Coronavirus Job Support Scheme: New expanded offering for ‘locked down’ businesses
We explain the new, enhanced measures for businesses who are legally forced to close over the winter months.
Just two weeks after announcing its Coronavirus Job Support Scheme, the successor to furlough which comes to an end on the 31 October 2020, the government has introduced new, enhanced measures for businesses who are legally forced to close over the winter months.
In anticipation of tougher ‘local lockdown’ measures being introduced shortly, the expanded scheme (which we have given the ‘working title’ CJSS2) will step up the government’s contribution to employee wage costs from a maximum of 22% (under the ‘original’ CJSS) to 67% for any period of mandatory shut-down. The scheme will apply across all four nations of the UK.
(The government has now confirmed that its ‘original’ scheme for open businesses will be referred to as the Job Support Scheme Open (JSSO) and the expanded scheme for closed businesses as the Job Support Scheme Closed (JSSC). Please note that, under new amended terms announced in late October, the government’s maximum contribution to employee wage costs under the JSSO is 61.7%, not 22%.)
Like the original scheme, CJSS2 will take over when furlough ends and run from 1 November 2020 to 30 April 2021 (with a review point in January 2021). In line with the ‘original’ CJSS, claims must be made on a monthly basis in arrears via a HMRC claims portal which will open in December. However, the government promises that businesses forced to close during the remainder of October, before the scheme formally opens, will also be eligible to claim.
For any period of mandatory closure, the government will pay two-thirds (67%) of an employee’s normal pay, up to a limit of £2,100 per month. Employers will continue to be responsible for paying NICs and employee pension contributions as usual.
To qualify, employees must be off work for a minimum of 7 consecutive/calendar days and, harking back to the original furlough scheme, must agree to cease work completely during any claim period. HMRC guidance states that employers may only claim in respect of "employees who cannot work (paid or unpaid) for that employer". It is not currently clear exactly what this means or how closely this will be scrutinised, but the need for direct linkage to mandatory closure is best assumed for now.
As with the original CJSS, an employee may not be made redundant or given notice of redundancy while CJSS2 funding is being claimed.
Who is eligible?
CJSS2 will apply only to businesses ‘legally required to close’ as a ‘direct result of COVID restrictions’. Importantly, this will include businesses that remain open, but are legally required to change their offering (for example restaurants restricted to delivery or collection only services).
Businesses that close due to reduced demand, when they are not legally obliged to do so, will not be eligible. Neither will any business ordered to close because of a specific workplace COVID outbreak.
Businesses will only be eligible for the enhanced support of CJSS2 while subject to restrictions. When legally allowed to re-open/open as normal, they must switch back to the less generous CJSS scheme.
A key area of difference between the CJSS schemes is that, under CJSS2, any business may apply for support (regardless of size or financial circumstances). The original scheme requires larger businesses to undergo a financial assessment to demonstrate that turnover has fallen due to the COVID crisis. However, in relation to both schemes, the government expresses the same ‘expectation’ that larger businesses will not make any capital distributions (such as dividend payments or share-buybacks) while accessing funding.
The new scheme was trailed by the government as an ‘expansion’ of the ‘original’ CJSS, but is really better understood as a separate, parallel scheme with its own rules and eligibility criteria. The new measures will effectively sit alongside the original scheme, and the separate Coronavirus Job Retention Bonus (CJRB) offering, which remains available to employers accessing either incarnation of the CJSS. Any sums claimed under either CJSS or CJSS2 will count towards the minimum pay requirement for the purposes of claiming the bonus (£1,560 in total over the three months November 2020 to January 2021).
The fact that this expanded scheme follows so closely behind the primary launch of the CJSS on 24 September, is perhaps an indication of how quickly the COVID landscape is changing nationally, and of the pressure being brought to bear on central government by the most adversely affected regions. For example, the Mayor of Greater Manchester, Andy Burnham, has been especially vocal regarding the need for additional financial support for areas placed in ‘local lockdown’.
CJSS2 inevitably invites comparison with the furlough scheme, as employees are not permitted to work at all during the claim period. The 67% wage subsidy on offer under CJSS2 is roughly equivalent to the government’s scaled-back contribution to furlough pay in September/October, with the important difference that employers are not required to make any contribution to employee wage costs. Many employers will be extremely relieved that this new ‘mini-furlough’ scheme has been introduced for employers forced to temporarily cease trading, as the ‘original’ CJSS provided support only for businesses able to provide employees with at least a third of their usual work to do.
Confusingly, the HMRC Factsheet on CJSS2 states that employers may top up employee pay if they wish to do so. This contrasts with original CJSS guidance which expressed a strong expectation that employers would not top up pay.
We await further guidance on both CJSS schemes and will hopefully clarify these areas of uncertainty.