As we head towards the end of the furlough scheme which is due to come to an end on 31 October 2020, we have been met with further restrictions as a result of the ‘second wave’ of the coronavirus. This has prompted the Government to act, making a series of changes to the Winter Budget. Perhaps most important for employers is the ‘Job Support Scheme’, which will be introduced from 1 November 2020.
This scheme is scheduled to last for six months, ending in April 2021, however the Government has reserved the right to review the terms of the scheme after three months. It will be open to all employers with a UK bank account and a UK PAYE scheme. All small and medium-sized enterprises (SMEs) will be eligible; large businesses will be required to demonstrate that their business has been adversely affected by COVID-19 by undertaking a financial assessment test, and the Government expects that large employers will not be making capital distributions (such as dividends) while using the scheme.
The scheme will require that employees work at least 1/3 (33%) of their usual hours, unlike the original furlough requirement that no work was undertaken by the employee (notwithstanding flexible furlough, which has been in place since July). For every hour not worked, the employer and the Government will each pay one third of the employee’s usual pay. The 1/3 contributed by the Government will be capped at £697.92 per month. Therefore, employees using the scheme will receive at least 77% of their usual salary. The employer will be reimbursed in arrears for the Government contribution. Employers must notify employees in writing of agreed short-time working arrangements and make such documentation available to HMRC on request.
Importantly, the employee must not be on a redundancy notice in order to receive the contribution from the Government. This is likely linked to the Job Retention Bonus, where the Government pays £1,000 for every furloughed employee who comes back to work until at least the end of January 2021. Employers utilising the Job Support Scheme can still claim the Job Retention Bonus available to employers in February 2021, should the individual remain employed until the end of January 2021.
Unhelpfully, some of the terminology contained in the guidance is unclear. For example, the Treasury’s factsheets state that "our expectation is that employers cannot top up their employees' wages above the two-thirds contribution to hours not worked at their own expense". This may acknowledge that employers cannot afford to do so. However, it may be a prohibition on topping up, albeit we believe that this is unlikely. Our understanding is therefore that employers may top up pay to 100% if they wish.
The key takeaways for the "Job Support Scheme are that:
- to be eligible, employees must have been on the employer's PAYE payroll on or before 23 September 2020, the day prior to the announcement (so real time information (RTI) submission notifying HMRC of payment to that employee must have been made on or before that date);
- For the first three months of the scheme (until the end of January), an employee must work at least 33% of their usual hours. After three months, the Government will consider increasing this threshold;
- Employees will be able to "cycle on and off the scheme" and will not have to work the same pattern each month, but each short-time working arrangement must cover at least seven days.
- Employees cannot be made redundant or given notice of redundancy during the period for which their employer is claiming the grant for them.
- For time worked, employees must be paid their normal contractual wage. For time not worked, the employee will be paid up to two-thirds of their usual wage: for every hour not worked, the Government and employer will each pay a third of the employee's usual hourly wage (the Government's contribution being capped at £697.92 a month).
- Calculation of "usual wages" will follow a similar method to the Coronavirus Job Retention Scheme. Employees who have previously been furloughed will have their usual pay and/or hours used to calculate usual wages, not their furlough pay.
- The grant will not cover Class 1 employer NICs or pension contributions, which will remain payable by the employer.
- Claims can be made online through GOV.UK from December 2020.
What should you be doing now?
Further information for employers will be made available over the next few weeks. Keep an eye on the gov.uk website and social media for updates. We will also be updating our twitter feed @BPE_Solicitors with news and commentary as soon as further guidance becomes available. If you have any queries, please feel free to call or email our employment team who will be able to advise on the matter.
The Winter Economy Plan which details the scheme can be found here.
The HM Treasury's Factsheet on the Job Support Scheme can be found here.
These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.