UK Announces New Job Support Scheme to Relieve COVID-19 Impact

September 24, 2020

Update (Sept. 25, 2020): The UK government also announced the Self-Employed Income Support Scheme (SEISS) Grant Extension on 24 September 2020 to support self-employed individuals. For further details, please see our recent alert.

The UK government announced on 24 September 2020 its “Winter Economy Plan” to support businesses and workers adversely affected by COVID-19 and the associated restrictions, which recently were tightened.

The new Job Support Scheme (JSS) will succeed the existing Coronavirus Job Retention Scheme (CJRS), which enabled employers to claim grants for furloughed staff from 1 March 2020 and which is currently being phased out, to be wound up on 31 October 2020.

The JSS will support only “viable” jobs where workers can still work at least one-third of their “normal” hours during the first three months of the JSS (i.e., until 1 February 2021) and be paid by their employer for that work in the usual way. It follows that jobs which have been sustained only because of the CJRS will not be supported through the JSS on expiry of the CJRS.

The balance of pay in respect of the two-thirds of hours which a worker cannot work will be split three ways. The government will cover one-third of “normal pay” in respect of those hours, with employers covering another third. The worker will forgo payment of the remaining third of pay in respect of the total hours they cannot work. Accordingly, workers who can go back to work only on shorter time will be paid for two-thirds of the hours they cannot work due to decreased demand.

The JSS will be operational from 1 November 2020 to April 2021, and all small and medium-sized businesses are eligible to apply. Larger businesses will only be eligible to apply under the JSS following a financial assessment and if their turnover has fallen, relative to pre-COVID-19 turnover, because of the impact of COVID-19. The government’s high-level guidance states that it does not expect larger businesses to make capital distributions, such as dividend payments to shareholders, whilst making claims under the JSS.

What qualifies as “normal pay” is expected to be calculated in the same way as under the CJRS, and will be calculated by reference to pre-furlough pay. After 1 February 2021, the government will review the “one-third in work” threshold and consider whether to increase this.

The level of grant to be applied for under the JSS will be calculated by reference to a worker’s normal pay, capped at £697.92 per month. Accordingly, those earning more than £38,000 a year will see their real term income fall. Where the cap is not applied, workers who work a third of their normal hours will be paid at least 77 percent of their normal pay.

Any person in employment, who has been on an employer’s PAYE payroll and has had a Real Time Information submission notified to HM Revenue & Customs on or before 23 September, 2020, will be eligible under the JSS. The grant under JSS will not cover Class 1, employer’s National Insurance contributions or pension contributions, which will remain the liability of the employer.

Employers must secure staff agreement of any new short-time working arrangements and, according to the government guidance, the agreed changes must be reflected in the employment contract with staff to be notified in writing. Businesses that did not previously use the CJRS will be eligible to apply under the JSS and can apply for grants online from December 2020.

Employers retaining furloughed staff on shorter hours can claim both JSS and the Jobs Retention Bonus, whereby the government will pay £1,000 for each worker who is retained until at least 31 January 2021.

The government has stated that a similar scheme in respect of self-employed individuals will be in place. The government has provided an online JSS fact sheet, with further guidance and detail on the JSS to be published in due course. 

McGuireWoods has published additional thought leadership analyzing how companies across industries can address crucial business and legal issues related to COVID-19.

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