23rd October 2020
This article was last updated on 23 October at 09:40 and includes details of the enhancements to the Scheme announced by the Chancellor on 22 October 2020.
The Chancellor of the Exchequer announced (24 September) details of the Job Support Scheme (the Scheme), which will replace the Coronavirus Job Retention Scheme (CJRS) with effect from 1 November 2020.
The Scheme will apply to all businesses, including those whose premises have been legally required to close as a direct result of COVID-19 restrictions, as determined by one of the four UK Governments.
Under the Scheme the employer will continue to pay its employees for the time worked but with the employer contribution being reduced to 5%. The Government will now pay at least 62% for the hours not worked. The further changes announced by the Chancellor sees the minimum number of hours the employee is required to work being reduced to 20% of their contracted hours.
The Scheme will run for six months, until April 2021.
Eligibility – the employer
All employers with a UK bank account and a PAYE scheme can claim under the Scheme.
An important point to note is that there is no requirement for either the employer or the employee to have previously used CJRS. This will prove invaluable for employers who are trying to preserve jobs.
Under the Scheme large businesses will be required to meet a financial assessment test. Only those businesses whose turnover is lower owing to the impact of the pandemic will be eligible to benefit from the Scheme.
Any large business who benefits from the Scheme will not be able to make capital distributions, such as the payment of dividends or share buyback arrangements.
Eligibility – the employee
Any employee must be on the employer’s payroll on or before 23 September 2020.
Employees must work at least 20% (previously 33%) of their usual hours. After three months, the Government will consider increasing the minimum working hours threshold.
There is scope to rotate employees on and off the scheme, without the requirement to work a similar work pattern each month. However, each working period must be for a minimum period of seven days.
How will the Scheme work?
Whilst full details of the Scheme are awaited, we do know the following:
- For every hour not worked by the employee, the Government will pay 62% (previously 33%) and the employer will pay 5% (previously 33%) of the usual hourly wage for that employee.
- Grant payments will be made in arrears, reimbursing the employer for the Government’s contribution.
- Unlike the initial phase of CJRS, the Government will not be contributing towards the Class 1 employer’s National Insurance contributions or pension contributions. These remain the responsibility of the employer.
- A similar methodology used under CJRS will apply when determining how to calculate the hours which will be supported under the Scheme.
- Employers must pay employees their contracted wages for the hours worked. The Government and employer are both contributing towards the hours not being worked.
- The employee must be working at least 20% (previously 33%) of their usual contracted hours.
- The employee must be paid their normal contracted salary.
- Under the Scheme the employee will be paid two-thirds of their usual salary.
- Employees cannot be made redundant or put on notice of redundancy during the period when their employer is claiming grant payments under the Scheme.
Job Support Scheme for closed business premises
Following the announcement of the Scheme, the Government announced an extension to provide support to businesses who are required to close as a consequence of tighter local or national restrictions across the UK. This formed part of the Chancellor’s announcement made on 13 October 2020.
The main features concerning the level of support being extended to businesses is set out earlier in this article. The extension to the Scheme announced on 13 October 2020 will support any business that is required to close its premises, which includes restriction to deliver and collection only services from those premises. The extension will only apply to businesses legally required to close their premises as a direct consequence of local or national restrictions.
The extension to the Scheme will not apply to any of the following businesses, even though they will potentially be affected by further lockdown restrictions:
- Businesses that are legally able to stay open but whose trade is significantly affected by any lockdown restrictions. Examples include suppliers to pubs, restaurants and hotels.
- Businesses that are able to remain open but where demand for their services is reduced, for example theatres and cinemas.
- Where a business decides to close owing to a decline in demand owing to the impact of COVID-19.
- Where a business is closed by a local public health authority owing to a specific workplace outbreak.
Claims under the Scheme will relate to any employee who has been instructed to cease work because of the closure of the business.
The extension of the Scheme will, as previously mentioned, follow the same rules as the initial version of the Scheme. Where any local or national restrictions are lifted, with the business re-opening, any small or medium sized businesses can still claim under the Scheme where they are facing a reduction in the demand for their services.
Details as to how employers will be able to claim payments under the Scheme, together with more technical information, are awaited.
However, employers will be able to claim payments from December 2020. The payments will be payable in arrears.
HMRC issued over 27,000 letters to employers who they believed had claimed support under CJRS to which they were not entitled to receive.
HMRC will undertake checks on claims made under the Scheme and will seek to recover any overstated or fraudulent claims. Furthermore, they will check the short-term working arrangements of employees to ensure compliance with the Scheme.
We recommend that even where an employer has not been contacted by HMRC regarding the claims submitted they should review the claims made. Where any errors have arisen, seek professional advice concerning how they should be resolved.