United States: The Job Support Scheme

The Coronavirus Job Retention Scheme ends on 31 October, and the new Job Support Scheme (the "Scheme") starts on 1 November 2020. The Scheme is intended to provide financial support to businesses with "viable jobs" and to support "short-time" working arrangements for affected employees.

Overview

The Scheme provides grants to employers to help cover the cost of employee wages for hours not worked by employees who can work at least 33% of their normal hours.

The Scheme will run for 6 months from 1 November 2020 until 30 April 2021.

There is no requirement for employees to previously have been furloughed or for employers to previously have made a claim under the Coronavirus Job Retention Scheme.

The amount that can be claimed

Employees must work at least 33% of their "usual" hours and employers must cover the entire wages for the hours that employees actually work.

The Government will provide a grant to cover one-third of the wages relating to the unworked usual hours, capped at £697.92 per month. The employer will need to pay a further one-third of the wages relating to those unworked hours.

In contrast to the Coronavirus Job Retention Scheme, claims only cover wages. Other employer costs (such as national insurance contributions and pension contributions) must be met, in their entirety, by the employer.

Amount to pay employees

Employers will need to ensure employees are paid their full contracted wages for the hours they actually work and two-thirds of their contracted wages for the hours they do not work. HM Treasury has stated that their "expectation is that employers cannot top up their employees' wages [for the] hours not worked".

OVERALL COSTS

This means that where an employee works 33% of their normal hours (and subject to the cap):

• The employee will earn 77% of their normal wages (on a gross basis);
• The employer will need to pay 55% of their normal wages; and
• The Scheme will cover 22% of their normal wages.
• Added together this means that it will cost an employer 165% of the cost of one employee to keep three (equally paid) employees each on one-third of their usual working hours. Businesses will need to think carefully about the cost implications of the Scheme.

Eligibility

The Scheme is open to any UK employer with a PAYE scheme and UK bank account. As mentioned, there is no requirement for an employer to have previously used the Coronavirus Job Retention Scheme.

Large businesses will only be eligible if they can show they have been negatively impacted by COVID-19 (and there will be a financial assessment test, based on turnover). There is also likely to be a prohibition on such businesses paying dividends (or making other capital contributions, such as share buybacks) whilst they receive the grant.

Claims will not be possible for any employees who are under notice of redundancy - although we note it appears permissible for employers using the Scheme to make employees (for whom they are not claiming a grant through the Scheme) redundant.

To be eligible, employees must have been paid via PAYE as at 23 September 2020 (and an accompanying RTI submission made to HMRC on or before that date).

As mentioned, employees must work at least 33% of their usual hours (subject to potential increase from 1 February 2021).

Whilst it will be possible for employees to change working patterns, or be brought into and out of the Scheme, each "short-time" working arrangement must last a minimum of seven days.

For employees who have been furloughed and who are retained, an employer's eligibility to claim the Jobs Retention Bonus will be unaffected, even where the Scheme is used.

Working out an employee's salary

Although full details will be released in due course, it is expected that the approach will be similar to the calculation for the Coronavirus Job Retention Scheme. For any employees that have been on furlough it will be their pre-furlough wages that will be used as the basis for calculation.

Tax treatment - employer and employee

Payments to employees for hours not worked will be treated as normal salary payments. This means they need to be paid via payroll and subject to the usual deductions via PAYE for income tax and NICs (including payment of employer's NICs).

The reimbursement from HMRC via the Scheme will need to be included in the calculation of taxable business profits for corporation (or income) tax purposes. However, the employer will still be able to deduct the costs of paying salary to furloughed employees and therefore the net tax effect should be neutral.

Employment law considerations

Given the expectation that employers will not be able to top-up employee wages for hours not worked, there are likely to be employment law considerations. Employers cannot unilaterally decide to place employees on shorttime working arrangements (unless there are specific contractual provisions already in place). Therefore, we expect that agreement will need to be reached with employees (or, in certain cases, with representative bodies such as trade unions). Once agreement with an employee has been reached, they must be notified in writing.

In addition, the following considerations are from an employment law perspective are likely to be key:

• Reaching agreement with employees on the amount they will be paid for hours not worked (i.e. two-third of their usual wage);
• Complying with equality and discrimination legislation when choosing whom to furlough;
• Deciding how contractual benefits in kind will be treated during short time working (and reaching agreement with employees if these are to be altered or suspended) - the default position being for them to continue as usual; and
• Noting that employees continue to have their usual employment rights (e.g. in relation to parental arrangements, sick pay, redundancy, and unfair dismissal etc.).

The National Minimum Wage ("NMW") does not apply to hours employees do not work, but employees will need to receive the NMW for hours worked (particularly relevant if there are salary sacrifice deductions which could reduce the hourly rate).

Employers will need to keep sufficient records of agreements with employees and copies of their communications with employees.

How to make the claim

Full details have not yet been released, but it has been announced that claims will be made online from December 2020 and paid on a monthly basis in arrears.

We expect that HMRC will administer claims via an online portal in a similar manner to the Coronavirus Job Retention Scheme and that employers will need to calculate their claims themselves.

As with the Coronavirus Job Retention Scheme, HMRC will undertake checks to ensure compliance and it will be vital for employers to maintain full records and copies of employee agreements, which may be requested by HM.

Timing and interim cashflow issues

Claims will only be possible after the employee has already been paid and PAYE details have been submitted to HMRC. We do not yet have information as to the expected timescale for payments after a claim has been made.

For employers suffering cash flow issues (given that payments to employees covered by the grant will need paying before reimbursement from the Scheme is received), other Coronavirus measures, including various loan options, may provide some assistance.

Worked example HM Treasury guidance provides the following example:

• An employee normally works 5 days a week, earning £350 a week.
• The employee is placed on the Scheme and works 40% of usual hours - i.e. 2 days per week.
• The employer pays the employee £140 for the days actually worked (i.e. £350 * 40%).
• The employer pays the employee £140 for the days not worked (i.e. £350 * 60% * 2/3rd).
• The employer can claim a grant of £70 for the days not worked (i.e. £350 * 60% * 1/3rd).
• Therefore, the employer will pay the employee a total of £280 (or 80% of the usual wages) and receives a grant for £70. Additional costs of the employer's national insurance contributions and pension contributions must be borne by the employer.