Changes to job support scheme announced

The Chancellor, Rishi Sunak, has announced changes to the Job Support Scheme aimed at protecting more jobs. A revised fact sheet and a new policy paper have also been published. The changes are beneficial to employers as they reduce the wage commitments to a lower level than first envisaged by the scheme. The revised scheme, now call the Job Support Scheme Open (JSS Open) is designed to protect jobs in businesses who can operate safely but are facing lower demand over the winter months due to Covid-19.

Under the revised JSS Open:

• Employees will have to work 20% of their usual hours (down from 33%) and their employer must pay them their contracted wage for the hours worked. Time spent training counts as working 
• Employers will pay 5% of the employee’s usual wage for the hours not worked (down from 33%).  Employers are able to cap their contribution at £125 per month. “Usual wage” calculations will follow a similar methodology as for the job retention scheme (see further information below).  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 while on furlough)
• The Government will pay 61.67% of the employee’s wages for the hours not worked (up from 33%) and the Government’s contribution will be capped at £1541.75 per month (up from £697.92)
• Employers can top up employee’s wages above the 5% contribution if they wish (previously it was unclear whether top up is permitted)
• Employers will have to pay employer National Insurance Contributions and employer pension contributions on all amounts paid to the employee, including the grant from the Government   
• The level of support will be reviewed in the new year
• Larger businesses (with 250 or more employees) have a financial impact test (further information below). They only qualify if their turnover has stayed level or is lower now than before experiencing difficulties from Covid-19 (previously their turnover had to be lower) 
• There will be no financial impact test for SMEs – those with fewer than 250 employees, or for charities    
• Fully publicly-funded organisations are not expected to use the scheme, but partially publicly funded organisations are eligible where their private revenues have been disrupted
• Employees must be on the employer’s PAYE payroll between 6 April 2019 and 23:59 on 23 September 2020 (and must have still been employed as at 23 September). This means a Real Time Information (RTI) submission notifying payment to that employee to HMRC must have been in respect of them at some point between 6 April 2019 and 23 September 2020
• Staff on any type of contract are eligible, including those on variable or zero hours and agency workers 

Other aspects of the scheme, including which businesses and employees qualify, remain unchanged from those originally announced. This means that:

• Neither the employer nor the employee needs to have used the job retention scheme 
• The employer must have a UK bank account and a UK PAYE scheme
• Employees will be able to cycle on and off the scheme and do not have to be working the same pattern each month.  However, each short time working arrangement must cover a minimum period of seven consecutive days
• Employers must agree the new short time working arrangements with their staff, make any changes to the employment contract by agreement, notify the employee in writing and make the agreement available to HMRC on request. Claims should commence from the later of the date the employee starts working reduced hours and the date this is confirmed in writing. It is therefore important to get the written agreement in place before 1 November. Despite this, the Government is only promising further guidance on what has to be included in the written agreement by the end of October.   
• Employers must pay the sums due and will then be reimbursed by the Government   
• Employees cannot be made redundant or given notice of redundancy while the employer is claiming a grant for them

The scheme will run for six months from 1 November 2020 and employers will be able to make a claim online from 8 December 2020. 

The extended support scheme, announced on 12 October, will be available for businesses legally required to shut due to coronavirus lockdown restrictions. This has been renamed the Job Support Scheme Closed (JSS Closed) 

Policy paper 

The Government has also published a job support scheme policy paper today, giving further details on eligibility criteria, conditions and timescales for making claims.  Further guidance will be published at the end of October.

The policy paper clears up some previously unanswered questions relating to the financial impact test for large employers under JSS Open and the expectation that large employers will not make capital distributions, such as dividend payments. It also provides guidance on working out an employee’s reference salary for the purposes of the JSS Open and an employee's usual hours. Further guidance will follow at the end of October for the JSS Closed.   

Financial impact test

The financial impact test for large employers applies where a legal entity has 250 or more employees across their payrolls on 23 September 2020. This financial impact test only needs to be taken once before the employer’s first claim. Large employers will qualify if their turnover has remained equal or has decreased compared to the previous year. 

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.

Further guidance for large employers who are not VAT registered will be available by the end of October.

Capital distributions 

The Government expects that large employers and their corporate groups using either the JSS Open or the JSS Closed will not make capital distributions while claiming the grant (including dividends and any equivalent payment that a partnership may make to its partners), but is not making this a condition of the scheme. However, it encourages businesses to reflect on their responsibilities and that taxpayers should be able to rely on public money only being claimed where it is clearly needed.

Reference salary - JSS Open

Employers should include regular wages, non-discretionary payments for hours worked (including overtime), non-discretionary fees, non-discretionary commission payments and piece rate payments. They should not include discretionary payments including tips, discretionary bonuses, discretionary commission payment, non-cash payments, benefits in kind and salary sacrifice schemes that reduce an employees’ taxable pay.

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
• The wages payable to the employee in the last pay period ending on or before 19 March 2020

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
• The average wages payable from 1 February 2020 (or the employee’s start date if later) until 23 September 2020

Usual hours 

For employees with fixed hours (and whose pay does not vary according to the number of hours they work) usual hours are calculated based on 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
• 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 with variable hours or whose pay depends on the number of hours they work, the number of usual hours is calculated based on the greater 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
• The average number of hours worked from 1 February 2020 (or the employee’s start date if later) until 23 September 2020

The policy paper provides worked examples of the calculations and can be viewed here.