In a surprising development on 9 October, the Chancellor of the Exchequer announced that the Job Support Scheme (the "Scheme"") will be expanded to support businesses and protect jobs across the UK where businesses are required to close their premises due to local or national coronavirus restrictions set by one or more of the four governments of the UK.
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.
There was more surprise on 22 October, when there was a further announcement by the Chancellor about significant changes to the Scheme itself.
For updated details of the Scheme and its eligibility requirements, see our earlier article.
In this article, we are however looking specifically at the expansion of the Scheme to businesses required to close due to coronavirus restrictions.
Practically, what does this mean?
Eligible businesses will benefit from Government grants amounting to 67% of an employee’s salary up to a maximum of £2,100 a month. However, employers can top up employees’ pay. The Government’s aim with the expansion of the Scheme is to provide a safety net for these eligible businesses by helping them to retain staff and reopen quickly once restrictions are lifted. As mentioned in our earlier article, the Scheme will be available from 1 November and for six months.
What requirements must be satisfied before a successful claim can be made?
In addition to the eligibility requirements for the Scheme itself, under the expansion provisions:
- The business must be instructed to cease work (due to coronavirus restrictions) for a minimum of 7 consecutive (or calendar) days and employees must cease working at the relevant premises.
- The employees of the business cannot be made redundant or put on notice of redundancy during the period that the grant is claimed.
Other important points to note about the expansion of the Scheme
- Although employers of eligible businesses will not be required to make further contributions towards wage costs, they are asked to cover employer NICs and auto-enrolment pension contributions in full;
- Payment of grants, due to begin in December, will be made in arrears, reimbursing the employer for the Government’s contribution;
- Further guidance on the scheme will be set out by HMRC in due course;
- Businesses required to close as a result of specific workplace outbreaks by local public health authorities are not eligible to make a claim under the expansion of the Scheme; and
- Neither the employer nor the employee needs to have previously used the Coronavirus Job Retention Scheme, better known as the furlough scheme.
When the premises re-open, employers can claim under the Scheme where there are “viable” jobs. When originally announced, the Scheme required employers to pay a third of their employees’ wages for hours not worked and required employees to work a minimum 33% of their normal hours. This has changed significantly with the announcement of 22 October. Employees’ minimum hours’ requirement has been reduced to 20% and there is a very significant reduction in the employer contribution to unworked hours to 5%.
An increasing number of regions in England are now in Tier 3 facing the highest level of coronavirus restrictions including the closure, temporarily hopefully, of many businesses, particularly in the hospitality sector. Many businesses are still closed in the central belt of Scotland and the national lockdown in Wales is imminent.
Clearly, employers will be keen to make use of the expansion of the Scheme from 1 November. However, there are some significant concerns about it. One of the issues raised in the high profile dispute with the Government about Greater Manchester entering into Tier 3 is that under the expansion of the Scheme, employees will only receive 67% of their salary whereas under the furlough scheme, the figure is 80%. The concern is that people on low wages will suffer significant financial hardship.
Another issue is timing. Some businesses are already closed or are about to close. Take the national lockdown in Wales for instance. This starts at 6pm on 23 October but the expansion to the Scheme starts on 1 November and claims under it cannot be made until December. There is therefore a gap between when these businesses closed or are about to close and the start of the expanded Scheme. What support is available for employers and employees in these circumstances? The Government has stated that employers can still make use of the furlough scheme which ends on 31 October. That’s not as straightforward as it sounds. Current eligibility for furlough depends on having been previously furloughed for at least three consecutive weeks between 1 March 2020 and 30 June although there are some exceptions such as family leave returners. Consequently, the salaries of some employees who have not previously been furloughed for the requisite period and at the right time cannot be claimed for until the expanded Scheme commences. It is important to point out however that significant other sources of financial support are available for employers.
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