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Government announces extension to Job Support Scheme for closed business premises

12 October 2020

The Chancellor has announced an extension to the Job Support Scheme targeted at businesses required to close entirely due to tighter local or national coronavirus restrictions. Under these proposals, the government will pay two-thirds of wages for businesses forced to close in the coming months as it seeks to slow the rise in coronavirus cases. This article looks at what we know so far and considers what affected employers should do now.

Friday’s announcement of targeted support comes ahead of the expected introduction of a new three-tiered set of restrictions today (Monday) which may see many people and businesses affected by mandatory closures. In the face of rapidly increasing cases of Covid-19, pressure had been mounting on the government to introduce targeted support for these businesses.

The government has announced an extension of the Job Support Scheme unveiled by the Chancellor last month. This Scheme will replace the existing furlough scheme from 1 November, and will run for 6 months. Under the extension, businesses that are told to close will receive two-thirds of their employees’ wages, subject to a cap of £2,100 a month. This is more generous than what was originally announced in respect of the Job Support Scheme, which will provide ongoing wage support for people working at least 33% of their usual hours, but is less generous than the original Job Retention Scheme (i.e. the furlough scheme), which initially subsidised up to 80 per cent of wages, up to a maximum of £2,500 a month (although in the last two months employers have had to make increasing contributions).

What do we know so far?

The government has published a factsheet which provides further detail on how the extension will work. Further guidance is expected soon.

Key features of the extension are explained below.

Which businesses are covered? The extension will support any business that is required to close its premises. This includes premises restricted to delivery or collection only services from their premises.

All employers with a UK bank account and a UK PAYE scheme registered on or before 23 September 2020 can claim under the scheme. It is not sector specific (although in practice the restrictions are likely to disproportionately impact the hospitality sector) and it does not appear that larger employers will be required to demonstrate any particular level of financial impact before they can access the scheme.

The extension applies only to businesses that are legally required to close their premises as a direct result of local or national restrictions. It will not benefit any of the following businesses, which may also be significantly impacted:

  • Businesses that are legally able to stay open but whose trade is significantly affected by a local lockdown, such as suppliers to the hospitality sector.
  • Businesses that are able to stay open but experience very reduced demand (such as theatres or cinemas in areas not subject to a local lockdown).
  • Businesses that decide to shut because of the reduced demand or broader impact of Covid on (such as some cinemas).
  • Businesses required to close by local public health authorities as a result of specific workplace outbreaks.

Which employees can be claimed for? The employer can make a claim under the JSS extension for any employee who has been instructed to cease work because of the required closure. The employee  does not need to have been furloughed but a Real Time Information (RTI) submission notifying payment to that employee to HMRC must have been made on or before 23 September 2020.

Employers will only be able to use the scheme for employees who cannot work (paid or unpaid) for that employer (suggesting that if you can transfer them to other work then you should do so rather than claiming under the scheme).

Employees must be instructed to and cease work for a minimum of seven consecutive days.

How does the extension relate to other schemes? The extension sits alongside the original Job Support Scheme and Job Retention Bonus. It will be available to employers for 6 months, from 1 November 2020.

What are the government and employer contributions? The government will pay 67% of employees’ normal wages, up to a maximum of £2,100 a month. Payments will be taxable, and employers will need to cover employer NICs and automatic enrolment pension contributions. Employers can top up employee pay if they wish.

Do staff need to agree? Yes. Employers must agree the new scheme with the relevant staff. Any changes to the employment contract will need to be agreed and notified to the employee in writing.

How will the grant be paid? The scheme will pay a grant to the employer calculated on the number of eligible employees who have been instructed to and agree to cease work. Claims must not overlap and must be made monthly in arrears. Employers will be able to make a claim on a monthly basis online from December 2020. This will be reviewed in January 2021. HMRC will check claims and may withhold payments or request repayment if a claim is found to be fraudulent or based on incorrect information.

The factsheet says that HMRC intend to publish the names of employers who have used the scheme, and employees will be able to find out if their employer has claimed for them under the scheme. This is presumably a measure that is intended to reduce fraud.

Can we still use the Job Support Scheme when restrictions are lifted? Yes, when premises re-open, small and medium sized employers can still claim under the JSS when facing reduced demand.

Can we still apply for the Job Retention Bonus? Yes, provided eligibility criteria are met and employees were previously part of the Job Retention (i.e. furloughing) Scheme.

What about redundancies? 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. However, it isn’t clear how this will impact affected businesses which are already in a redundancy consultation or which have already served notice of redndancy.

What should potentially affected employers do now?

Employers who may be impacted by compulsory closures should consider:

  • Whether furlough is available before the scheme starts on 1 November: Businesses that are required to close in the coming days can continue to use the existing furlough scheme until 1 November. However, since the furlough scheme is now closed to new joiners, businesses will only be able to re-furlough employees who were previously furloughed under the scheme. The furlough scheme currently requires employers to contribute 20% of employees’ wages (up to a cap) plus National Insurance and pension contributions.
  • What to do about pay: Employees are generally entitled to full pay during a lockdown if they are ready and willing to work (although this is not true for all staff – casual workers, for example, are generally only entitled to be paid for the hours they actually work). Employers will need to negotiate and agree any reduced pay arrangements with employees.
  • How to notify employees and reach agreement: Employers will need to be ready to act quickly to secure employee agreement to any new working arrangements.
  • Should we pause redundancy consultation? Employers who have already commenced redundancy consultation will need to consider their next steps. An employee cannot be made redundant or put on notice of redundancy during the period within which their employer is claiming a JSS grant for that employee (under the extended or general JSS). Employers will therefore need to consider whether to continue with redundancy consultation or whether this should be paused.

 

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