The Government’s revised Job Support Scheme was scheduled to come into effect on 1 November the date after which the Coronavirus Job Retention Scheme scheme was due to close.

Here is a guide for accountants on how to approach the administration and HR issues involved.

NOTE: Implementation has been put on hold while the furlough scheme is extended. This guide will be revised when a new start date is determined. Until then, please ignore references to November.

• Sections
• Nature of the scheme and eligibility
• Putting JSS Open arrangements in place
• Working requirements
• Calculating JSS Open pay and making a claim
• Sickness, holiday and other absence
• Disciplinary and grievance
• Redundancy
• The end of JSS Open temporary working arrangements

Nature of the scheme and eligibility

1. What is the JSS Open?

The Government announced the original Job Support Scheme on 24 September 2020. It has since been revised and the Job Support Scheme Open (JSS Open) was announced in its current form on 22 October 2020. The JSS Open is set to run for a six month period.

It was intended to launch on 1 November 2020, but has been postponed until at least December. It is intended to support businesses that remain open to continue employing people in “viable jobs” after the Coronavirus Job Retention Scheme (furlough / the CJRS) comes to an end on 31 October.

Under the JSS Open, employers facing depressed demand can claim financial support to retain employees in their jobs on short hours, rather than making them redundant. The financial burden of hours not worked is split between the employer and the Government (through wage support) and the employee (through a wage reduction).

Change to minimum hours

When the scheme was first announced, the minimum that employees were to be required to work was 33% of their usual hours, for which their employer would pay them as normal. On top of that, the employee would be entitled to payment for two-thirds of the non-worked hours, with responsibility for that payment split equally between the Government and the employer.

On 22 October, the Government responded to business’ concerns that the financial support this would provide would not be sufficient to protect jobs and announced ] significant changes to make the scheme more generous, reducing the minimum hours requirement and increasing the proportion of pay for non-worked hours that will be funded by the Government.

• Under the JSS Open, employees will only have to work a minimum of 20% of their usual hours.
• This means that an employee who usually works a five day week will be eligible if they work one day or more per week.
• Employers will have to pay employees as normal for the hours that they work.
• The Government will provide a grant of 61.67% of employees’ pay for the non-worked hours, subject to a cap of £1,541.75 per month.
• Employers will have to fund an additional 5% of employees’ pay for the non-worked hours, capped at £125 per month.
• This means that employees should receive at least 66.67% of their usual pay for non-worked hours and at least 73% of their normal wages in total, where they normally earn £3,125 per month or less.

Note, however, that employers will be able to top up employees’ pay for non-worked hours above their 5% compulsory contribution if they wish.

The grant does not cover Class 1 employer NICs or pension contributions, although these contributions remain payable by the employer.

All small and medium size businesses are eligible to claim under the JSS Open provided that some or all of their employees are working reduced hours (which must be at least 20% of their usual hours. However, large businesses (those with 250 or more employees at 23 September 2020) also have to undertake a Financial Impact Test to demonstrate that their turnover has remained equal or fallen compared to the previous year due to Covid-19. This test only needs to be taken once before the employer’s first claim under the JSS Open (see question 3 below).

 The JSS Open is open to all employers across the UK, including those who have not previously used the furlough scheme. Employers retaining staff on shorter hours will be able to claim both the JSS Open and the Job Retention Bonus (see question 10, below).

In order to be eligible under the JSS Open, an employee must have been in your employment on 23 September and must have had an RTI Full Payment Submission made in respect of them at some point between 6 April 2019 and 11.59pm on 23 September 2020.  

Rotation

Employees can cycle on and off the JSS Open and do not have to be working the same pattern each month, but each short-time working arrangement must cover a minimum period of seven days.

Employers must agree any new short-time working arrangements with their staff, make any changes to the employment contract by agreement and notify the employee in writing. This agreement must be made available to HMRC on request and the employer must keep a copy for 5 years. HMRC will check claims and payments may be withheld or have to be repaid if a claim is found to be fraudulent or based on incorrect information. As with the furlough scheme, JSS Open grants can only be used as reimbursement for wage costs actually incurred.

With regard to restrictions on the use of the JSS Open, the Government expects that large companies will not make capital distributions, such as dividend payments, charges, etc. while they are in receipt of funding under the JSS Open, although this will not be made a strict legal requirement for access to the scheme.

In addition, an employer is not permitted to make a claim for an employee under the JSS Open if during the claim period, that employee has been made redundant or been served with a notice of redundancy.

Business operating under restrictions

Note also that specific support is provided for businesses that are legally required to close due to tighter local or national Coronavirus restrictions, under a separate branch of the JSS known as ‘JSS Closed’. Businesses that are eligible under JSS Closed can claim 67% of each of their employees’ wages from the Government, subject to a cap of £2,100 per month. Employers do not have to contribute towards employees’ wages while their business is required to remain closed, but must cover NICs and pension contributions where applicable. This scheme is available for six months from 1 November 2020, but will be subject to review in January 2021. Under the three tiered alert system  categorising areas of the country by reference to their Covid-19 transmission rate and imposing differing levels of restriction accordingly, certain businesses in the hospitality sector may be required to close at the ‘high’ and ‘very high’ alert levels – and at the ‘very high’ alert level other businesses such as leisure centres and providers of close contact services could also be required to close depending on local circumstances. It is these businesses at which the JSS Closed is targeted and we do not anticipate that it will be available to manufacturers. We therefore do not cover the JSS Closed in these FAQs.

2. What official guidance is there on the JSS Open?

The Government issued an initial factsheet and a policy paper about the JSS Open on 22 October. Together, we refer to these documents as the ‘Government guidance’. Further guidance is anticipated before 31 October.

Note that the Government guidance may be updated over time. While we endeavour to keep these FAQs up to date, we do encourage employers to check the Government guidance for the very latest information.

3. Which employers are eligible?

All small and medium size businesses are eligible to claim under the JSS Open, provided that some or all of their employees are working reduced hours (which must be at least 20% of their usual hours) and they have enrolled for PAYE online.

However, large businesses (those with 250 or more employees at 23 September 2020) also have to undertake a Financial Impact Test to demonstrate that their turnover has remained equal or fallen compared to the previous year due to Covid-19. This test only needs to be taken once before the employer’s first claim under the JSS Open.

The Financial Impact Test for large employers who are VAT registered is based on the total sales figure on their VAT return. This figure (recorded in box 6 of the VAT return) captures the total value of sales and all other outputs excluding any VAT. It captures all sales, whether subject to VAT or not. The Government guidance states that:

• Large employers who submit quarterly VAT returns should compare the total sales figure on their VAT return which is due to be filed and paid between 31 August 2020 and 7 November 2020, with the total sales figure from the same quarter in 2019.
• Large employers who submit monthly VAT returns should compare the three consecutive months which are due to be filed and paid by 7 November 2020 with the same period in 2019.
• Large employers who file less frequently should compare the three consecutive months which are due to be filed and paid by 7 November 2020 with the same period in 2019 but will need to have submitted a VAT return between 31 August 2020 and 7 November 2020 to be eligible.
• Large employers who are part of a VAT group will use the turnover figures for the VAT group for this calculation.

Examples of how to conduct the Financial Impact Test in each case are included in the Government guidance.

The Government has indicated that further guidance for large employers who are not VAT registered will be available by the end of October.

Large employers should also note that the Government expects them not to make capital distributions (such as dividend payments, charges, free or other distributions, or any equivalent payment that a partnership may make to its partners) while they are claiming under the JSS Open. The Government guidance states that there is no plan to make this a contractual or legal condition of eligibility for the scheme, but encourages businesses to “reflect on their responsibilities” and be aware that taxpayers “should be able to rely on public money only being claimed where it is clearly needed”.

Subject to the above requirements, the JSS Open is open to all employers across the UK, including those who have not previously used the furlough scheme.

4. Which employees are eligible?

In order to be eligible under the JSS Open, employees must have been in their employer’s employment on 23 September 2020 and had an RTI Full Payment Submission made in respect of them at some point between 6 April 2019 and 11.59pm on 23 September 2020.

If employees ceased employment after 23 September 2020 and were subsequently rehired, then employers can claim for them.

Employees can be on any type of contract, including zero-hours or temporary contracts. Agency workers will be regarded as employees of the employment agency for the purposes of JSS Open, provided they are employees for income tax purposes.

Employees do not need to have been furloughed under the CJRS in order to be eligible for the JSS Open.

Putting JSS Open arrangements in place 

5. Is the JSS Open suitable for your business?

The JSS Open has significant scope to benefit any employees who otherwise might be at risk of losing their jobs.  In addition, using the scheme may allow employers to:

• avoid the immediate costs of making redundancies (in particular, redundancy and notice payments);
• retain a staff base which is available and ready to increase their hours if and when customer demand picks up (rather than the employer having to incur the  time and costs of recruitment later on);
• stay flexible in responding to fluctuating demand, as employers will be able to move employees on and off the JSS Open and they will not be required to work the same pattern throughout (for example, if one month is quiet, employers could agree with employees – subject to the rules of the scheme – that they will work the minimum 20% of hours required, whereas if the next month is busier, this could be increased as needed); and
• safeguard their earlier investments by retaining qualified and experienced staff whom the business may have trained and invested in.

However, there are various practical and operational implications that employers will need to take into account when deciding whether and how they can use the JSS Open.

First, from a practical perspective, do you have enough work available for applicable employees over the next few months?  Under the JSS Open, employees will need to work at least one-fifth of their pre-Covid usual hours and their employer will have to pay them as normal for those hours.

What will be the financial cost to your business of using the JSS Open?  In addition to paying the employee for the actual hours worked (at least one-fifth of the usual hours), the employer will need to contribute 5% of the employee’s pay for the hours not worked. The JSS Open also requires the employer to cover the cost of employer NICs and pension contributions on the full amount of pay that the employee receives under the scheme.

Employee roles

From an operational perspective, employers need to think carefully about what roles they currently require employees to perform, the numbers they need in each role and the hours and pattern of work needed in each role to enable necessary operations to continue. For example, an employer suffering reduced demand for its products but still needing to operate a production line will require a certain number of supervisors to work, in addition to the production operatives. What will work best for you operationally? Can you choose whether to keep some employees on full hours and some on very low hours, or would you prefer to have all your employees working slightly reduced hours? Do you want to rotate groups of employees on and off the JSS Open in order to ‘share the pain’? Alternatively, might it be administratively and operationally simpler to keep a small number of employees on full hours and make others redundant, rather than reduce the hours of all employees – juggling rotas accordingly – and claim under the JSS Open for all of them? In practice, you will need to make the operational decision first as to what it is you wish to achieve, before looking at what to do if you have a choice as to which employees you place on the JSS Open. 

Employee selection

If you do have to choose between employees to place on the JSS Open, this will require careful thought – not just if you will have to make other employees redundant, but equally if you will be able to keep them on their full hours. In this regard, it is important to note that the Government guidance makes clear that when employers are making decisions in relation to the JSS Open, equality and discrimination laws will apply in the usual way.

If you are unsure about the future security of your business and think that, notwithstanding the availability of support under the JSS Open, you might need to consider making redundancies in the future, it is important to be aware of the restriction on claiming under the JSS Open in respect of an employee whom you have made redundant or upon whom you have served notice of dismissal for redundancy.

If, prior to the announcement of the JSS Open, you had already been contemplating redundancies, or are currently in the midst of making redundancies, careful financial modelling will be needed to assess the cost and practical implications of using the JSS Open as an alternative to some, or all, proposed redundancies.

Consultation with affected staff should address whether the roles that are subject to redundancy are ‘viable’ under the JSS Open (and otherwise fulfil its criteria) and if so how the scheme would work.  Failure to address these issues with employees could be relevant to an employment tribunal’s assessment of any unfair dismissal claims.

Viability

It is possible that, having undertaken a detailed analysis of your business’ individual circumstances (and sought legal advice as needed), you might conclude that the introduction of the JSS Open does not change the outcome of the original redundancy plans. For example, the JSS Open aims to protect ‘viable jobs’, so if you have had employees on full furlough for the duration of the furlough scheme, and had been intending that their employment would end when the furlough scheme closes, it may still be reasonable for those redundancies to go ahead as planned. If you cannot offer at least one-fifth of an employee’s usual working hours, there is an argument that the job is not ‘viable’ and therefore the only option is to make the role redundant.  That said, in some circumstances the introduction of the JSS Open may be the lifeline your business needs during the months ahead.

6. How do you choose whom to place on the JSS Open if you have enough work to keep some – but not all – employees on their normal hours?

If an employer is in the position where it will need to select just some employees in a particular role to go onto the JSS Open, it will need to decide how best to do this. In our view, an employer  can probably ask employees to volunteer to go onto the JSS Open – and doing so may help to reduce any sense of unfairness. Some employees may be keener than others to work the altered hours due to their personal circumstances, e.g. if they fall into a vulnerable category and wish to limit the amount of time they spend in the workplace, or if they have childcare issues.

Assuming that the employer is not proposing to top up employees’ JSS Open Pay above the amount that it can recover from the Government under the scheme, employees’ willingness to volunteer to go onto the JSS Open may also be influenced by how much they are normally paid. As noted above, where an employee is working the JSS Open minimum of 20% of their usual hours, the Government grant to cover 61.67% of the employee’s non-working hours (effectively, 49.3% of their usual hours) is capped at £1,541.75 per month. Accordingly, employees on the JSS Open will receive at least 73% of their normal wages if they usually earn no more than £3,125 per month. Employees whose normal pay is higher than this and who are currently working their full hours will suffer more than a 27% pay cut and therefore might be less willing to move onto the JSS Open than those for whom the pay cut is limited to 27%. That said, many employees on lower pay may be unable to afford even a 27% pay cut and therefore may be keen to continue working their normal hours if at all possible.

All of these factors are likely to influence the number of willing volunteers an employer has when asking employees if they wish to work reduced hours under the JSS Open.

Where an employer receives more volunteers than it needs to go onto the JSS Open, or does not receive enough volunteers, it will need to conduct some sort of selection process to determine which volunteers it will turn down / which employees it will select from amongst those who did not volunteer. Alternatively, as a way of sharing the burden more equally among the workforce, the employer could consider asking more employees to work reduced hours under the JSS Open, but with each of them working more hours than it had originally envisaged. However, this does have cost implications for the employer and may not be practicable in some workplaces, given the social distancing measures that may be required from a health and safety perspective (see the ‘Health and safety measures’ FAQs).

A further possible alternative may be a rotational JSS Open arrangement, whereby some employees are kept on their normal hours while others reduce their hours under the JSS Open, and then the groups are switched over. The Government guidance does not expressly address whether such rotational arrangements are permitted, but nor does any of its content suggest that they would be prohibited.

The safest approach when deciding whom to place on the JSS Open if you don’t have the right number of volunteers may be to conduct an objective selection exercise in relation to the roles required in order to ensure you have the best employees working the greatest number of hours but, in reality, practical considerations as to which employees are able to work, as well as employee relations issues, will probably take precedence. 

Employers will also need to keep the situation under review, as they may find that work volumes increase or reduce unexpectedly and they need to end some employees’ JSS Open working arrangements and have them back at work on a full-time basis, place more employees on reduced hours under the JSS Open, or agree to increase or reduce the part-time working hours of employees on the JSS Open, as things evolve.

7. What process should you follow to place an employee on the JSS Open?

The Government guidance makes clear that, to be eligible for the grant, employers must have reached written agreement with their employees (or reached written collective agreement with a trade union where the relevant terms are determined by collective agreement) that they will go onto the JSS.

In practice, given the unprecedented circumstances of the Covid-19 crisis, it is likely that many employees will agree to move onto the JSS. Good communication is key in order to encourage agreement. While in-person meetings with all affected staff might still not be possible in the current circumstances, we would recommend that employers try to arrange some form of meeting (e.g. via Zoom, Skype, or even telephone) at which they can explain to affected employees what they are proposing and the reasons why reduced working hours under the JSS are necessary, before sending them letters to seek their agreement.

In terms of the mechanics of seeking agreement, where practical, it is best for an employer to write to the employee setting out the proposed arrangements and ask the employee to sign and return a copy of the letter.

AAT members can access template  letters for the JSS Open in Knowledge Hub.

• JSS Open template letter for employee who is working normally 
• JSS Open template letter for employee on full furlough
• JSS Open template letter for employee on flexible furlough

E-signatures would be appropriate if the company has the necessary software. If e-signatures are not possible, the employer could ask employees to sign and return a hard copy letter. However, if the letter is sent by email to employees who are not currently in the workplace (e.g. because they are working remotely, or they are self-isolating), they may not have access to printing and scanning facilities that would enable them to provide this. Accordingly, employers could as an alternative provide for employees to confirm their agreement by replying to the employer’s email using a set form of words or voting buttons.

Trade unions

Employers that recognise a trade union for collective bargaining with a defined bargaining unit and have a standard incorporation clause in individual contracts of employment should seek to engage with the trade union. In our view, if your collective bargaining arrangements cover changes to pay and hours, then they should also cover reduced working hours arrangements under the JSS Open. The Government guidance expressly recognises that a collective agreement reached with a trade union can be used to agree JSS Open working arrangements. Once the union agrees to JSS Open working arrangements for the employees in the bargaining unit, we would suggest that you also communicate/send letters to employees individually, to confirm the change to terms that has been agreed by the union and that it is incorporated into their contracts temporarily.

The Government guidance specifies that employers must maintain records relating to the terms of the temporary working agreements for each employee, and that they must:

• make sure that the agreement is consistent with employment, equality and discrimination laws;
• keep a written record of the agreement for 5 years;
• keep records of how many hours employees work and the number of usual hours they are not working; and
• make the agreement available to HMRC on request.

The Government will publish further guidance on what to include in the written agreement by the end of October.

8. What happens to an employee’s terms and conditions while they are on the JSS Open?

We would anticipate that employees on the JSS Open will have the same employment rights as they did previously, including statutory sick pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and rights to redundancy payments. (Note that the Government guidance specifically states that employees cannot be made redundant or given notice of redundancy dismissal while you are claiming for them under the JSS Open – see question 35, below).

However, employers may wish to agree changes to contractual benefits that would apply while employees are on the JSS Open when they seek employees’ agreement to go onto the JSS Open, for example changes to bonus schemes, or the suspension of other benefits.

While the Government guidance does not address what happens when an employee who is working reduced hours under the JSS Open falls ill or needs to self-isolate or how JSS Open Pay interacts with the right to SSP or company sick pay, employers that operate a company sick pay scheme may wish to confirm to employees that company sick pay during non-working hours under the JSS Open will be payable at the JSS Open rate of pay. We have included optional language to provide for this in our template JSS Open letters .

In theory, an employer could agree any changes it wishes with the employees it places on the JSS Open. But in practice, the more severely the employer tries to remove or restrict benefits during a period of reduced hours under the JSS Open, the more likely it is that employees might refuse to agree to the proposed changes. Employees may be more likely to agree to otherwise unpalatable changes where the employer is in difficult financial circumstances and can clearly explain to employees the need for particular changes in order to help the company continue as a viable business. In all cases, however, it is important for the employer to communicate with its employees so that they understand the changes the employer is seeking to make and why it needs to make them.

Employers cannot place employees on the JSS Open without their agreement, so will have to weigh up the importance of additional contractual changes against the likelihood of employees refusing to agree – and the potential complications that could cause. Indeed, proposing to implement very significant contractual changes as part of an agreement to place employees onto the JSS Open might risk triggering the requirement to conduct collective consultation (if the proposed changes would amount to a repudiatory breach of contract were you to impose them unilaterally), or prompt disgruntled employees to resign and claim constructive dismissal. (Note also that we do not think it would be appropriate for an employer seeking employees’ agreement to go onto the JSS Open to seek to make permanent changes to employees’ contractual terms that will continue to apply after their time on the JSS Open ends as part of that process).

9. What if employees won’t agree to go onto the JSS Open?

If employees refuse to agree to move onto the JSS Open, the first step for an employer would be to engage with the employees if possible, explaining the need for the proposed arrangements, the benefits to employees and the alternatives. In some circumstances, listening to employees’ concerns or alternative suggestions could result in a new arrangement being agreed which is more acceptable to employees, for example ‘sharing the pain’ by spreading available hours of work in a different way amongst a group of employees. If employees still do not agree, the employer can:

• consider implementing lay-off or short-time working (which would be likely to be less attractive to employees and which cannot normally be imposed without agreement either); or
• require employees to take annual leave (giving the requisite notice under the Working Time Regulations, and paying holiday pay in full – although this is not a long-term solution, employees are unlikely to be keen to use up their holiday entitlement in this way and it does not assist the employer in terms of its need for employees to carry out work for at least some of their hours); or
• move to redundancies, if the conditions for redundancy are met in the usual way (note that the usual employment law requirements of redundancy consultation will still apply, including collective consultation if the relevant thresholds are met, i.e. minimum of 30 days’ consultation where 20 or more redundancies are proposed within a 90 day period, or 45 days’ consultation where 100 or more redundancies are proposed).

There are different benefits and risks in relation to each of these options and which you choose will depend on your particular circumstances. Speak to your Make UK adviser about the best way to handle employees who refuse to agree to move onto the JSS Open.

10. What is the Job Retention Bonus and can you claim it in respect of an employee on the JSS Open?

The Government will provide a one-off bonus of £1,000 as a ‘Job Retention Bonus‘  for employers for every furloughed employee whom the employer keeps in employment after the CJRS comes to an end. Employers can claim the Job Retention Bonus even if those employees are working reduced hours under the JSS Open.

The Government published guidance on the Job Retention Bonus on 2 October (along with a Treasury Direction providing the legal foundation for the Job Retention Bonus scheme and an example showing how to apply the minimum income threshold). The guidance indicates that eligibility for the bonus will be conditional on the employee:

• having been furloughed by the employer and had a claim submitted for them under the CJRS that meets all relevant CJRS eligibility criteria;
• having been continuously employed by the employer from the time of the employer’s most recent claim for that employee under the CJRS until at least 31 January 2021;
• having been paid an average of at least the lower earnings limit (£520 per month) over the three tax months 6 November to 5 December 2020, 6 December 2020 to 5 January 2021 and 6 January 2021 to 5 February 2021 (i.e. at least £1,560 across the three months, with at least some earnings in each of the three months that have been paid and reported to HMRC via RTI, as only earnings recorded through RTI records can be counted). This minimum earnings threshold applies regardless of how often the employee is paid or any circumstances that may have reduced the employee’s pay in the relevant tax periods, such as being on statutory leave or unpaid leave;
• having up-to-date RTI records for the period to 5 February 2021; and
• not working out a contractual or statutory notice period (including notice of retirement) that started before 1 February 2021 for the employer.

Employers can claim the Job Retention Bonus for all employees who meet the above criteria, as well as office holders, company directors and agency workers, including those employed by umbrella companies.

Employers will be able to claim the Job Retention Bonus online between 15 February and 31 March 2021. Employers that are intending to claim should ensure that they have:

• complied with their obligations to pay and file PAYE accurately and on time under the RTI reporting system for all employees;
• maintained enrolment for PAYE online; and
• a UK bank account

Employers must keep their payroll up-to-date and accurate, ensure all of their claims under the CJRS have been accurately submitted and notify any necessary amendments to HMRC as well as addressing all requests from HMRC to provide missing employee data in respect of historic claims under the CJRS. Failure to maintain accurate records may jeopardise an employer’s claim. HMRC will withhold payment of the Job Retention Bonus where it believes there is a risk that CJRS claims may have been fraudulently claimed or inflated, until the enquiry is completed.

Further guidance on how to claim the Job Retention Bonus is expected to be published before the end of January 2021.

Working requirements

11. What is the minimum working requirement for an employee on the JSS Open?

Under the JSS Open, employees must work at least 20% of their usual hours.

The Government guidance notes that employees can undertake training during working hours under the JSS Open – such time spent training will count towards the 20% requirement and must be paid for by the employer at their full rate of pay. (Note that employees can also undertake training during non-working hours and this would not count towards the 20% requirement – see question 16, below).

12. Can an employee work more than 20% of their hours while on the JSS Open?

Yes. Employees can work more than 20% of their hours while on the JSS Open. 20% is simply the minimum working requirement. The Government guidance does not specify a maximum, but clearly employers will not be able to claim under the JSS Open in respect of an employee who is working their usual hours in full.

13. Can an employee’s working pattern be varied while they are on the JSS Open?

Yes. Employees’ working patterns can be varied while they are on the JSS Open. The Government guidance expressly states that employees do not have to work the same pattern every month. However, the minimum period for which a particular working arrangement must apply is seven days. While it does not say so expressly, the tone of the Government guidance suggests that changes to working arrangements should be agreed with the employee in writing.  

If you know at the point at which you are seeking to agree that employees should go onto the JSS Open that the number and/or pattern of hours that you will need them to work will fluctuate in a particular way, we think that you can provide for this changing working pattern in advance in a single agreement. For example, you might need employees to work only a fifth of their usual hours during November, but half of their usual hours during December in order to satisfy pre-Christmas demand, reducing to one fifth of their hours again after Christmas.

(Note that the Government has indicated that it will provide further guidance on what to include in an agreement to place employees onto the JSS Open by the end of October. It is possible that this will include additional detail on how employees’ working patterns can be varied while they are on the JSS Open).

14. Can you move employees on and off the JSS Open and is there any minimum period for which they must be on it?

Yes. The Government guidance states that employees can cycle on and off the JSS Open, although it does not yet provide details on how this will work in practice. However, the minimum period for any JSS Open working arrangement is seven consecutive days.

15. Can an employee on the JSS Open work, either for you or elsewhere, during their non-working hours?

The Government guidance is currently silent on this issue. However, by analogy with the position for flexible furlough, our tentative view is that it is likely that employees will:

• not be able to carry out any work / provide any services for you or any associated company during their non-working hours under the JSS Open; and
• be able to work for another employer during their non-working hours under the JSS Open provided that this is permitted under their contract of employment and does not prevent them from being available to return to work their full usual hours with you if you decide to end their JSS Open working arrangement and bring them back to work as normal.

We will seek clarity on this from the Government and will update these FAQs when any further guidance is available.

16. Can an employee undertake training for you during their non-working hours?

The Government guidance indicates that employees can undertake training during their non-working hours. However, it specifies that time spent on training during non-working hours under the JSS Open is treated as working time for the purposes of the National Minimum Wage (NMW). Accordingly, employers need to ensure that employees receive at least the applicable rate of the NMW for time spent training during their JSS Open non-working hours. (See question 11, above, for details of how to treat training during JSS Open working hours.)

17. Can employees on the JSS Open undertake voluntary work during their non-working hours?

The Government guidance is currently silent on this issue. However, by analogy with the position for furlough, we think it is likely that employees will be permitted to undertake voluntary work during their non-working hours.

Calculating JSS Open pay and making a claim

18. What pay is an employee entitled to while they are on the JSS Open and what does the Government’s contribution cover?

An employee on the JSS Open must be paid their normal pay by their employer for the hours that they work. As noted above, the employee must work at least 20% of their usual working hours.

In addition, the employee is entitled to 66.67% of their normal pay for the portion of their usual hours that they are not working under the JSS Open, subject to the applicable cap. This payment will be funded jointly by the Government (which will cover 61.67%) and the employer (which will cover the remaining 5%).

Where an employee is working the minimum 20% of their usual hours, the Government contribution to pay for their non-working hours will be capped at £1,541.75 per month and the employer’s compulsory contribution will be capped at £125 per month. However, the employer is permitted to top up the employee’s pay for non-working hours above the 5% compulsory contribution if it wishes to do so. Our template JSS Open letters include optional wording that you can use if you decide to top up your contribution above the compulsory 5%.

The level at which the caps are set means that employees should receive at least 66.67% of their usual pay for non-worked hours and at least 73% of their normal wages in total, where they normally earn £3,125 per month or less.

Note that it is not yet clear from the Government guidance whether the caps will be reduced pro rata depending on the proportion of usual hours that an employee works, but we assume that this is the Government’s intention.

The Government’s contribution does not cover employer or employee NICs or auto-enrolment pension contributions, but the employer will still have to pay these.

In these FAQs, we refer to the pay an employee is entitled to for their non-working hours as ‘JSS Open Pay’. In order to calculate an employee’s JSS Open Pay, you first need to work out their usual hours and their normal pay.

19. How do you calculate an employee’s usual hours for the purposes of the JSS Open?

The method of calculating an employee’s usual hours for the purposes of the JSS Open is set out in the Government guidance. There are different calculation methods for employees on fixed hours and pay and those whose hours and pay vary.

The Government guidance provides two worked examples. However, these are currently stated to be ‘indicative’ only and full sample calculations and rules will be included in forthcoming guidance. Our explanations set out below are based on the indicative examples in the guidance that is currently available.

Fixed hours and pay

For employees whose contracts provide for them to work a fixed number of hours and whose pay does not vary according to the number of hours they work, usual hours are calculated based upon the greater of:

• the hours that the employee was contracted for at the end of the last full pay period ending on or before 23 September 2020; or
• the hours that the employee was contracted for at the end of the last full pay period ending on or before 19 March 2020.

The result of this is that an employee who has been on furlough should have their usual hours based on their pre-furlough hours so that they will not be disadvantaged by the fact that they were furloughed.

(Note, however that the guidance flags that the position may be different if employees had moved to part time working and that further details will be provided in due course.)

When you have identified the number of hours for which the employee was contracted at the end of the last full pay period on or before 23 September 2020 (or 19 March 2020, if greater), to calculate usual hours for the days on which the employee will be on a JSS Open temporary working arrangement during a pay period, you must:

• Divide the number of contracted hours by the number of calendar days in the employee’s repeating working pattern under the JSS Open temporary working arrangement (including non-working days).
• Multiply the resulting figure by the number of days in the pay period for which the employee is eligible to be claimed for under the JSS Open.

For example, if a fixed hours and pay employee’s contracted hours were 37.5, there were seven calendar days in the repeating working pattern under the JSS Open temporary working arrangement and the JSS Open temporary working arrangement were to apply from 2 to 30 November (so for 29 days in the month of November):

• 37.5 ÷ 7 = 5.36
• 5.36 x 29 = 155.44
• This is rounded down to give 155 as the number of the employee’s usual hours.

Variable hours

If the employee is not contracted to work a fixed number of hours, or if their pay depends on the number of hours they work, the employee’s usual hours for the purposes of the JSS open are calculated based on the highest of:

• the number of hours worked in the same calendar period in the tax year 2019 to 2020;
• the average number of hours worked in the tax year 2019 to 2020; or
• the average number of hours worked from 1 February 2020 (or the employee’s start date if later) until 23 September 2020.

The Government guidance specifies that the calculation of usual hours is not and cannot be altered if the employee is expecting to work more or fewer hours than this in the future.

20. What is an employee’s normal pay for the purposes of the JSS Open?

The Government guidance specifies that the amount an employer should use for calculating an employee’s normal pay (referred to in the guidance as ‘Reference Salary’) is made up of the regular payments they are obliged to make to the employee. This includes:

• regular wages;
• non-discretionary payments for hours worked, including overtime;
• non-discretionary fees;
• non-discretionary commission payments; and
• piece rate payments.

However, it is specifically stated to exclude:

• payments made at the discretion of the employer or a client, where the employer or client was under no contractual obligation to pay, including any tips (whether or not distributed through troncs);
• discretionary bonuses;
• discretionary commission payments;
• non-cash payments;
• non-monetary benefits like benefits in kind (such as a company car); and
• salary sacrifice schemes (including pension contributions) that reduce an employees’ taxable pay.

The method of calculating an employee’s Reference Salary will vary depending on whether they are paid a fixed salary or receive variable pay.

Fixed salary

For employees who are paid a fixed salary, the Reference Salary is the greater of:

• the wages payable to the employee in the last pay period ending on or before 23 September 2020; or
• the wages payable to the employee in the last pay period ending on or before 19 March 2020.

The result of this is that an employee who has been on furlough should have their Reference Salary based on their pre-furlough pay so that they will not be disadvantaged by the fact that they were furloughed.

Variable pay

For employees whose pay is variable, the Reference Salary is the greatest of:

• the wages earned in the same calendar period in the tax year 2019 to 2020;
• the average wages payable in the tax year 2019 to 2020; or
• the average wages payable from 1 February 2020 (or the employee’s start date if later) until 23 September 2020.

The Government guidance provides two worked examples. However, these are currently stated to be ‘indicative’ only and full sample calculations will be included in forthcoming guidance. Our explanations set out above are based on the indicative examples in the guidance that is currently available.

21. How do you use the employee’s usual hours and Reference Salary to calculate their JSS Open Pay for their non-working hours?

Having identified an employee’s usual hours for a pay period during which a JSS Open temporary working arrangement applies (see question 19, above), the Government guidance states that you should first check that you can claim for the employee by calculating the percentage of the usual hours that the employee actually worked in the pay period and checking that this is at least 20%.

For example, if the employee’s usual hours for the period in question were 155 and the employee actually worked 67.5 hours during that period:

• (67.5 ÷ 155) x 100 = 43.55%, so the employee is eligible to be claimed for under the JSS Open.

To work out the employee’s JSS Open Pay for the non-working hours in the pay period, the Government guidance gives the following instructions:

• Start with the employee’s Reference Salary for the pay period.
• Divide this by the number of calendar days in the pay period.
• Multiply the resulting figure by the number of days in the pay period that are subject to a JSS Open temporary working arrangement.
• Divide the resulting figure by the number of usual hours for the JSS Open days in the pay period.
• Multiply the resulting figure by the number of non-working hours for the JSS Open days in the pay period.
• Multiply the resulting figure by 66.67% to give the amount of JSS Open Pay to which the employee is entitled.

This will be made up of a 5% employer contribution and a 61.67% employer contribution, which you will be able to reclaim under the JSS Open after you have paid the employee.

To work out the amount that you will be able to reclaim from the Government:

• Start with the total amount of JSS Open Pay for the non-working hours.
• Divide this by 66.67.
• Multiply the resulting figure by 61.67.

The Government guidance provides two worked examples. However, these are currently stated to be ‘indicative’ only and full sample calculations will be included in forthcoming guidance. Our explanations set out above are based on the indicative examples in the guidance that is currently available.

22. What should you deduct from the employee’s pay under the JSS Open?

Employers must deduct and pay to HMRC income tax and employee NICs on the full amount that is paid to the employee (both pay for hours worked and JSS Open Pay for non-working hours), including any amounts subsequently met by a scheme grant.

Note that employers must also pay to HMRC any employer NICs due on the full amount that is paid to the employee, including any amounts subsequently met by a scheme grant, but employer NICs cannot be deducted from sums paid to the employee and must be funded by the employer.

Employers and employees must also still pay pension contributions in accordance with the applicable pension scheme terms, unless the employee has opted out or stopped saving into their pension. This means that you may need to deduct employee pension contributions from the amount that is paid to the employee.

23. What is the position with the apprenticeship levy and student loans?

If applicable, you will also need to deduct Student Loan repayments from the amount paid to the employee.

If you are subject to the Apprenticeship Levy, you must also continue to pay this (but this is an employer cost that cannot be deducted from employees’ pay).

24. What is the interplay between the JSS Open and the NMW?

The Government guidance states that employees are entitled to the applicable rate of the NMW for the hours they are working or treated as working (such as training undertaken at the request of the employer in non-working hours) under minimum wage rules. Under the JSS Open, you must pay employees at least the applicable rate of the NMW for all hours worked or treated as worked.

As noted at questions 11 and 16, above, if an employee undertakes training during their working hours, this will count towards the JSS Open 20% minimum working hours requirement and must be paid at their full normal pay rate. If an employee undertakes training during their non-working hours, this will be treated as working time for the purposes of the NMW and the employee must receive at least the applicable NMW rate for that time.

25. What will you need to make a claim under the JSS Open and how do you do it?

Claims should commence from the later of the date that the employee starts working reduced hours or the date when working reduced hours is confirmed in writing, not when the decision is made. Claim periods can start from 1 November 2020 onwards.

The Government guidance does not yet provide details on the mechanics of making a claim. The claims process will open from 8 December, covering salary for pay periods ending and paid in November. Subsequent months will follow a similar pattern, with the final claims for April being made from early May.

Further details of the claims process will be included in forthcoming guidance.

Sickness, holiday and other absence

26. What happens if an employee becomes sick (whether or not for a Coronavirus-related reason), or needs to self-isolate while on the JSS Open?

The Government guidance does not yet cover the interaction between sickness absence / self-isolation and JSS Open temporary working arrangements. However, by analogy with the position for flexible furlough, our tentative view is that it is likely that employees on the JSS Open will retain their statutory right to SSP with the result that they must be paid at least SSP if they become ill or need to self-isolate because they or someone in their household/support bubble have symptoms of Covid-19, because they have been told to self-isolate under the NHS test and trace programme, or because they have been advised by a medical practitioner to self-isolate in advance of an operation.

As noted at question 8, above, while the Government guidance does not address what happens when an employee who is working reduced hours under the JSS Open falls ill or needs to self-isolate or how JSS Open Pay interacts with the right to SSP or company sick pay, employers that operate a company sick pay scheme may wish to confirm to employees that company sick pay during non-working hours under the JSS Open will be payable at the JSS Open rate of pay. We have included optional language to provide for this in our template JSS Open letters .

27. Do employees on the JSS Open continue to accrue holiday?

The Government guidance does not yet cover how employees’ entitlement to holiday is affected by them being on the JSS Open. However, by analogy with the position for furlough, we think it is highly likely that employees on the JSS Open continue to accrue holiday in the usual way based on the employee’s full usual hours and the statutory minimum entitlement of 5.6 weeks’ annual leave per year cannot be reduced.

While, in theory, it may be possible for employers to agree with employees entering into the JSS Open that their accrual of additional contractual holiday entitlement would be reduced in proportion to the reduction in their working hours under the JSS Open, this would be very complex to implement and probably not worth the administrative hassle involved. It would also be unpopular with employees and may make them less willing to agree to reduce their hours under the JSS Open, so we do not recommend it.

28. Can an employee on the JSS Open take holiday and what is the position on holiday pay?

The Government guidance does not yet cover whether employees who are working reduced hours under the JSS Open can take holiday during that time, or what they should be paid for such holiday. However, by analogy with the position for furlough, we think it is highly likely that employees will be able to take holiday while they are on the JSS Open and that they would be entitled to receive normal pay for such holiday.

It is not yet clear how an employee taking holiday while on the JSS Open would affect the amount of the grant that the employer can claim from the Government for non-working hours.

29. Can you require an employee to use their holiday entitlement while on the JSS Open?

The Government guidance does not yet address whether an employer can require an employee to use their holiday entitlement while on the JSS Open. However, by analogy with the position for furlough, we think it is probable that employers will be able to do this by giving the required notice under the Working Time Regulations 1998 (WTR).

30. What is the position on bank holidays that fall while employees are on JSS Open temporary working arrangements?

The Government guidance does not yet cover the position on bank holidays that fall while employees are on the JSS Open temporary working arrangements. However, our tentative view is that it is likely that:

• an employee who usually takes bank holidays as leave would continue to do so during any period on the JSS Open and would therefore need to be paid normal pay for that day, whether or not it falls on a working day or non-working day; and
• an employee who usually works on bank holidays may or may not work them while on the JSS Open, depending on the temporary working arrangements in place – if they work a bank holiday they will be paid for the hours worked at the appropriate rate under their contract of employment, whereas if they do not work they will be entitled to JSS Open Pay for the non-worked hours.

31. What if you can’t afford for employees on the JSS Open to take holiday?

The Government guidance does not yet deal with this issue. However, by analogy with the position for furlough, and in recognition of the fact that some employers whose business has been severely affected by the Covid-19 crisis may be unable to afford to top up JSS Open Pay to meet the WTR holiday pay requirements, we think it is likely that employers will be able to rely on their right under the WTR to restrict when annual leave can be taken if there is a business need. 

In this regard, it is worth noting the existence of special regulations which provide that up to four weeks’ paid holiday can be carried over into the next two holiday years if it cannot be taken due to coronavirus.

For further discussion of an employer’s ability to prevent employees from taking holiday on specified dates and the regulations that permit the carry forward of leave that an employee has been unable to take due to coronavirus, see our FAQs on ‘Managing employees during the pandemic ’.

32. What if an employee on the JSS Open is otherwise unable to attend work, e.g. due to post-travel quarantine, or the reintroduction of shielding guidance in their area?

If an employee can work from home for the hours required under their JSS Open temporary working arrangement, we consider that the employer should allow this, paying them as normal for their working hours and JSS Open Pay for the non-working hours.

If the employee cannot work from home, the position is potentially more complicated and may depend on the reason why the employee cannot attend work.

Outside the JSS Open, employers are tending to require employees who have to self-isolate for a post-travel quarantine period and cannot work from home to take annual leave or unpaid leave to cover their absence – see our FAQs on ‘Managing employees during the pandemic ’.

With regard to the potential reintroduction of shielding guidance in areas that fall into the ‘very high’ alert level under the three tiered Covid-19 alert system, the Government has indicated that this will only be considered in the very worst affected areas based on advice from the Chief Medical Officer. The regulations that extended SSP entitlement to shielders earlier in the Covid-19 pandemic are drafted in such a way that, if shielding guidance were to be reintroduced in a specified area, individuals who are advised to shield would become entitled to SSP again.

The Government guidance does not currently address how an employee being unable to attend work for either of these reasons would affect their eligibility under the JSS Open.

33. How does being on maternity or other family leave interact with the JSS Open?

In view of the way in which entitlement to statutory maternity/family leave pay is calculated, an employee who has been on the JSS Open for a period before going on maternity/family leave could find that the calculation of their maternity/family leave pay is affected by the fact that their pay was lower than usual while they were working reduced hours under the JSS Open.

The Government guidance states that the Government will introduce legislation as soon as possible (covering maternity allowance, statutory maternity, paternity, shared parental, adoption and parental bereavement leave pay) to avoid parents losing out on their entitlement to such family leave pay as a result of being put on the JSS Open during the relevant assessment period.

The Government guidance also notes that further details on employee eligibility will be provided in due course.

Disciplinary and grievance

34. Can an employee participate in a disciplinary or grievance process while on the JSS Open?

The Government guidance does not yet address this issue. However, by analogy with the position on flexible furlough, our tentative view is that it is likely that:

• Employees will be unable to carry out work for their employer during the non-working hours under a JSS Open temporary working arrangement, so an HR manager or line manager would only be able to run a disciplinary or grievance process during their working hours while on the JSS Open.
• For the aggrieved employee, or the employee who is the subject of disciplinary proceedings, we think that participating in a grievance or disciplinary hearing is unlikely to amount to ‘work’, and that such participation should therefore be possible during the employee’s non-working hours under the JSS Open.
• As for the employee’s companion, employees who are union or non-union representatives should be able to undertake duties and activities for the purposes of representation of employees during both working and non-working hours under the JSS.

In any event, it will also be important to bear in mind the practicalities of conducting such processes remotely if any of the employees involved is unable to attend the workplace for face-to-face meetings and the difficulties this may cause in relation to ensuring a full investigation and fair hearing. In some cases, it may be necessary to suspend the relevant process until after the Covid-19 crisis has passed. We recommend seeking advice on your particular circumstances.

Redundancy

35. What if you need to make an employee who is on the JSS Open redundant?

The Government guidance makes clear that employers cannot claim under the JSS Open for an employee who has been made redundant or is serving a contractual or statutory notice period during the claim period.

Accordingly, if you are contemplating making redundant any employees for whom you are claiming under the JSS Open, you will need to consider the point at which you must cease claiming for them. The Government guidance does not specify whether you can conduct redundancy consultation with an employee for whom you are claiming under the JSS Open. Since the guidance is explicit about the prohibition on claiming once an employee has been given notice of redundancy, our tentative view is that it should be possible to continue to claim for employees while consulting them on the possibility of redundancy – but that you would need to stop claiming before the final individual consultation meeting at which their dismissal for redundancy would be confirmed. That said, it might be argued that this goes against the spirit of the scheme and we are therefore seeking confirmation from the Government as to what is permitted in this regard.

36. How do you calculate statutory redundancy pay for an employee who is made redundant after a period on the JSS Open?

Statutory redundancy pay is calculated based on an employee’s length of service, age and week’s pay (calculated in accordance with the ERA provisions and subject to a statutory cap – currently £538 per week).

For certain categories of employee, a week’s pay for these purposes is calculated by reference to pay received over a 12 week reference period. If the employee’s pay during the relevant 12 week reference period was lower than normal because they were working reduced hours under the JSS Open during that time, this could result in their statutory redundancy pay being lower than it would otherwise be.

A similar issue arose in respect of employees made redundant after a period on furlough and the Government introduced regulations to ensure that such employees did not lose out, providing that any reduction in pay the employee had been subject to as a result of being furloughed would be ignored when conducting the relevant calculations.

We think it is highly likely that the Government will introduce similar regulations to ensure that employees who are made redundant after a period on the JSS Open also do not lose out when their statutory redundancy pay is calculated.

The end of JSS Open temporary working arrangements

37. What happens at the end of an employee’s JSS Open temporary working arrangements?

Where a JSS Open temporary working arrangement that you have entered into with an employee comes to an end, for whatever reason, the default position is that the employee would return to their normal terms and conditions of employment.

As noted above, the JSS Open is currently set to run for six months from 1 November 2020, closing on 30 April 2021, although the Government has said that it will review the terms of the scheme in January 2021.

It is to be hoped that, by the time the JSS Open comes to an end, businesses will have seen demand return and will be able to have their employees back on their full usual hours. If you are not in a position to have employees back on their full usual hours, you will need to seek advice on the most appropriate course of action for your business at that time.

This content has been provided by MakeUK and is reproduced with permission.

Chancellor Rishi Sunak has unveiled revised support for businesses affected by Covid-19. Accountants provide their thoughts on its measures and potential impacts.

Amid controversy over the business effects of the UK’s Covid-19 tiered restrictions, Chancellor Rishi Sunak announced out a new package of emergency business support – including the Job Support Scheme Open –  on 22 October.

The package is tailored to the tiered system of lockdowns, including:

• Local authorities will provide cash grants of up to £2,100 per month to firms in Tier 2 areas, covering all affected hospitality, accommodation and leisure premises.
• The government will backdate the grants to August.
• The employer contribution to unworked hours under the Job Support Scheme Open is reduced from 33% to 5%. The package also reduces the minimum-hours requirements to 20%, – see our 37 point comprehensive guide for further details.

Accountants react to the Chancellor’s announcement and explore what its measures will mean to clients.

The new package provides much-needed clarity

Caroline Harwood, Employment Tax Partner, Crowe UK

Many firms had voiced concerns over inconsistencies in the government’s previous measures. Businesses legally required to close in Tier three areas were benefitting from the expanded Job Support Scheme. Meanwhile, those in Tier two areas were suffering significantly from reduced footfall and limited support from the original scheme. In many cases, that would not have enabled firms to keep staff in jobs.

The new grants and revised Job Support Scheme, which offers government funding of up to 62% of wage cost with the employer paying just 5%, will not match the level of income that many firms had enjoyed before the start of the pandemic. However, these measures will provide vital funding, enabling many to keep staff in jobs throughout the second wave.

Business communities who’d faced the stark reality of being unable to pay staff – even at a reduced level of work, and despite help from the original Job Support Scheme – now have some breathing space in the coming months.

Verdict: The new support package is broadly a workable companion to the tier rules and may help settle businesses’ nerves.

But is it an adequate substitute for furlough?

Natasha Frangos, Partner and Head of Corporate at haysmacintyre

As local coronavirus restrictions up and down the country start to tighten, there has been a significant concern across sectors over the financial support available to businesses. As new regions continue to enter into Tier two and Tier three restrictions, the Chancellor’s change of tack with the Job Support Scheme will have undoubtedly put some minds at ease.

However, while substantially reducing the employer contribution to employees’ unworked hours and offering grants to impacted firms will have come as a welcome relief, there are concerns that the measures still leave many companies in the dust, struggling to cope.

Furlough had provided many firms with a lifeline in the depths of lockdown. But with businesses receiving less support from the new scheme and facing ongoing uncertainties over future trade restrictions, we may still see a flurry of job losses as reduced footfall and increased costs continue to hit the high street hard.

We can recommend the new package to many clients

Neil Driver, director, Davis Grant

Thanks to a) the welcome improvement to the government’s contribution to the Job Support Scheme, and b) the reduction in employer contributions, we are now able to advise a significant proportion of our clients that the government support may be useful to them. Previously, we felt it was not.

However, I should note that a large proportion of our owner-managed SMEs – those taking a minimal salary and drawing income via dividends – are still in a challenging situation in terms of obtaining government support.

The furlough scheme sparked an unprecedented demand for the services of our payroll team to administer claims. With these changes, it seems their work is not over, and will instead turn to the impacts of the new scheme.

Timely help, but redundancies are still likely

Robert Bean, managing partner, Grunberg & Co and Reanda UK

The Chancellor’s decision to extend financial support measures couldn’t have come at a more critical time – especially for the sectors hardest hit by restrictions. While this new package may not, sadly, save every job or business, it will help those that were viable pre-pandemic to hold out longer, in the hope that restrictions can gradually be lifted. They can resume something like normal trading.

Changes to the Job Support Scheme will be critical once furlough ends – but even so, some firms may still have little choice but to make redundancies. It is down to businesses and their advisers to explore other options that can help them not only survive but hopefully thrive. As accountants, we have a vital role to play in helping the UK business community recover in the coming weeks, months and years.

Verdict: The spectre of large-scale redundancies has not gone away, and accountants will need to work closely with clients to develop contingencies.

Will surviving businesses face higher taxes?

Rob Chedzoy, tax partner, Milsted Langdon

The introduction of the new tiered system of alerts forced the Chancellor’s hand, here. His new measures have somewhat shifted costs away from businesses and back towards the government, which many companies will welcome – especially the expanded business grants scheme and the reduction in employer contributions under the Job Support Scheme.

However, one question looms large on the horizon: how does the government intend to cover these costs and pay off the growing national debt? Unfortunately, we must now await the next Budget – whenever that may be – to find out how much of a burden is placed back on businesses and their owners in the form of new taxes or cuts to reliefs.

Verdict: Accountants must have one eye on helping clients prepare for the government’s long-term fiscal response, as well as addressing more fluid, near-term issues.

The new tiered restrictions are moving the goalposts for businesses. Accountants report a wide range of reactions from their clients.

Meanwhile, the Government has responded unusually fast to criticisms, with the Chancellor announcing another emergency help plan to the House of Commons.

Health restrictions

Businesses are still adapting to the new tiered lockdown, announced last week, puts various regions across the UK under different rules. Certain regions were moved into tiers two and three over the weekend, followed on Tuesday by Greater Manchester, after local officials contested the decision.

The tier system works like this, with some regional variations:

• Tier one, or medium, continues the already established ‘rule of six’ and the 10 pm curfew for hospitality venues
• Tier two, high, extends the rule of six to apply to outdoor spaces, and no two households are allowed to mix indoors
• Tier three, very high, extends the ‘no households mixing’ rule to outdoor spaces, and closes pubs and bars unless they can operate as restaurants. People are also advised not to travel

These rules have already thrown up several contentious points, such as the lack of clarity over what classifies as a ‘substantial meal’ to allow pubs and bars to remain open. There has also been pushback about the blanket application of the tier system in some regions, such as the Wirral and south east London.

We asked accountants for their thoughts on the scheme and how it’s affecting their clients.

It feels like there’s no master plan

David Fort, Managing Partner, Haines Watts Manchester

The move to Tier three will be disastrous for businesses, especially in hospitality, and would hit business and consumer confidence.

Businesses need stability and certainty. If they have that then it’s amazing how robust and agile our clients can be. But the Government’s constant changes and negative stories in the press have damaged confidence, and patience is wearing thin.

Clients are just confused, angry and confused again. They are trying their best to adhere to the changing situation and make plans, but are exasperated by the Government’s mixed messages. As Greater Manchester moves to Tier three, I can’t help concluding there is no master plan and it feels like the Government is playing politics with people’s livelihoods and lives.

Are they really following the science any more? Where are the facts? Especially on hospitality who feel like scapegoats. The main impact on Tier three is on hospitality. If the science is that damning on an area, isn’t total lockdown the only possible solution?

Verdict: Tier three could be a disaster for many businesses, and many clients are exasperated.

Tier three will have a knock-on effect beyond the hospitality sector

Rebecca Bradshaw, director, Rotherham Taylor Limited, Preston

 The Tier three restrictions look as if they will have a very significant impact on some of our clients and the local economy as a whole. Those that are forced to close – pubs and bars in most circumstances, as well as casinos, bingo halls, betting shops, gaming centres and soft play operators – are clearly the most severely affected.

However, these closures have a knock-on effect on the businesses that supply those that are unable to trade, especially in the hospitality sector. At the moment, all businesses can furlough staff that have been furloughed previously. However, from 1 November, only businesses that are legally required to close will be able to claim support in respect of employees who cannot work through the Job Support Scheme (JSS).

Similarly, only businesses that have been legally required to close will be able to access grants from the Local Restrictions Support Grant Scheme. Other businesses will only be able to use short-time working of at least 33% of an employee’s usual hours under the JSS, while paying 55% of their usual wages, which although is a contribution it could still be very challenging for employers to cover the 55% cost if most of their business has dried up.

We are working closely with our clients to support them in dealing with the challenges they are facing. However, we would like to see further support for those that are legally able to open but that have seen trade collapse as a consequence of the restrictions.

Verdict: The tiered restrictions will have a farther-reaching effect than people might think.

The tier system is unfortunate but necessary

Craig Billington, accountant and business advisor, Kirkwood Wilson Lancashire

Unfortunately, these tier changes are required, with cases on the rise. Personally, I feel our local regions will dip in and out of the higher tiers over the coming 12 months unless a vaccine is approved soon. Where possible, businesses now need to find ways of coping with the relaxing and tightening of restrictions.

The majority of clients have remained open since the new tiering system was announced. We have a few that have been forced to close, and some within the hospitality and leisure sector who might be forced to reopen once the furlough scheme is wound up at the end of the month. I think as we get deeper into the Tier three lockdown, it’ll become more apparent as to how clients will cope.

For us, the message remains the same; we’re here for our clients and are open for business. We’ve continued to trade and grow our team even during lockdown, with our clients needing to lean on us now more than ever.

The best advice we can give right now is not to panic. Use any spare time to take stock of things and look for ways to reduce overheads. Sanctity can often be found in times of adversity, and many businesses are diversifying their trade portfolio to help reduce the risk to the business as rules change. If a client is concerned about their business, they should talk to their accountant, they may be able to help.

Verdict: The full effects are not clear yet, but most clients are coping.

Tier three would be preferable to Tier two in some cases

John Lawrence, director, Guida Accountancy

We’re Tier two at the moment, but I know from speaking to people in the hospitality sector that quite a few of them would prefer to be in Tier three because they fear that Tier two will adversely affect their business, but they won’t get the support that businesses in Tier three gets.

Most people also don’t seem to know what the rules are. There are very mixed messages coming out at the moment, and people are very unclear as to what’s actually going on. Most businesses feel like they’re being punished a little bit. Here in Essex, we had a bit of a warning that it was coming, as we heard that Essex County Council was applying for Tier two status. We had about a week where we knew we were going to go into Tier two.

We’ve got two unitary authorities that are separate from Essex County Council. I’m in the Castle Point area, which is under Tier two restrictions, but if you go two miles down the road to Southend, you’re in Tier one. It’s really strange. You have far more freedom in Southend, even though the number of cases is just as high as Castle Point.

I have clients that are under Tier two restrictions and others, a mile down the road, who are not. So we’ve had to juggle it as well. Accountants have two, possibly even three systems that they have to work to, and it’s a bit of a headache.

Verdict: The new restrictions have created more admin for us, and confusion for clients.

SMEs can react swiftly, but they are increasingly disillusioned

Simon Young, managing partner, Aysgarth Chartered Accountants

A lot of clients are surviving the best they can in these strange times. Being small and medium-sized businesses they can react swiftly to any changes that are imposed. There is a lot of bad feeling towards the Government. It is seen as remote, clueless, London-based and unable to follow the rules they have set for everyone else.

The support that was provided earlier in the year was random, with winners and losers. Obviously looking after the health of the nation is critical but if the Government closes businesses down, the Government should compensate them and their staff.

Many clients are back working in their offices and units. Some of them literally could not function by working from home. Any restrictions that will be imposed on Leeds and West Yorkshire will have a short effect but in the long term, I suspect most of our clients will survive as there are certain sectors we do not touch and many clients are winning new contracts, with some taking on extra staff.

Verdict: The new system will do nothing to curb businesses’ bad feeling towards the Government.