The chancellor has announced a new Job Support Scheme (JSS) to run from 1 November 2020, after the Coronavirus Job Retention Scheme (CJRS) ends on 31 October 2020. As this new scheme won't be suitable for every employer that has been using the CJRS, businesses will need to decide what to do from 1 November and take another look at pension and life assurance arrangements.
Who can access the support scheme?
For employers that do access the scheme, the first fact sheet published by the government states:
- The JSS is designed to protect viable jobs in businesses who are facing lower demand over the winter months due to Covid-19 and so will run from 1 November 2020 to 30 April 2021.
- It will be open to all employers, although large businesses will have to meet a financial assessment test to show if their turnover is lower than before the Covid-19 pandemic. There will be no condition that an employer must have previously accessed the CJRS.
- Employees must be on the payroll on or before 23 September 2020.
- For the first three months of the JSS, employees will need to work a minimum of 33% of their usual hours. The government may increase this threshold after three months.
- During hours worked, an employee will be paid in the normal way by their employer. For every hour not worked, the employer and the government will each pay a third of the employee's usual pay. The government contribution is capped at £697.92 per month. The JSS does not cover class 1 employer National Insurance contributions (NICs) or pension contributions – these will remain payable by the employer.
- Like the CJRS, the employer will be reimbursed in arrears for the government contribution. Employers make their claims online (from December 2020) and will be paid on a monthly basis.
A second fact sheet, published after the chancellor's announcement on 9 October 2020, confirms that special rules will apply to employers whose premises are "legally required to close as a direct result of coronavirus restrictions set by one or more of the four governments of the UK", with the result that their employees are temporarily unable to work. In this case (to begin with at least), the government will pay 66% of the employee's wages, capped at £2,100 per month. The employer will have to pay class 1 employer NICs and pension contributions. When the business reopens, the employer will be able to claim under the standard JSS rules if eligible.
Retention versus support
How do the costs for employers and government compare under the CJRS with the new JSS?
|Scheme||Government pays||Employer pays||Top up to full pay||Employee does/does not have to work|
(From 1 October 2020)
60% of wages up to a cap of £1,875 for the hours the employee is on furlough.
Where the employer has agreed a flexible furlough with the employee, the cap of £1,875 is proportional to the hours the employee is furloughed (not working).
(From 1 October 2020)
Where the employee is on flexible furlough, wages for hours worked.20% of wages to make sure employee receives 80% in total of their wages (up to a cap of £2,500) for the hours the employee is furloughed (not working).*
Employer's NICs and statutory minimum employer's pension contributions.
|Employer can top up wages to full pay.||Flexible furlough (return to short-time working) permitted since 1 July 2020.|
|JSS (employer's premises is open)||
One-third of the usual hourly wage for every hour not worked, subject to a monthly cap of £697.92.
Guidance will confirm whether the monthly cap is proportional to the hours above 33% that the employee is not working.
Wages for hours worked.
One -third of the usual hourly wage for every hour not worked.
Employer's NICs and employer's pension contributions. (Guidance awaited.)
|Unlikely employer will be able to top up wages to full pay.||Employee must work at least 33% of their usual hours.|
(employer has been legally required to close its premises as a result of coronavirus restrictions)
|Two-thirds of normal pay, subject to a monthly cap of £2,100.||Employer's NICs and employer's automatic enrolment pension contributions.||Employer can top up wages||Employee cannot work (paid or unpaid)|
* Where the employer has agreed flexible furlough with the employee, the cap of £2,500 is proportional to the hours the employee is furloughed (not working). For example, 60% of the £2,500 cap if the employee is not working for 60% of their usual hours.
Pension and life assurance arrangements
The fact sheet for the JSS says that the government "grant will not cover Class 1 employer NICs or pension contributions, although these contributions will remain payable by the employer". It does not state whether employers will need to pay pension contributions on all pay and grant elements (the sums paid by the employer plus the government grant under the JSS). Nor does it say what pension contributions the employer must pay: the automatic enrolment minimum or the standard employer contribution (if different), although the announcement made in relation to the expanded JSS for businesses which have to close suggests it might be the automatic enrolment minimum. The position will become clearer when detailed guidance is published later this month.
Employers who intend to use the JSS will need to think about how this fits with their pensions and life assurance arrangements. For example, how will the member's employment status fit with the scheme rules and do the scheme rules provide the expected outcome in terms of contributions to be paid and benefits? What will happen if the business has to close and the employer needs to make use of the expanded JSS?
Employers who have used the CJRS but do not intend to use the JSS might be considering a range of options, including redundancy or short-time working arrangements. If short-time working arrangements are going to be agreed, pension and life assurance arrangements will need to be reviewed to make sure they will provide the intended benefit.
In both cases, the fit with any salary sacrifice arrangements will also need to be considered.
Action for employers
Employers are recommended to take advice on how the JSS will impact their workplace pension and life assurance arrangements. Please contact Claire Rankin or your usual Osborne Clarke contact for more information.