Out with the old, in with the new

The Chancellor of the Exchequer, Rishi Sunak, has announced the replacement to the Coronavirus Job Retention Scheme (CJRS): the Job Support Scheme (JSS). Like the CJRS, the JSS is aimed at protecting employees who might otherwise be made redundant as a result of a coronavirus related downturn in work, and will run from 1 November 2020 until 30 April 2021.

Employees on the scheme must work at least 33% of their usual hours, for which hours their employer must provide them with full pay. However, for the remaining unworked hours, the government and employer will each pay one third of the employee's normal pay (i.e. 22% each). The remaining third of unworked hours will be unpaid.

Employers will have to pay both their own and the government’s thirds to the employee and then claim back the government contribution, which is capped at £697.92 per month. An employee therefore has to be earning £38,000 or less to maximise the benefit of the scheme, and any pay over this amount will diminish the percentage that the government contribute. The government's share will not include cover for Class 1 Employer NICs or pension contributions, whilst the employer's will. Although the scheme starts on 1 November 2020, employers will not be able to claim reimbursement of the government’s third until December 2020.

The scheme offers some flexibility to employers in allowing them to bring employees back for any percentage of their usual working hours above 33%. After the first three months of the scheme, the government will consider whether to raise the 33% minimum.

The contributions from employers and the government corresponding to the varying levels of work can be seen in the following table:

Hours employee works	33%	40%	50%	60%	70%
Hours Employee not working	67%	60%	50%	40%	30%
Employee earnings (% of normal wages)	78%	80%	83%	87%	90%
Gov’t Grant (% of normal wages)	22%	20%	17%	13%	10%
Employer cost (% of normal wages)	55%	60%	67%	73%	80%

 

Eligibility

Eligible employees must have been on the employers PAYE payroll on or before 23 September 2020. Large employers will have to carry out a financial assessment test to demonstrate that their turnover is lower than before the coronavirus disruption, whereas Small and Medium enterprises do not have to undertake any financial assessment test to use the JSS.

For more information, view the government’s Job Support Scheme Factsheet here. Further guidance is due to be published ‘shortly’, but no specific timeframe has yet been given. 

Potential issues with the scheme

The employer’s partial liability for unworked hours has led many to believe that the JSS will not prevent many redundancies, particularly for jobs which are the hardest hit by coronavirus disruption. This is best demonstrated by the following example:

An employer has two employees on equal pay who both carry out the same role. Each is paid £360 per week for 36 hours of week. As a result of coronavirus, there is not enough work for both of these employees. The employer therefore has two options:

Firstly, they could put both employees on the JSS, with the minimum part time work of 33% (i.e. 12 hours per week per employee). The employer would therefore have to pay £200 per week to each employee (comprising of £120 for the 12 hours worked, plus £80 for the 8 hours not worked). This amounts to a total cost to the employer of £400 per week for the 24 hours worked cumulatively by the two employees.

Alternatively, the employer could put one employee on the JSS and provide them double the minimum amount of work (i.e. 24 hours per week). The employer would pay this employee £280 per week (£240 for 24 hours worked plus £40 for the 4 hours not worked). In this scenario, the employer would receive the same 24 hours of work as the first option, but at a lesser cost than retaining two employees. It would therefore be more cost effective for the employer to put one employee on the JSS and make the other redundant.

In addition, if there were three employees and only work available for one, it would be more cost effective for an employer to make two redundant and keep one employee full-time without utilising the scheme at all.

The above examples assume that there is some work remaining for the employers, albeit a lesser amount than usual. Where coronavirus has caused a complete cessation in all work for some employees (even if only on a temporary basis), the JSS will be of no use, as the employer will not be able to provide the minimum 33% of work to access the scheme. In contrast, the CJRS (as originally implemented) allowed employers to utilise the scheme for employees who had no work (and initially they were prohibited from working if they were placed on the scheme!). 

The lack of cost effectiveness may in some cases be tempered by the Job Retention Bonus, which will provide employers with a one-off payment of £1,000 for every employee who is brought back from the CJRS and remains in employment until 31 January 2021. However, this will only push back the potential ‘cliff edge’ of redundancies until January 2021, at which point keeping employees on the JSS will become significantly more expensive.  

Practical considerations

Employers should start evaluating as soon as possible whether it will be cost effective to utilise the JSS, factoring in the relevant employee’s pay, how many hours they work, how much work is actually available, the Job Retention Bonus and the medium to long term viability of the particular role.

As utilising the JSS will inevitably lead to a pay reduction of up to 22%, and work reduction of up to 67%, employers will also need to seek agreement from employees to reduce their pay and hours (unless the employment contract allows for employers to unilaterally vary these). This will be a similar process to that which employers had to follow when putting employees on the CJRS, and legal advice should be sought before employers proceed.

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For further information and advice on the above, please contact the Employment Team or your usual Wilsons contact.