Welcome changes to the Job Support Scheme announced by the Chancellor

The Job Support Scheme (JSS) was amended yesterday (22 October) by the Chancellor. The amendments he has made should be welcomed by businesses across the UK, particularly in regions that have been put into either Tier 2 or Tier 3 coronavirus restrictions.

The JSS was originally announced on 24 September as the successor for the Coronavirus Job Retention Scheme (CJRS) which ceases on 31 October 2020. The fact that the Chancellor has had to change the operation of a support measure before it has come into use indicates how quickly things are changing in the economy.

Why has the JSS had to be changed?

The JSS as originally announced was criticised widely because the overall level of support that it provided employers who were being affected by coronavirus restrictions was comparatively low compared its predecessor, the CJRS.

The view from many businesses was that it did not provide enough support to justify retaining jobs at a time where businesses were being either closed or severely restricted in terms of operations. For many businesses, the simpler choice was to move to redundancy processes and that was likely to accelerate as more areas in England moved into Tier 2 or Tier 3 restrictions.

The updated JSS will operate through the same period as previously intended, from 1 November 2020 to 30 April 2021.

Key changes

The key changes which have been announced by the chancellor are as follows:

1) The JSS is now being split into two different types
a. the JSS (Open) and
b. the JSS (Closed).

As you might identify, two different schemes apply; employers who are suffering decreased demand can use the JSS (Open) scheme or employers whose premises have had to close due to legal restrictions are able to use the JSS (Closed) scheme. These can be summarised as follows:

JSS (Open)JSS (Closed)The original JSS
Time to be worked and to be paid by employer as workedMinimum of 20% of their usual hoursNo minimumMinimum of 33% of their usual hours
Employer contribution to wages required for hours not worked5% of reference salary for hours not worked up to a maximum of £125 a monthNone33% of reference salary up to a maximum of £697.92 a month
Government contribution61.67% of reference salary up to a maximum of £1,541.75 a month66.67% of reference salary up to a maximum of £2,083.33 a month22% of reference salary up to a maximum of £697.92 a month
Can an employer voluntarily add further payYesYesWas not expected
Total wages which can be earned by the employee under the measureAt least 73% of normal wages, where an employee earns £3,125 a month or lessAt least 66.6% of normal wages, where an employee earns £3,125 a month or less77% of normal wages
Pension and Employer NIC costsPaid by employerPaid by employerPaid by employer
JSS funds payment received whenIn arrears, the month after payroll RTI submittedIn arrears, the month after payroll RTI submittedIn arrears, the month after payroll RTI submitted

For businesses who want to use the JSS (Closed) scheme it is a requirement that any claims made relate only to periods where the restrictions applied by Government in their area have caused that closure to occur and the claims under JSS (Closed) are required to cease when those restrictions no longer apply.

However, a business that has been in the JSS (Closed) scheme can then move into the JSS (Open) scheme when the restrictions are eased so that their premises can open but operating at a level of reduced demand.

This effectively means that JSS (Closed) is applicable to only those businesses which have been legally required to cease operations, rather than where they have chosen to. It will apply to employees only when the business premises are required to be closed, meaning that if an employer chose to remain closed then employees may not then be eligible for the JSS (Open) scheme given that they will not meet the minimum working time requirements. In addition, it applies only to employees who have been required to cease working at sites which are closed, and where that period of cessation continues for at least seven consecutive days.

This means that businesses in England in Tier 2 restrictions may be likely to claim under JSS (Open) and then claim under JSS (Closed) only when in Tier 3.

Written agreements will have to be put in place between the employer and employee under both the JSS (Open) and the JSS (Closed) schemes.

2) Large employers will have to show reduced sales to use the JSS (Open)

Large employers with more than 250 employees will have to be able to show that their “income” has remained equal to, or been negatively affected, compared to the same period in 2019.

In practice, it is expected that this will be carried out by using VAT returns which are to be filed from 31 August 2020 to 7 November 2020 and comparing those to the VAT returns for the same period in 2019.

The turnover in the VAT returns will be used to carry out a Financial Impact Test where the turnover would be expected to be equal to, or less than, the 2019 figure for a large business to use JSS (Open).

The Financial Impact Test requirement for large businesses is stated to apply to the JSS (Open) scheme and so the assumption is that large businesses can use the JSS (Closed) for employees at premises which have been closed by legal requirement without the Financial Impact Test applying to those premises.

3) No JSS claims by large employers where shareholder distributions made

The guidance states that where large employers (i.e. those with >250 employees) are claiming JSS (Open) or JSS (Closed) then they will not be able to make capital distributions in the form of dividends, charges, free distributions or any equivalent payment a partnership may make to its partners. Notably the guidance says:

“the Government does not plan to make this expectation a contractual or legal condition of the scheme but encourages business to reflect on their responsibilities and that taxpayers should be able to rely on public money only being claimed where it is clearly needed”

Overall these changes are welcome and make the JSS more appropriate for the increased restrictions and Tier 2 or Tier 3 measures within which a large part of England’s businesses are now operating.

However, the rules for when a business is within JSS (Open) and JSS (Closed) will of course create additional complexity and difficulty when viewed from the perspective of businesses by whom the claims will actually be made.

Contact us

If you would like assistance with JSS claims, please contact us at advice@taitwalker.co.uk.