The Coronavirus Job Support Scheme (“JSS”)

There is no draft legislation or guidance, yet, but HMRC has said it will issue some guidance later in October.

Period of the scheme

The JSS is designed to replace the coronavirus job retention scheme (CJRS) for furloughed workers, which comes to an end on 31 October 2020. The JSS also has a limited life as it will only apply to salaries or wages paid in the period from 1 November 2020 to 30 April 2021, unless it is extended.

Which employees qualify? 

Any employee who was included on an RTI return submitted by the employer on or before 23 September 2020, will be eligible to be included in a JSS claim, if the working hours conditions are also met for that employee.

We do not know whether that RTI return must have been submitted for the 2020/21 tax year or for an earlier year. If the employee had to be paid in 2020/21, directors who are paid annually in late March will not be eligible for the JSS grant as they won’t have been included on an RTI return for 2020/21 before September. Those annually paid directors were also excluded from the CJRS as they had not been paid in 2019/20 before that scheme started.   

The JSS is not restricted to employees who were furloughed at some point between March and October 2020. Also, unlike the CJRS, the JSS will be available for employees who have recently joined the payroll, for example since March 2020.

Employees who are already on notice for redundancy, or who have been made redundant cannot be included on a JSS claim submitted by the employer who made them redundant.

Which employers qualify?

Any small or medium sized employer with a UK bank account will be able to use the JSS without further conditions applying.

Large employers will have to show that their business turnover has reduced due to Covid-19 before they can use the JSS. This test is clearer than the “adversely affected” condition for the self-employed income support scheme (SEISS), as it concentrates on turnover rather than on profits or costs.

HMRC has said that large employers will be expected to refrain from paying dividends to shareholders, and must not use share buy-back schemes, while claiming under the JSS. It will be interesting to see how this ban on dividends will be defined in the law and guidance.

We do not know how “large employer” will be defined for the JSS, but it is likely to be by number of employees, such as 250 or more. Regulations will need to determine whether the employee headcount is for the corporate group as a whole, and whether the employee numbers are “full-time equivalents”, as applies to, for example, most share schemes.   

Working hours

The employee must work at least 33% of their usual hours, but we do not know how “usual hours” will be defined. Many employees have been working part-time under flexi-furlough since 1 July, so it will be crucial to know at what date “usual hours” will be measured. This will be an interesting problem for employees who have recently joined the workforce.

The 33% of working time ratio will apply for November 2020 to January 2021, and the government may increase this minimum percentage from 1 February onwards.   

The employee will not have to work one third of every week, they will be able to chop and change, as long as each period containing some work lasts for least seven days.

Who pays what?

The employer will have to pay the employee for the actual hours worked according to their normal terms of employment. The factsheet makes it clear that this is the pre-Covid wage rate, not 80% of normal pay, which furloughed employees may have agreed to take.

The JSS grant only covers the pay for 33% of the hours not worked. The employer must pay for 33% of the non-working hours, and the employee must forego pay on the balance of the non-working hours. Thus, the cost of the non-working time is born equally by the employer, the government, and the employee. However, the government’s contribution under the JSS is capped at £697.22 per month.

Under the JSS the employer will pay around 55% of the employee’s normal pay in return for 33% of their normal working hours, and the government will contribute 22% of the employee’s normal pay. The employer will also pay all of the employer’s NI and employer’s minimum pension contributions to a workplace pension, both on the entire amount of wages paid.    

Example

Alex is an airline pilot paid £52,000 a year, £1,000 per week. Before the Covid-19 pandemic he worked 36 basic hours per week, so his basic hourly rate is £27.78

Alex agreed to work 12 hours per week, with 24 non-working hours. His employer must pay him for 28 hours (12 working + 16 non-working). The JSS will cover eight of those non-working hours, subject to the monthly cap.

On a weekly basis Alex receives pay for 28 hours: £777.84, and the JSS covers eight hours: £222.24, per week.

In November Alex works 48 hours over four weeks and is paid for 112 hours: £3,111.36. The JSS is capped at £697.92 per month, so the employer must bear the cost of the balance: £2,413.44 plus employer’s NI and pension. That works out at £50.28 of basic pay per hour; 180% of Alex’s normal hourly rate.

When is the claim made?

The employer must pay the employee first, and then make a claim for the JSS through an online portal which will open in December 2020. The employer will be paid the JSS grant once each month, but only after the RTI return that reports the employee’s wages has been received by HMRC.

The JSS grant can only be used as reimbursement for wage costs actually paid.

Communication

HMRC have said that employees will be informed by HMRC directly of the JSS claim made to support their pay. This indicates that each claim will have to include an email address or mobile phone number for every employee in that claim. 

If you would like further help with any of the above, get in touch with your usual Continuum contact or email info@continuum-ltd.co.uk