Is the Job Support Scheme for you

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01.10.2020

On 24 September, the Government announced the introduction of a new Job Support Scheme (JSS), which will be available to eligible employers from 1 November. According to the initial announcement, press release and factsheet, the new scheme aims to protect ‘viable jobs’ in businesses which are ‘facing lower demand over the winter months due to Covid-19, to help keep their employees attached to the workforce’.

Where an eligible employer claims under the scheme, ‘the company will continue to pay its employee for time worked, but the burden of hours not worked will be split between the employer and the Government (through wage support) and the employee (through a wage reduction), and the employee will keep their job’. Further guidance about the operation of the scheme is expected shortly.

In light of this recent announcement, will the new JSS help your business get through the winter? Below, we look at some issues to start thinking about.

Are you eligible?

As an employer, your first step should be to consider whether your business is likely to be eligible for the grant under the new scheme. The Government factsheet states that all employers with UK bank accounts and UK PAYE schemes will be able to claim the grant, even if they have not previously claimed under the Coronavirus Job Retention (furlough) Scheme. However, large businesses will only be eligible if their turnover is lower now than it was before the Covid-19 pandemic. The factsheet also outlines an expectation that large employers using the JSS will not be making capital distributions (such as dividend payments or share buybacks) while they are claiming under the scheme.

Whether the JSS is for you is of course about more than whether or not you are eligible for the scheme; it is also about whether the scheme actually benefits you and your employees. We look at this in more detail below.

What are the benefits of using the JSS?

It goes without saying that the introduction of the JSS has significant scope to benefit any employees who otherwise might be at risk of losing their jobs. There are also various potential benefits to employers of using the JSS and no doubt many employers will be supportive of the idea of cutting hours rather than jobs to support the economy in the context of the Covid-19 pandemic, particularly if this fits well with their culture of corporate social responsibility. In addition, using the scheme may allow employers to:

avoid the immediate costs of making redundancies (in particular, redundancy and notice payments);
retain a staff base which is available and ready to increase their hours if and when customer demand picks up (rather than the employer having to incur the time and costs of recruitment later on);
stay flexible in responding to fluctuating demand, as employers will be able to move employees on and off the JSS and they will not be required to work the same pattern each week (for example, if one month is quiet, we assume that employees could agree with employees - subject to the rules of the scheme - to work the minimum 33% of hours required, whereas if the next month is busier, this could be increased as needed); and
safeguard their earlier investments by retaining qualified and experienced staff who the business may have trained and invested in.

Will the JSS work for you?

If your business is eligible under the JSS, you will need to give careful thought to the operational implications of using the scheme, as these will vary depending on your current business circumstances. You may wish to consider the following:

Remind yourself how many people you currently have on full furlough and/or flexible furlough. Doubtless you have a plan for what will happen to any individuals who are furloughed or flexibly-furloughed once the furlough scheme comes to an end on 31 October – so now you need to consider how the new JSS impacts those original plans.

From a practical perspective, do you have enough work available for applicable employees over the next few months? Under the JSS, employees will need to work at least one-third of their pre-Covid usual hours and their employer will have to pay them as normal for those hours. (Also note that the Government has said that, after the first three months, it will consider whether to increase this minimum hours threshold and so this could become more onerous; employers will need to stay on top of the relevant guidance.)

What will be the financial cost to your business of using the JSS? In addition to paying the employer for the actual hours worked (at least one-third of the usual hours), the employer will need to contribute towards the hours not worked. The burden of hours not worked will be split between the employer and the Government (through the JSS grant) and the employee (through a wage reduction). It is clear that the JSS is less generous for both employers and employees than the furlough scheme, and there are likely to be additional costs to employers of keeping employees on the JSS, rather than making them redundant. For example, it may cost an employer less to keep one or two employees on full hours and make others redundant, than to reduce the hours of these employees and claim under the JSS for all of them.

If prior to the Government’s announcement you had been contemplating redundancies, or are currently in the midst of making redundancies, careful financial modelling will be needed to assess the cost and practical implications of using the new scheme as an alternative to some, or all, proposed redundancies (see ‘What if you are currently facing a redundancy situation?’ below).

Note that, based on what we know of the JSS so far, an employer will not be permitted to make redundant, or issue notice of redundancy to, any employee during any period within which it is claiming support under the JSS for that employee.

Finally, businesses are eligible even if they have not used the furlough scheme before; therefore even if you do not currently have employees on furlough or flexible furlough, you might want to consider changing your normal operations to enable you to claim under the JSS. This means businesses which envisage lower customer demand over the coming months may well take the decision to claim for ‘viable jobs’ under the JSS as part of a general cost-cutting exercise.

What to tell employees at this stage?

Your employees may be keen to know whether the introduction of the JSS will impact them. If you are eligible under the terms of the JSS and currently have employees on flexible furlough, it may be relatively straightforward to transition them onto the JSS from the start of November so you could let those employees know now that you are provisionally considering doing this (you will need their agreement to do so). Flexibly-furloughed employees are likely to experience some reduction in pay under the JSS compared with furlough, but the practicalities of flexible furlough and the JSS will be broadly similar. Equally, if currently you have employees on full furlough, you will need to let them know of the provisional impact of the JSS scheme on your current plans.

What if you are currently facing a redundancy situation?

As the furlough scheme is due to end on 31 October, you may already be in the middle of a redundancy consultation, or have served notice on employees whose employment was anticipated to end on closure of the furlough scheme. If so, you will need to consider the impact of the JSS announcement. This will include thinking carefully about whether the new JSS impacts your original redundancy plans and doing some detailed financial modelling. Consultation with affected staff should address whether the roles that are subject to redundancy are ‘viable’ under the JSS (and otherwise fulfil its criteria) and if so how the scheme would work. Failure to address these issues with employees could be relevant to an employment tribunal’s assessment of any unfair dismissal claims.

It is possible that, having undertaken a detailed analysis of your business’ individual circumstances (and sought legal advice as needed), you might conclude that the introduction of the JSS does not change the outcome of the original redundancy plans. For example, accessing the JSS in order to ‘share the pain’ of reduced working amongst a wider group of affected employees may not be an attractive option where your redundancy plans are advanced (particularly if you have already told some employees that they are ‘safe’).

Also note that the JSS aims to protect ‘viable jobs’, so if for example you have placed employees on furlough throughout the duration of the furlough scheme, and had been intending that their employment would end when the furlough scheme closes, it may still be reasonable for those redundancies to go ahead as planned. If you cannot offer at least one-third of an employee’s usual working hours, there is an argument that the job is not ‘viable’ and therefore the only option is to make the role redundant. That said, in some circumstances the introduction of this new Scheme may be the lifeline your business needs during the months ahead.

How we can help

We expect further guidance on the JSS to be published shortly and we will update members when this is available. In this regard, we also note the Chancellor’s statement that additional details on the operation of the JSS will be worked out with businesses and unions over the next few weeks, as was the case at the inception of the furlough scheme. Our Policy team will continue to work closely with Government to ensure that the interests of manufacturers are represented and we will keep members updated on any developments.

Once further information is available from the Government, we will create various template documents to help employers bring employees onto the JSS and some JSS-focused FAQs.

The Coronavirus FAQs on our website are also updated regularly and provide detailed guidance on furlough, self-isolation and other issues relating to Covid-19. If you are a Make UK member, please contact your adviser with any queries you wish to discuss. Alternatively, non-members are welcome to call us on 0808 168 5874, or email [email protected].

News / Coronavirus / Make UK