Now that the Coronavirus Job Retention Scheme (furlough scheme) is due to end this week what do we know about the replacement scheme?
The replacement scheme is the Job Support Scheme (JSS) and has 2 elements, JSS Open and JSS Closed. The more generous JSS Closed can only be used by businesses which are required to close by the coronavirus regulations, such as under the tier 3 restrictions in England, or the similarly regulations in Wales, Scotland or Northern Ireland. However, where premises are restricted to delivery or collection services, or to serving food outdoors, they count as “closed” if located in a restricted area.
JSS Closed
Under this scheme, the grant will cover for two thirds of the normal pay of furloughed employees, who cannot work at all, up to a maximum of £2,083.33 per month. The employee must give up one third of their wages, and will have to agree to that change in their employment contract in writing if they are not already on a zero hours contract.
Example
Donny is a chef on a salary of £32,000
As his employer is a burger bar in a tier 3 zone they are eligible for the JSS Closed scheme.
His employer can claim 2/3rds of Donny’s monthly salary of £1777.78 under JSS Closed. His employer will then also have to pay pension contributions and NIC.
Donny will receive £1,777.78 before tax and NIC deductions.
JSS Open
JSS Open is for businesses who can operate and open but facing lower demand over the winter months due to Covid. We currently only have the outline of the scheme available (further detail will follow) but there are actions that may be required before they are released.
How the scheme works
The government will pay 61.67% of hours not worked up to a cap of £1,541.75 per month.
The employer must contribute 5% of non worked ours up to a cap of £125 per month but this can be topped up by the employer.
The employee must work a minimum of 20% of their normal hours.
The employer will need to pay NIC’s and automatic enrolment pension contributions in full.
Grants will be made in arrears after the submission of the RTI (as opposed to CJRS which could be claimed in advance) The claim portal opens 8th December 2020.
Who is eligible
Employers with a UK PAYE scheme, they do not have to have previously used CJRS.
Large employers (over 250 staff) will need to meet the financial impact test.
Employees must be on an employer’s PAYE payroll between 6 April 2019 to 23:59 23 September 2020. This means a Real Time Information (RTI) submission notifying payment to that employee to HMRC must have been made on or before 23 September 2020.
Staff on any type of contract are eligible, including those on variable or zero hours and agency workers.
Employees will be able to cycle on and off the scheme and do not have to be working the same pattern each month, but each short time working arrangement must cover a minimum period of seven consecutive days.
Example
Andrew normally works 5 days a week and earns £1,400 a month
Andrew works 20% of his usual hours, his employer pays him £280 for these hours
For the time he is not working (80%) he will get 66.67% of his pay for that time. His total wage package is 73% equal to £1,027
The government will grant £691 (61.67% of hours not worked) and his employer will pay a further £56 for hours not worked (5%)
The employer will then also cover NIC and pension contributions
Further considerations
Employers using the Job Support Scheme Open will also be able to claim the Job Retention Bonus if they meet the eligibility criteria.
Employees cannot be made redundant or put on notice of redundancy during the period within which their employer is claiming the grant for that employee.
HMRC intend to publish the names of employers who have used the scheme. The public can report fraud to HMRC if they have evidence to suggest an employer is abusing the scheme
Action points to take
Employers must have agreed the temporary working arrangement for shorter hours in writing with staff (and this agreement could be requested by HMRC), therefore contracts may need to reviewed or additional paperwork put in place, you may wish to do this if you are still undecided if you will use the scheme or not
If using the scheme ensure you have the cashflow in place to pay the wages before the grant comes through.
For further guidance specific to your own circumstances, we recommend meeting with an accountant. For more information and advice, get in touch with Catherine today. Give her a call on 01423 431889 or email catherine@bctaccountants.co.uk.