What is the Job Support Scheme?
The Chancellor Rishi Sunak has today (24th September 2020) announced a new help package, Job Support Scheme, commencing 1st November 2020 to replace the furlough scheme which ends at the end of October 2020. By doing so, the Government is trying to fend off mass unemployment during the challenging winter months ahead. This new scheme will last for six months – coming to an end in April 2021.
The scheme is to prevent employees from being laid off because a company’s demand for goods or services has decreased. It will support people who can work but have shorter working hours; topping up salaries in firms which can’t take employees back full-time.
Without this plan, companies would have had to lay off some employees and let others work full-time. Now, they can keep more employees in work with the Government to pay for wages as well as the “job retention bonus” – £1000; for every previously furloughed employee if they are still employed by the end of Jan 2021. This was promised to employers who bring back people off furlough.
Why replace Furlough Scheme with Job Support Scheme?
As Chancellor Rishi Sunak said during the pandemic, furlough was a temporary measure to keep people in jobs. It has been a safety net for millions of people because it “wrongly” allowed workers to be in jobs that only existed due to the grants. He added he “will no longer keep the country’s economy on artificial life support”.
On the other side of the scale, the Job Support Scheme will “target support on those businesses that need it most: focusing on those that are being impacted by Coronavirus and who can support their employees doing some work, but that needs more time for demand to recover.”
Job Support Scheme, in effect, will avoid redundancies for those that will have cost more to hold onto while the work isn’t there or are forced to work fewer hours.
How will the Job Support Scheme work?
The UK government will cover 22% of a worker pay for six months up to a maximum of £697.92 a month; much lower than the furlough scheme of £2,500.
This German-style wage subsidies scheme will contribute towards the wages of employees who are working fewer than their regular working hours.
Employers will continue to pay their regular wages based on their working hours. For the number of hours that employees are not working, the Government and the employer will each pay one-third of the equivalent salary; leaving workers with 77% of their usual pay.
In short, for the hours an employee can’t work, the cost is split three ways –
- the employer pays one third
- the government pays one third
- you lose one third
55% paid by the employer and 22% by the government.
How much will you earn under the Job Support Scheme?
Let’s say Boris works 5 days a week and earns £500 a week. – assuming Boris works 5 days a week. If Boris were to work part-time; say, 2 days a week (40% of his usual hours), his employer will pay him £200 for the days he works.
Here is the crucial part. For the unworked hours (60% or 3 days worth £300), he will earn 2/3 of that amount – £200. His employer will pay £100 (bonus pay), and the government will pay £100.
Boris will pocket £400; that is 80% of his regular pay that week.
This means that employees who work 33% of the time will receive at least 77% of their salary.
Now if you are to work half of your normal working hours; for example, if you earn £2000 a month, you will get £1000 a month from your expected pay. Then, you’d get £333 extra from your employer and £333 from the government – taking your total monthly wages to £1,666.
In brief, the more hours someone works, the smaller the hit they have to take on their pay package.
Breakdown of wages under the Job Support Scheme
Who is eligible for the Job Support Scheme?
The scheme applies to all small and medium-sized enterprises, with 250 employees or less and large enterprises that have been adversely affected by the Coronavirus Pandemic with a declining turnover by at least a third.
The Job Support Scheme will be open to all employers with a UK bank account and on UK PAYE schemes. Neither the employee nor the employer needs to have previously been on the Job Retention Scheme.
The government also expects large employers not to pay dividends to shareholders while using the scheme.
To be eligible, an employee must have been on the firm’s payroll as of 23rd September 2020. They must not have been on a redundancy notice.
An employee can be moved on and off the scheme or have different working hours over the course of the six months. Bottom line, the working arrangement must cover a minimum period of seven days.
For the first three months of the scheme, an employee must at least work 33% of their usual hours. After three months, the government will review whether to increase the threshold.
Conversely to furlough, the good news is that an employee cannot be made redundant or put on notice when on the Job Support Scheme; while the grant is being claimed on their behalf.
Do employees need to agree to be put on this scheme?
Employers must agree on the new short-time working arrangements with their employees. Consequently, employers must make any changes to the employment contract by agreement and notify the employee in writing.
While only companies that are struggling should use this scheme, how can we be sure a business will be strong enough to weather the storm in the short term to be able to still keep their employees in jobs in the near future. If there is no improvement in some industries, unfortunately, redundancies may need to be considered.
If an employer keeps on a member of staff for a third of his or her hours under Rishi Sunak’s plan, he is still accountable for a third of the pay of the remaining 66pc. Effectively he has to bear 55pc of a worker’s wages for one-third of the hours. How many companies can afford to do that?
At least, in the short term, the Job Support Scheme will keep more employees on the payroll.
Do you want to discuss the scheme further? Do you want to know your rights as an employee? Are you an employer who are still considering your options regarding redundancies and surviving through this pandemic, contact an employment lawyer now for expert legal advice! Free initial consultations available.
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