On 22 October 2020, the Chancellor announced that the government will significantly increase the generosity and reach of its winter support schemes to ensure that livelihoods and jobs across the UK continue to be protected in the difficult months to come. In particular, changes were announced to the new Job Support Scheme (the “Scheme”), which will run for six months from 1 November 2020, in an attempt to try and avoid a wave of redundancies and job losses when the Coronavirus Job Retention Scheme (the “CJRS”) ends at the end of this month.
HMRC has published a policy paper setting out eligibility criteria and conditions for the whole Scheme (i.e. the “open” Scheme – where employers are facing a decrease in demand; and the “closed” Scheme – for those businesses legally required to close their premises as a direct result of coronavirus restrictions). Whilst the most recent guidance provides some welcome clarification on certain issues (such as employer eligibility), further details are expected by the end of the month.
Under the revised open Scheme, the government has committed to increasing its contribution to employers’ wage costs and has reduced the proportion of contractual hours that an employee must work each week in order to be eligible to participate in the Scheme. This will certainly be welcome news for eligible schools and staff.
The original open Scheme details
When originally announced, the open Scheme was set to cover one third of the wage costs of employees who were working reduced hours (but at least 33% of their normal hours) in respect of hours not worked. This was subject to a cap of £697.72 per calendar month. The employer was to contribute a further one-third of an employee’s pay for hours not worked, with the employee foregoing the final third.
Initially, the government’s expectation appeared to be that employers would not have scope to “top-up” an employee’s salary.
The Scheme was criticised for failing to go far enough in supporting employers and employees in those sectors that have been most heavily hit by the pandemic (such as the hospitality sector).
What has changed?
The government will now provide up to 61.67% of the wage costs of employees who are working reduced hours (up to a maximum of £1,541.75 per calendar month) in respect of hours not worked, more than doubling the maximum payment under the previous rules. This reduces the employer contribution in respect of unworked hours to just 5% (subject to a maximum of £125 per month), although an employer has discretion to pay more (i.e. “top-up” an employee’s salary) if it wishes.
Overall, this will ensure that employees benefiting from the open Scheme will continue to receive at least 73% of their normal pay, where their normal monthly pay does not exceed £3,125 (i.e. employees who earn below £37,500 a year).
In addition, the ‘minimum hours’ requirement has been reduced to 20%, so those employees working just one day a week will be eligible to participate in the Scheme.
The rules of the Scheme otherwise remain largely unchanged. For further details, please see the policy paper and our FAQ document for schools.
The closed Scheme
In response to the growing threat of local lockdowns within certain areas of the UK, on 9 October 2020, the Chancellor announced an extension to the Scheme to provide temporary support to businesses required to close their premises due to local or national coronavirus restrictions (now known as the “closed” Scheme).
In that situation, the government will cover two thirds of an employee’s normal salary (67%) for time not worked up to a maximum of £2,100 per calendar month. The employee will effectively agree to a pay cut in respect of the final third of their salary.
At this stage, it is expected that the closed Scheme is most likely to be of benefit to businesses within the hospitality sector (including pubs, restaurants, bars and other venues) in the worst-affected areas of the UK that may well be forced to close their doors, once again, as a result of the rapidly rising infection rates.
Unfortunately, we do not expect it to be of benefit to schools unless perhaps they operate stand-alone trading companies (for example, within the events or hospitality sector) that are forced to close as a result of a local lockdown.
Further guidance on employer eligibility for the open Scheme
The HMCR policy paper provides welcomed clarification on employer eligibility.
As expected, organisations that have staff costs which are fully publicly funded (even if they are not in the public sector), should continue to use that money to pay their staff, and will not be able to benefit from the Scheme. As such, maintained schools and academies are unlikely to be able to access the Scheme.
All small and medium enterprises (“SMEs”) will be automatically eligible to participate in the Scheme (both open and closed). SME for this purpose means an employer with less than 250 employees as at 23 September 2020. Large businesses (i.e. those with 250 or more employees as at 23 September 2020) will have to meet a financial assessment test in order to demonstrate that their turnover has remained equal, or has decreased, compared with the previous year.
Interestingly, charities with 250 or more employees that are registered with a UK charity regulator, or are exempt from such registration, will not be required to carry out the financial assessment test and are eligible for the Scheme. As such, it appears that those schools that have charitable status will be automatically eligible.
Impact on schools
For eligible schools, it is hoped that the recent announcement will lighten the burden of retaining staff in those areas where there is a reduced demand as a result of the pandemic.
We recommend that schools familiarise themselves with the changes and the policy paper, and, if they believe they are likely to be eligible to participate in the Scheme, consider which employees may be able to benefit and the potential cost implications.
Unfortunately, the changes will still not be of assistance to those employees in roles where there is currently no work available as a result of social distancing measures and government restrictions (such as school bus drivers and lunch time supervisors).
Further guidance on the Scheme is expected by the end of the month and we will update schools once it has been issued. For specific queries in the meantime, please get in touch.
This note is correct at the time of writing on 28 October 2020.