Rishi Sunak’s plan for the winter includes the Job Support Scheme, which was outlined in a basic format on the 24th September 20.
With 12% of the UK’s workforce currently on partial or full furlough leave, the Job Support Scheme aims to stem the tide of redundancies as the furlough scheme comes to a close on the 31st October 2020.
Effectively a wage subsidy scheme, the idea behind the emergency measures is to protect as many ‘viable’ jobs as possible in sectors that may well recover once demand for their services increases once more.
Eligibility - Employers
The scheme is aimed at businesses that are still running but not at capacity due to a lack of demand because of the pandemic.
All ‘small and medium sized’ businesses will be eligible with larger businesses also able to make use of the scheme if their turnover has fallen due to the crisis- they will be subject to a financial assessment. Employers must have a UK bank account and utilise UK PAYE schemes.
Businesses from across the UK may apply- even if they or their employees have not previously made use of the furlough scheme. Importantly, employers using the scheme can still claim the Job Retention Bonus if they are eligible under the criteria.
Eligibility - Employees
Employees must be on an employer’s PAYE payroll on or before 23rd September 2020. For the first three months of the scheme, the employee must work at least 33% of their normal hours. Beyond this, the Government will consider whether to increase the minimum threshold.
Employees don’t have to work the same pattern each month and can even come on and off the scheme as demand rises and falls, however, each time the scheme is utilised it must be for a minimum of 7 days.
How Will It Work?
Starting on the 1st November 2020 and running for 6 months, the scheme will work as follows:
- Employees must work at least one third of their usual hours and those hours must be paid directly and solely by their employer.
- The employer then tops up the wages by another third of the employees usual hours work.
- The government will then pay another third of the employee’s wages, capped at £697.92 per month.
In effect, employees will receive 77% of their wages for working a third of their hours (where the Government cap has not been met), with the Government paying a maximum of 22% of someone’s wages. A steep drop from the 80% they were covering at the start of the furlough scheme.
The Government’s contribution will be paid in arrears to effectively reimburse the employer so the first claims can be made from December 2020 onwards.
The grant will not cover Class 1 employer NICs or pension contributions which will remain payable by the employer.
Employees cannot be made redundant or put on notice of redundancy while their employer is claiming under the scheme and their holiday will continue to accrue as normal.
A Basic Example
An employee who is usually on £2000 a month but is now working only 50% of their hours would receive £1000 from their employer as normal pay. The employer would then top that up by a third of their remaining usual hours (£333), as would the government so they would receive a total £1666 per month.
The Government website provides the useful breakdown below:
What Constitutes a ‘Viable’ Job?
When Mr Sunak was questioned re what defines a job as “viable”, he said the following:
“It is not for me to sit here and make pronouncements on every individual job,” he said. “What I want to be able to do is to provide as much support as possible given the constraints we operate in. We obviously can’t sustain the same level of things that we were doing at the beginning of this crisis.”
So, while all are welcome to apply and are potentially eligible, it may be that some businesses will not be considered ‘viable’. As it stands at the moment, viability appears to mean ‘jobs that are likely to be in existence beyond the crisis but that are reliant on the recovery of demand.’ As Mr Sunak said, “I cannot save every business, I cannot save every job.”
What Will the Scheme Cost?
For employers, the scheme will cost them 2 thirds of the wages their employee would normally earn when working their usual hours as well as NI and pension contributions which will be calculated based on the gross wages the employee receives.
Estimations state that the Job Support Scheme will cost the treasury around £300m a month on top of the Job Retention Bonus that will run alongside it.