There are now two job support schemes (JSS). The original one designed for businesses that are legally required to close because of COVID restrictions – now called JSS Closed, and the “new” one introduced by the Chancellor on 22 October for businesses that remain open but with employees working reduced hours, i.e. JSS Open.
How do businesses qualify for the closed and open Job Retention Schemes?
The JSS Closed can only be used by businesses which are required to close by the coronavirus regulations, such as under the Tier 3 restrictions in England. Otherwise, all other small and medium sized businesses can use the JSS Open if some or all of their employees are working reduced hours.
Are there any restrictions to the employers if they wish to benefit from the JSS Open?
Large employers (with 250 or more employees on 23 September 2020) wanting to use JSS Open must also show that their trade has suffered a downturn as a result of coronavirus. They demonstrate this by completing a financial impact test. They must compare turnover recorded on box 6 of their VAT returns (filed between 31 August and 7 November 2020) with the VAT returns for the same period in 2019, to evidence a fall in income.
Employers with less than 250 employees are not required to complete this test. Also businesses that benefit from public funds should use these funds first before making any claim. Large businesses are not permitted to pay dividends or return capital to shareholders while using the scheme.
What are the common conditions for both JSS Open and JSS Closed?
Both JSS grants schemes will run from 1 November 2020 to 30 April 2021, with the conditions to be reviewed in January 2021. The employer need not have claimed under the CJRS to use either JSS. Publicly funded bodies are not expected to use either JSS scheme as:
The other conditions for both JSS are as follows:
- The employer must have a UK, Isle of Man or Channel Island bank account
- The employer must use PAYE online
- Only payments to eligible employees qualify for the grants (see below)
- Large businesses are not permitted to pay dividends or return capital to shareholders while using the scheme.
- Employers must have paid the full amount claimed for an employee’s wages to the employee before each claim is made. They should also pay the associated employee tax and employee and employer National Insurance contributions to HMRC.
Which employees are eligible?
The factsheet says employees must be on the payroll of the employer between 6 April 2019 and 23 September 2020, and included on at least one RTI return in that period that was submitted before midnight on 23 September 2020. However, the gov.uk guidance says the employee must be employed on 23 September 2020. Any person who is taxed as an employee is an eligible employee for JSS, which would include contractors subject to IR35 and agency workers.
How is the JSS Open scheme calculated?
Under JSS Open, the employee must work at least 20% of their usual working hours- which equates to one day of a normal five-day working week. This reduction in hours must be agreed in writing with the employee.
The employer must pay for all of the worked hours at the employee’s agreed reference salary, plus up to 5% of the value of the hours not worked, up to £125 per month, but the employer may top-up this figure if they wish to.
The maximum reference salary ( generally based on will be capped at £3,125 per month and the JSS grant will cover up to two thirds of the hours not worked, capped at £1541.75 per month.
The employer must pay all of the employer’s national insurance (NIC) on all of the wages the employee receives plus any employer’s minimum contribution to a workplace pension.
If an employee works for one day a week, how are the contributions made up?
An employee who works for 20% of their contracted hours will receive 20% of pay for the time they have worked by their employer;
The employer will also pay 5% of pay for the time not worked, which is capped at £125 per month;
The government will pay 61.67% of the hours that are not worked, up to a cap of £1,541.75 per month.
In effect, this will see an employee receive two-thirds of their pay for each hour that they do not work, subject to the above.
The caps are based on a maximum monthly “reference salary” i.e. regular wages, of £3,125. They will ensure that an employee will earn at least 73% of their normal wage for working a minimum of 20% of their usual hours. National Insurance and pension contributions remain payable by the employer. In total the employee receives 73.33% of their pay and foregoes 26.67% of their normal pay.
What is the basis of the reference salary?
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.
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;
- The wages payable to the employee in the last pay period ending on or before 19 March 2020, this may be the same salary calculated under the CJRS scheme.
What is the basis of usual hours?
Knowing employees’ usual hours is important to establish the minimum 20% working threshold requirement.
For employees contracted for a fixed number of hours and whose pay does not vary according to the number of hours they work, usual hours are calculated based upon 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.
The variable hours calculation applies if either:
- The employee is not contracted to a fixed number of hours;
- The employee’s pay depends on the number of hours they work.
For employees whose number of hours varies and/or whose pay depends on the number of hours they work, the number of usual hours is calculated based on the higher 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.
How is the JSS Closed scheme calculated?
Under this scheme the grant will cover for two thirds of the normal pay of furloughed employees, who cannot work at all, up to a maximum of £2,083.33 per month. The employee must give up one third of their wages, and will have to agree to that change in their employment contract in writing if they are not already on a zero hours contract.
When can employers claim?
Employers will be able to claim under either JSS from 8 December 2020, although the first claim period can’t start before 1 November 2020.
The claims must be made for minimum seven-day periods, but employees can move in and out of the JSS Open and do not have to work the same pattern each month.
A claim can’t be submitted for a particular employee until that employee’s wages have been paid and reported under RTI. This is to reduce fraud, but means the employer has to fund the entire payment to the employee in advance.
Further detailed guidance on how to make claims under either JSS will be published shortly.
Steps taken to mitigate fraud
HMRC will publish the names of the employers which use either JSS Open or JSS Closed and employees will employees will be able to check if their employer has made a JSS claim relating to them via their personal tax account- this step is designed to prevent employers from claiming JSS while also asking employees to work.