October 22, 2020
It’s hard to look at current events without a sense of déjà vu. In many ways, recent Covid developments and media rhetoric has an unfortunate familiarity to that which we all experienced back in March. This certainly rings true in terms of the government’s package of support to employers affected by the recently introduced tiered regional restrictions.
Following the Chancellor’s extension to the Job Support Scheme (JSS) which we reported on 9 October 2020, a further and arguably even more significant change to the JSS has been announced today. As a result, we’re now left with a package of protection for employers and the self-employed which is not drastically different to that which preceded it.
When the JSS was initially unveiled, the plan was to allow employers to reduce workers’ hours (provided at least 33% of normal hours were worked) and protect workers’ pay by providing a government contribution of a third of the wages for unworked hours (provided the employer covered another third). While this would have left workers with 77% of their usual pay (subject to a cap on the government’s contribution), it’s fair to say this plan never received a particularly enthusiastic response from business given the requirement to make large contributions to staff wages in respect of hours staff couldn’t then work.
The JSS was subsequently amended on 9 October 2020 but only to provide additional support for employers who were forced to close as a result of Covid restrictions (in short, the government will cover two thirds of an effectively ‘furloughed’ worker’s wages up to a maximum of £2,100 per month). The rest of the JSS remained unchanged until now. However, following pressure that businesses in tier 2 areas are going to suffer more than those in tier 3, the announcement today represents a dramatic extension to the protection previously afforded by the JSS and one which may mean the scheme now finally proves relevant to many of our clients.
Under the new rules, employers can agree to reduce a worker’s hours to 20% of their normal hours (down from the previous minimum of 33%), meaning a worker only needs to work one day a week to benefit from the scheme. In addition, the government and employer contributions for unworked hours have changed materially. Workers will still be entitled to two thirds of pay for unworked hours but employers will only be required to pay 5%, with the government picking up the remaining 61.67% (subject to a cap of £1,541.75 per month). These measures will apply to all businesses (regardless of the tier they are in), though as previously announced, larger businesses will need to demonstrate their revenues have been adversely affected to utilise the scheme. The protections announced on 9 October for those who are forced to close will also continue to apply.
There’s no doubt that today’s news represents a real game changer for the JSS. What previously may have had limited impact and utilisation now appears to represent a truly flexible and attractive scheme for employers which hopefully will reduce the need for large numbers of redundancies (at least for the scheme’s duration).
In conjunction with these changes to the JSS, it was also announced that the additional grants available under the Self-Employment Income Support Scheme (SEISS) will be increased, with the first now comprising 40% of three months’ average trading profits (previously this was due to be 20%), paid out in a single instalment and capped at £3,750.