20 October, 2020
On 24 September 2020, the Chancellor announced the new Coronavirus Job Support Scheme (JSS), the successor to Coronavirus Job Retention Scheme (CJRS). The new scheme is intended to support business who wish to retain their employees and avoid compulsory redundancies. As of 9 October 2020, the Chancellor has announced further expansion to the scheme and the intention to support businesses and organisations forced to close by Government health regulations.
The JSS is intended to run from 1 November 2020 and will be in place for an initial period of six months, but how will this work in reality and what, if any, benefit will it bring to Social Housing organisations?
The JSS is applicable across sectors and applies irrespective of whether an organisation has previously utilised the CJRS. The scheme is mainly targeted as small and medium sized employers (SME's) with a headcount of under 250 employees. This does not preclude larger organisations from benefitting from the scheme, though to do so must they undertake a financial assessment. Whilst many details regarding the assessment remain unknown, we do understand that the assessment must show that the turnover for a larger organisation is lower now than before experiencing difficulties due to COVID-19. It is also understood that SME's will be able to claim under the JSS, without undertaking this assessment.
Whilst the JSS will not automatically apply to a number of Social Housing organisations, we understand it does not automatically prevent them from benefitting from it, to protect job roles and help maintain salaries.
The scheme covers employees (including workers) who were on a UK employer's PAYE payroll and notified to HMRC on a Real Time Information (RTI) submission on or before 23 September 2020. Making eligibility subject to an RTI submission does lead us to anticipate problems for some employees, specifically new employees who have not had their first payroll processed prior to 23 September, meaning they will likely not benefit from the scheme.
It is currently understood that the same categories of employees and workers can benefit under the JSS, as the CJRS. In addition, it is assumed that there will be no limit on the number of employees that can be provided for under this scheme, meaning it may be attractive to many organisations.
Unfortunately, the JSS will not apply to those who have already been given notice of redundancy or have had their employment terminated, as this contradicts the aim of the scheme which is to safeguard jobs for a longer term.
The JSS is intended to bring employees back to the workplace (who may have been on furlough or flexible furlough) or reduce the working time of employees who continue to work their full contracted hours.
In practice, this means an employee or worker will be required to work a minimum of one third of their usual hours, to enable their employer to qualify for Government support. The employer will then be required to pay an employee for those hours worked and will also still be liable to make National Insurance and pension contributions. For every hour not worked by the employee, both the Government and employer will pay a third each of the usual hourly wage for that employee (up to a cap of £697.92 per month). This means that, as a minimum, an employee will receive 77% of their usual wage.
Overall, this means an employer will be expected to contribute to a minimum of 55% of the employee's usual wages, whilst the Government will reimburse 22%, meaning the scheme is less beneficial financially than the CJRS. If an employee were to work more than one third of their hours, the amount of employer contributions and Government contributions will increase and decrease respectively.
Also, whilst this remains to be confirmed, it is understood that employers will not be considered able to top up their employees salary to 100%, as it is intended to be a job-saving scheme, meaning employees will have to agree to a reduction in pay. This will affect many Social Housing employees, who may have previously benefitted from full remuneration from organisations, who were able to continue to provide for them, because of the Governments previous contributions under the CJRS.
Unfortunately, the scheme is less beneficial overall though it may still provide some benefit to organisations where there are more singular, moderate earning roles that may be desirable to maintain, but difficult to utilise and fund during the COVID-19 pandemic.
Firstly, an employee will need to agree to a variation of their original employment contract, to agree to a reduction in hours and pay, though it is believed that short-time working agreement under the JSS will not be dissimilar to those used for the flexible-furlough scheme.
Employers will again be mindful of keeping paper trails of all agreements and discussions relating to the JSS, for the purposes of reporting to HMRC.
There are currently many unknowns regarding the JSS, including how it will work in practice, the eligibility of some larger organisations and how employees will be required to confirm their agreement to it, though unfortunately, it does seem the scheme will provide much less financial benefit than initially thought.
Despite this, there may still be some benefit to its use. Social Housing organisations would be advised to consider their financial position, identify any areas of weakness and decide if the scheme and the working arrangements imposed will be of benefit.
As the scheme is due to come into effect in the coming weeks, we hope to be able to provide further clarity on it and the obligations it imposes. In the meantime, if your organisation has identified roles that are difficult to maintain and are considering the prospect of supporting these long term, please do seek further advice and support regarding the JSS, redundancy and any available alternatives
For more information contact Laura Cieplak in our Housing & Regeneration department via email or phone on 01772 220188. Alternatively send any question through to Forbes Solicitors via our online Contact Form.