What is it, and how generous is it compared to the Coronavirus Job Retention Scheme (CJRS / Furlough)?
The government say that the JSS is designed to protect viable jobs in businesses who are facing lower demand over the winter months due to Covid-19. A company will continue to pay its employee for time worked, but the burden of hours not worked will be split between the government (through the grant), the employer (through paying for hours not worked), and the employee (through a wage reduction), in order to protect the job in question.
It is less generous than the Furlough scheme. Employees will not see much difference in their pay packets – the minimum they will receive will be 77% of their normal wages, compared with 80% under the furlough scheme. However, the maximum government contribution to employees’ wages will be 22%, compared with 60% during the final month (October) of the furlough scheme. They will have had to have worked for at least 33% of their usual hours though, unlike the furlough scheme where an employee wouldn’t have necessarily had to work at all.
Am I eligible?
All employers with a UK bank account and a UK PAYE scheme are eligible. It is irrelevant whether or not the employer or employee have previously used the CJRS (“Furlough scheme").
Large businesses will have to meet a financial assessment test in order to prove that turnover is lower now than before experiencing COVID-19 related difficulties. It is also expected that large employers will not be making capital distributions such as dividend payments or share buybacks whilst using the JSS.
There will be no financial assessment for small and medium enterprises (SME’s).
Employees must be on an employers PAYE scheme on or before 23rd September 2020. This means a Real Time Information (RTI) submission notifying payment to that employee to HM Revenue & Customs (HMRC) on or before this date.
For the first 3 months of the scheme (November to January), an employee must be working at least 33% of their normal hours in order to qualify for the scheme. This is where the scheme differs greatly to the Furlough scheme, where an employee could be not working at all. After the first 3 months, the government will consider how to move forward for February, March and April.
Employees can move on and off the JSS, but each short time working arrangement must last at least 7 days.
How does the grant work?
For every hour not worked, the government and the employer will pay a third each. The remaining third is essentially a pay cut for the employee.
As an example:
An employee works the minimum of one third (33%) of their usual hours. Of the remaining 66% (save for some rounding) not worked, 22% will be paid for by the JSS, 22% must be paid by the employer, and the remaining 22% will not be paid to the employee.
In monetary terms:
An employee usually works 40 hours per week, earning £500 per week. Due to Covid-19, there is less work than usual and so they only work a third of their hours (13 hours 20 minutes). The employer must pay their usual wages for the time worked. This would equate to £166.67.
Of the remaining 26 hours and 40 minutes, a third will be covered by the JSS. This equates to 8 hours and 53 minutes, being £111.11.
The employer must also pay £111.11, being another third of the hours not worked.
The remaining £111.11 will remain unpaid.
The grant will not cover employers Class 1 National Insurance Contributions (NIC) or pension contributions, so the employer will also bear the cost of these.
The amount receivable from the JSS will be capped at £627.92 per month per employee.
Grant payments will be made in arrears. This means a claim can only be submitted after payment to the employee has been made and that payment has been reported to HMRC via an RTI return.
What counts as “Usual Hours” and “Usual Wages?”
Under furlough, for employees who are not on a fixed salary or fixed hours, calculations and workings were done to work out their “usual” hours or “usual” pay. They were broadly based on the higher of an average of last years wages or last year’s hours, against wages or hours in the equivalent pay period of the previous year. The government is yet to provide guidance on how this will work for the JSS, but they have indicated that these calculations are likely to be very similar.
Other key points to consider
- Employees cannot be made redundant or put on notice of redundancy during the period within which their employer is claiming a grant for them
- 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. The agreement must be made available to HMRC on request
- HMRC will be checking claims made under the scheme and payments may be withheld, or need to be paid back, if the claim is found to be fraudulent or incorrect
Is this scheme right for my business?
The scheme is much less generous than the furlough scheme, and in the government’s own words, it is there to protect “viable jobs” – whereas the furlough scheme was there to preserve all jobs regardless of their viability during the pandemic.
Under the JSS, an employer will still have to pay one third of an employee’s unworked hours, plus the associated National Insurance and pension contributions on top. This means it may not be ideal in a business where employee numbers correlate strongly with turnover and margins are tight.
It is likely to be more suited to keep hold of an employee who may be more difficult and expensive to replace should they leave. Considerations will need to be made about the consequence of such an employee leaving, both in terms of the short term business effect, but also the medium term cost of recruiting and training a new person if and when business picks up in future.