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.
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.
But what does this mean for employees and businesses? How will the new scheme ensure that redundancies are kept at a minimum, and people can continue to receive their wages? We’ve compiled all the information you need to know on the new Coronavirus Job Support Scheme, and have answered the most frequently asked questions on the subject.
What is the Job Support Scheme?
The government (in particular the Chancellor Rishi Sunak) has just published its Winter Economy Plan, which details plans on ensuring that the economy survives the coming winter and the stresses of the second wave of Covid-19.
As part of this plan, it includes a new job support scheme to help businesses retain employees.
The scheme will come into effect on November 1st 2020, the day after the original furlough scheme ends. It is scheduled to run until the end of April 2021.
The scheme will provide financial aid to businesses to help pay the wages of their employees.
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?
To take advantage of this new job support scheme, employers will have to ensure that they meet specific criteria. We will go into further details as to how to be eligible for the scheme in later questions. However, one of the main criteria is that employees must work at least 33% of their regular hours.
If this is the case, then the government will assist in the paying of their wages, along with the employer who also pays a percentage of the salary as per usual.
The main aspects of the scheme can be summarised into these nine points:
- No distinctions between sectors: This new Job Support Scheme is designed to aid any business, regardless of the industry in which they operate.
- Employees are obliged to work at least a third of their usual hours: For these hours, the employer must pay the employee as usual. This is one of the main differences between the original furlough scheme and this new support scheme. The purpose of the scheme is to support jobs that are viable, rather than ones that are effectively redundant.
- Government and employers will share the cost when paying unworked hours: According to the government’s factsheet, they will offer financial assistance for a maximum of 22% for the wages of those employees who are working only a third of their regular hours. This means that for every hour an employee does not work, the employer and the government have to pay a third each of the worker’s standard pay. The maximum amount the government will pay per employee is £697.92 per month.
- The scheme is limited to employers of a certain size: Unlike the furlough scheme, where any business could apply no matter their size, this new job support scheme is open automatically only to small and medium-sized companies. If a larger business wishes to apply for the financial support detailed in the scheme, then they must prove that their operations have been negatively affected by the Covid-19 restrictions.
- Redundancy is not banned, but is restricted: Employers cannot make an employee redundant if they are claiming the grant during the six month period in which the scheme is active. They can, however, move the employee in question out of the new scheme, and can then make them redundant if they wish. This means that there is no ban on redundancies, but the existence of this scheme should help to discourage them.
- The Jobs Retention Scheme can still apply: If employers claim under the Job Support Scheme, they can also still claim under the jobs retention scheme. Claiming one does not negate the other.
- Does not have to have claimed under the furlough scheme: An employer is still permitted to claim under the new Job Support Scheme even if they did not make use of the original furlough scheme.
- Distributing capital to shareholders is restricted: The details of the scheme make clear that if an employer makes use of the new scheme, they should not also distribute money to shareholders. For example, paying dividends.
- The Self-Employed Income Support Scheme (SEISS) will be extended: The SEISS was introduced in order to help support those self-employed workers whose professions were adversely affected by the Covid-19 restrictions. Under the new scheme, the SEISS will be extended by six months and will take the form of two more grants. The first will run from the beginning of November until the end of January. This will cover 20% of a worker’s profits but is capped at £1,875. The second of these grants will run from the beginning of February until the end of April. The cap on this has not yet been decided.
It’s important to remember that these are the main points so far – there are amendments and extra information expected in the coming days and weeks. These will clarify specific issues, as well as offering more details on what we can expect from the new Job Support Scheme.
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 employees receive?
The cap on how much the government contributes to an individual worker’s pay will be much lower than it was for the furlough scheme. During that original scheme, the maximum amount paid by the government was £2,500 per month. During this new Job Support Scheme, the cap will be £697.92 per month.
For any employees kept under the scheme, it will be mandatory for them to work a third of their regular hours, and the scheme will then cover their wages for the 66% of their hours that are not being worked. This means that a worker can expect to receive a minimum of 77% of their usual monthly pay during this period. The government’s contribution would amount to 22% of that.
This amount takes into account the pay earned by an employee during their hours of work and combines that amount with the unworked hours, which will be subsidised by the company and the government.
Who will be eligible for the scheme?
To be eligible for the scheme, a worker cannot be on notice for redundancy. The government mandated this in order to encourage companies to retain their staff.
This Job Support scheme is open to any employers that have a bank account registered in the UK, and a part of PAYE. Any small to medium-sized companies will be eligible to apply. Larger companies, on the other hand, must be prepared to show that they have been negatively affected by the Coronavirus pandemic. This amounts to proving that they have lost up to a third of their profits during this time.
This scheme will be more flexible than the furlough in the sense that employers will be able to cycle their workers on and off the support scheme, depending on when they work. Each working period must be a minimum of seven days, however, before it can be changed.
How can you apply for the scheme?
While this has not been announced or made clear yet, there are some assumptions we can make as to how an employer will be able to apply for the Job Support scheme.
It is expected that the process for applying to the scheme will be similar if not exactly the same as the process was for the original furlough scheme.
This means that an employer will be able to visit the HM Revenue & Customs website, or contact them directly, and apply for the grant. To do this, the employer will probably need to specify for which of their employees they wish to use this grant and be sure to notify that employee before it happens.
What if a job does not have 33% of its work available, but is viable in the long term?
There are specific sectors for which the pandemic means that there is less there 33% of their regular work available. This includes some industries, such as entertainment, sports, and certain hospitality sectors such as weddings, where there is virtually no work available. Due to the nature of these kinds of work, it is impossible to create more work – however, they are the kinds of environments which will return to normal in the future.
Companies in these types of industries face immediate and short term loss of work but are still viable businesses in the future.
Currently, there seem to be a few possibilities for businesses in these positions. One of these is that employers will have to consider the possibility of redundancies when there is no work available at all. These could be temporary or otherwise. Employees with specific skills could have a period of unpaid leave instead.
Otherwise, if there is a localised lockdown, then it may be possible for the government to waive the necessity for a business to allocate 33% of an employee’s standard working hours. This is likely as it will be impossible for many businesses to function at all during another lockdown. This has not yet been confirmed, however, and may well be included in further statements from the chancellor.
What if employees don’t want to go back to work?
Many employees either cannot return to work or are reluctant or unwilling to do so. This can be for any number of reasons, but mainly it will be because they are vulnerable to Covid-19 or live with someone that is.
These people have the option to either work at home, or, if that is not possible, they must work a minimum of 33% of the standard work hours if they hope to receive support from the new scheme.=
This has not yet been verified; however, it seems to be the most likely possibility based on what we know so far.
Can employers have a choice of whether or not to use the scheme?
It will be up to employers to give their employees a choice as to whether they take redundancy or be put on the Job Support scheme.
This will tend to come down to what the costs for each option will be for the employer. For example, if the costs of making an employee redundant are equal to or more than the costs of paying them under this new support scheme, then this will be an incentive to keep the employee.
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.
How much will the scheme cost the government?
The chancellor Rishi Sunak has said that it is hard to estimate how much the new Job Support scheme will cost the country, as it is impossible to know how many businesses will make use of it.
However, it is possible to estimate based on the figures for the furlough scheme. For example, if an employee of a company was receiving £1,400 per month from the government, then that same employee will receive around £300 per month on this new scheme.
This means that if around one million people make use of the support scheme, then it will cost the government around £300 million per month.
This number is a very rough estimate, however, and as mentioned above it is virtually impossible to know any more precisely than this exactly how much the whole scheme will cost the government.
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.
Want to know more?
The new Coronavirus Job Support Scheme introduced by the government is designed to help businesses cope with the coming second wave of coronavirus through this winter. It is expected that the government will implement more strict measures as infections rise, and the chancellor has designed this scheme as a method of ensuring that the absolute minimum job losses will be incurred through this period.
More details are expected to be announced over the coming weeks, which should provide more information on the scheme, as well as exactly how businesses can apply for the assistance.
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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