On Thursday 22 October, the Government announced significant changes to the Job Support Scheme (the “JSS”). We published information about the JSS as it was when first announced in an earlier article on 25 September 2020.
The JSS, as originally envisaged, was considerably less generous than the Coronavirus Job Retention Scheme (generally referred to as “the furlough scheme”). Under the furlough scheme an employer could (initially at least) claim for up to 80% of most employees’ wages. Initially, the employer contributed nothing, and, in most cases, employees would agree to limit their wages to what the Government provided. The furlough scheme enabled employees to be supported whether their job was viable or not. Some employees therefore remained on furlough even after their place of work had closed.
It is perhaps understandable that the JSS is less generous than the furlough scheme. The Government’s stated rationale for the JSS is to protect viable jobs (i.e. jobs that will still be there when some sort of normality returns).
Initially the JSS was designed to work as follows:
An employee had to work for at least 1/3 of their normal hours (which would be paid in full).
Of the remaining 2/3 of wages for hours not worked;
• The Government would pay 1/3
• The employer 1/3
• The employee would then lose 1/3 (i.e. nobody pays).*
(* as with the furlough scheme, the employee would have to agree to sacrifice part of their pay, but this is likely where redundancy is the alternative).
There was real concern that this new, less generous, scheme would lead to a significant increase in unemployment. An employer employing 5 full time employees would pay less money for more manhours by making 3 of the 5 employees redundant than by putting all 5 on the scheme at 1/3 of usual hours. Particularly in the hospitality sector, a significant number of redundancies were predicted.
The new scheme
Under the new scheme an employee will only be required to work for 20% of their normal hours (as opposed to 1/3).
Of the remaining 80% of wages for hours not worked;
- The Government will pay 61.67%
- The employer will pay 5%
- The employee then loses the remaining 33.3% (essentially 1/3 as before).
While less generous than the furlough scheme this is far more generous from an employer’s point of view than the initial plans for the JSS and it will hopefully prevent a significant number of redundancies.
As before, there is a cap on the payments. The Government’s 61.67% contribution is capped at £1,541.75 per month so some high earners will lose out, as was the case under the furlough scheme.
An employer will not be required to contribute more than £125 a month for their 5% contribution, although employers have the discretion to pay more if they so choose.
As before, the JSS does not provide any support towards pension or National Insurance contributions.
Other rules on eligibility appear to remain unchanged.
It is likely that this scheme will change again as the political and economic situation develops. While the scheme is due to last from 1 November 2020 to 30 April 2021, it could become less generous with time. Like the furlough scheme it is possible that the Government may seek to reduce their contribution in due course while also increasing the employer’s contribution.
If a business is forced to close
If a business is legally required to close (for example a nightclub in a Tier 3 lockdown area), then there is a separate Job Support Scheme (the “JSS Closed”).
Under the JSS Closed, employees can receive 67% of their normal wages. This is provided completely by the Government and is in many ways more similar to the furlough scheme. However, it is only available if a business is legally required to close. A business that is unviable due to Tier 2 restrictions but that is allowed to remain open cannot benefit.
For both the JSS and JSS Closed, there must be a written agreement between the employee and the employer. This is something we are happy to help prepare.
The above is based on current government guidance only and is not yet law. This could still change before 1 November or afterwards. There are other limitations and eligibility criteria that have not been stated in detail in the above article.