
For further information and advice on the new Job Support Scheme, the ending of the furlough scheme and any other related issues, please do not hesitate to speak to your usual Blake Morgan contact or our team of experts.
This article was first published on 28 September and last updated on 22 October.
Enjoy That? You Might Like These:
Brexit: an industry’s biggest challenge – a spotlight on the construction industry - 10am, Wednesday 25 November