26th October 2020
There will now be two forms of the JSS, Open and Closed. The Government advise that they are likely to update this guidance further on 31st October 2020. The JSS will apply from 1st November 2020 and is planned to end on 30th April 2021.
In order to be able to claim you must have a UK bank account, be registered for PAYE online (either by yourself or through us as your Agent) and you must pay your employee their wages in full before being reimbursed. This is a big change from the furlough rules. Employees must have been included on your payroll and an RTI submission sent by 23rd September 2020.
JSS (Open) – employers facing decreased demand
Employees must work a minimum of 20% of their usual hours (this will include any hours spent training).
The employer will pay 5% of the cost of hours not worked and the Government will pay 61.67% up to a maximum of £1,541.75pm (a salary equivalent to £37,500).
Employees must be paid at least the minimum wage for the hours they work. It would seem that this clause will mean that Directors are no longer eligible as in most cases they do not get minimum wage.
You must reach a written agreement with your employee (or reach a written collective agreement with a trade union where the relevant terms are determined by collective agreement) that they have been offered a temporary working agreement. This temporary working agreement must cover at least seven consecutive days. Once the agreement expires you will need a new agreement for the next period. Further guidance will follow on this point.
Employers should discuss with their employees and make any changes to their employment contract by written agreement. When employers are making decisions, including deciding to whom they should offer reduced hours, equality and discrimination laws will apply in the usual way.
Employers must maintain records relating to the terms of the temporary working agreements for each employee, and:
- make sure that the agreement is consistent with employment, equality and discrimination laws
- keep a written record of the agreement for 5 years
- keep records of how many hours employees work and the number of usual hours they are not working
- this agreement must be made available to HMRC on request
HMRC will publish further guidance on what to include in the written agreement by the end of October. We will not be able to advise on this as this is an employment law matter and you should make sure you take sufficient legal advice on this. Failure to do so could leave you open to legal claims.
How are the unpaid wages calculated?
The amount an employer should use for calculating an employees’ reference salary is made up of the regular payments they are obliged to make, including:
- regular wages
- non-discretionary payments for hours worked, including overtime (i.e. compulsory overtime)
- non-discretionary fees
- non-discretionary commission payments
- piece rate payments
Calculations cannot include:
- payments made at the discretion of the employer or a client, where the employer or client was under no contractual obligation to pay, including:
- any tips, including those distributed through troncs
- discretionary bonuses
- discretionary commission payments
- non-cash payments
- non-monetary benefits like benefits in kind (such as a company car) and salary sacrifice schemes (including pension contributions) that reduce an employees’ taxable pay
Reference salary for employees with fixed pay
For employees who are paid a fixed salary, the Reference Salary is the greater of:
- the wages payable to the employee in the last pay period ending on or before 23rd September 2020
- the wages payable to the employee in the last pay period ending on or before 19th March 2020, this may be the same salary calculated under the CJRS scheme
Reference salary for employees with variable pay
For employees whose pay is variable the Reference Salary is the greater of:
- the wages earned in the same calendar period in the tax year 2019 to 2020
- the average wages payable in the tax year 2019 to 2020
- the average wages payable from 1st February 2020 (or the employee’s start date if later) until 23rd September 2020
What are the employee’s usual hours?
Employees who work fixed hours
For employees contracted for a fixed number of hours and whose pay does not vary according to the number of hours they work, usual hours are calculated based upon the greater of:
- the hours that the employee was contracted for at the end of the last full pay period ending on or before 23rd September 2020
- the hours that the employee was contracted for at the end of the last full pay period ending on or before 19th March 2020, this may be the same number of hours calculated under the Coronavirus Job Retention scheme (NB. if employees moved to part time working, this may be varied, full details will be included in forthcoming guidance)
This should include hours paid as annual leave and statutory leave.
Employees who work variable hours
The variable hours calculation applies if either:
- the employee is not contracted to a fixed number of hours
- the employee’s pay depends on the number of hours they work
For employees whose number of hours varies and/or whose pay depends on the number of hours they work, the number of usual hours is calculated based on the higher of:
- the number of hours worked in the same calendar period in the tax year 2019 to 2020
- the average number of hours worked in the tax year 2019 to 2020
- the average number of hours worked from 1st February 2020 (or the employee’s start date if later) until 23rd September 2020
This should include hours paid as annual leave and statutory leave.
The calculation of usual hours is not and cannot be altered if the employee is expecting to work more or fewer hours than this in the future.
For employees who are part of a flexible work time arrangement, employers should:
- not count as hours worked any hours that the employee worked but was not paid for because they accrued paid time off which they could take later
- count as hours worked any hours that the employee took as paid time off (‘flexi-leave’), which they had accrued by working additional hours at some other time
For employees who are paid per task or per piece of work done whose hours cannot be calculated in this way, hours can be estimated based on the number of ‘pieces’ produced and the average rate of work per hour, as per National Minimum Wage rules.
JSS (Closed) – employers who are legally required to close their premises (Tier 3)
Each employee who cannot work due to these restrictions will receive two thirds of their normal pay, paid by their employer and fully funded by the Government, to a maximum of £2,083.33 per month, although their employer has discretion to pay more than this if they wish.
How are the wages calculated?
The amount an employer should use for calculating an employees’ reference salary is made up of the regular payments they are obliged to make, including:
- regular wages
- non-discretionary payments for hours worked, including overtime (i.e. compulsory overtime)
- non-discretionary fees
- non-discretionary commission payments
- piece rate payments
Calculations cannot include:
- payments made at the discretion of the employer or a client, where the employer or client was under no contractual obligation to pay, including:
- any tips, including those distributed through troncs
- discretionary bonuses
- discretionary commission payments
- non-cash payments
- non-monetary benefits like benefits in kind (such as a company car) and salary sacrifice schemes (including pension contributions) that reduce an employees’ taxable pay
Reference salary for employees with fixed pay
For employees who are paid a fixed salary, the Reference Salary is the greater of:
- the wages payable to the employee in the last pay period ending on or before 23rd September 2020
- the wages payable to the employee in the last pay period ending on or before 19th March 2020, this may be the same salary calculated under the CJRS scheme
Reference salary for employees with variable pay
For employees whose pay is variable the Reference Salary is the greater of:
- the wages earned in the same calendar period in the tax year 2019 to 2020
- the average wages payable in the tax year 2019 to 2020
- the average wages payable from 1st February 2020 (or the employee’s start date if later) until 23rd September 2020
Conditions of claiming
Employers cannot claim for an employee who has been made redundant or is serving a contractual or statutory notice period during the claim period.
The Job Support Scheme grant will not cover National Insurance contributions (NICs) or pension contributions. These contributions remain payable by the employer.
Employers must deduct and pay to HMRC income tax and employee NICs on the full amount that is paid to the employee, including any amounts subsequently met by a scheme grant.
Employers must also pay to HMRC any employer NICs due on the full amount that that is paid to the employee, including any amounts subsequently met by a scheme grant.
Employers must report these payments via a Full Payment Submission (FPS) to HMRC on or before the pay date in the normal way.
Employers and Employees must also still pay pension contributions in accordance with the applicable pension scheme terms, unless the employee has opted out or stopped saving into their pension. If applicable Student Loan deductions and the Apprenticeship Levy must also still be paid.
Employers must have paid the full amount claimed for an employee’s wages to the employee before each claim is made. They should also pay the associated employee tax and employee and employer National Insurance contributions to HMRC, even if the Company is in administration.
Employers cannot enter into any commitment or transaction with the employee which would reduce wages below the amount claimed (for example a salary sacrifice scheme). This includes any administration charge, fees or other costs in connection with the employment. Where an employee had authorised their employer to make deductions from their net salary, these deductions can continue while the employee is working reduced hours provided that these deductions are not administration charges, fees or other costs in connection with the employment (for example, pension contributions and charitable giving). This means that for those with a salary sacrifice pension scheme this must be deducted from the claim amount before calculating the available grant claim.
Employees will be able to check if their employer has made a Job Support Scheme claim relating to them via their Personal Tax Account (sign up on GOV.UK).
The claim
No claim can be made before 8th December 2020. More details on the claim process will be published later. Agents will be able to make the claim on your behalf.