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21 Oct 2020
by Caroline Harwood

The Job Support Scheme, its expansion and its role in supporting business this winter

As the UK continues to battle a second wave of COVID-19 there has been a great deal of political and commercial pressure on the Chancellor, Rishi Sunak, as commentators suggest that the package of measures in the Winter Economic Plan do not go far enough to support British businesses hit by the pandemic.

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On 9 October 2020, the Prime Minister announced a new system of 'Local COVID Alert Levels' under which England is divided into areas, with each assigned to one of three tiers. Local rules are being introduced in other parts of the UK.

The higher tiers (Tier 2 and 3) will have the greatest impact on businesses, with Tier 3 seeing businesses such as pubs and bars (unless they operate as restaurants) forced to close alongside gyms, leisure centres, betting shops and casinos.

In Tier 2, households will not be permitted to mix indoors. This will impact the ability of hospitality businesses to operate, but without a legal requirement to close.

Shortly before the introduction of the three tier system, the Chancellor announced an expansion of the Job Support Scheme (JSS) to support businesses across the UK required to close their premises due to coronavirus restrictions, with the new scheme covering up to two-thirds of employees' salaries.

Which businesses are eligible?

In order to qualify, businesses must meet the following requirements:

  • The relevant business must be subject to COVID-related restrictions such that they are legally required to close their premises, which includes being required to provide only delivery and collection services from their premises, or food and drink outdoors from their premises.
  • The employees subject to a claim must be off work for at least seven consecutive days.

The business can be located anywhere in the UK, and can claim under the expanded JSS regardless of whether they have previously made a claim under the furlough scheme, or any other COVID-19 wages support scheme.

How does the JSS expansion work?

  • The government will pay two-thirds of each employee’s salary (or 67%), up to a maximum of £2,100 a month.
  • Employers will not have to contribute anything towards those employee’s wage costs.
  • Employers will have to pay applicable National Insurance Contributions (NIC) and pension contributions.
  • Claims can only be made for workers who are employed, and an RTI submission notifying payment, in respect of that employee to HMRC, must have been made on or before 23 September.

In line with the JSS, as originally announced, the expansion will start on 1 November 2020 and last for six months, with a review taking place in January 2021. Claims can be made online from December 2021 with payments being made in arrears. 

Impact

This package will provide essential support to businesses forced to close due to local lockdowns and has generally been welcomed, especially in the hard hit hospitality sector. 

However, since the announcement of the three tier system, more concerns have been raised as to the interaction of the two schemes. 

Currently more businesses are in Tier 2 areas than Tier 3. So while the limited lockdown measures in Tier 2 will mean that many businesses will suffer significantly reduced trade, they will only be able to rely on the JSS in its original form, where they are not legally required to close. This means the government will fund just 22% of wage costs (capped at £697.92 per month) where employees work one-third of their usual hours, compared with 60% under the current furlough scheme. Many employers feel ill-equipped to meet this funding requirement, believing that they would be better off in Tier 3, being forced to close and thereby benefitting from the JSS expansion providing funding for 67% of salaries. 

Those who do benefit from the expansion have concerns about being able to meet the costs of employers’ NIC and pension contributions while they have no income and with reserves which may be been significantly diminished or exhausted. However, where businesses are to survive these costs may well not be as high as those for recruiting and training a new workforce.

It has been suggested that the new scheme will cost the Treasury hundreds of millions each month, and while it is essential that businesses which are viable in the longer term are supported to ensure that economic recovery is optimised, the amount of borrowing required to fund these measures has to be managed.

What employers should do now is carefully monitor restrictions in their local area and make best use of the JSS and its extension to support their workers through the next six months.

The author is Caroline Harwood, head of share plans and employment tax, Crowe.

For more information on how Crowe’s Employment Tax team can support you, contact [email protected].

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