The new Job Support Scheme – How does it work?

Blogs

The Chancellor of the Exchequer, Rishi Sunak has today unveiled his new Job Support Scheme. This has been introduced as a consequence of the ongoing battle against Covid-19 which as we go into the colder months of the year is resulting in increased infections. It is also aimed at keeping the economy afloat and minimising job losses.

The Government’s current Coronavirus Job Retention Scheme is still due to expire on 31st October 2020 and employers who still have qualifying staff on Furlough are having now to contribute towards salary costs in addition to employer national insurance and pension contributions. Some larger employers are in fact entering into collective redundancy consultations with the closure of the scheme in 6 weeks’ time.

The new scheme models Germany’s Kurzarbeit (short-time work) scheme and is similar to France’s wage top-up scheme.

So what is involved and how different is it to the current job retention scheme? The main difference is that employers will be required to provide their staff with 33% of their usual contractual hours and the Government will cover some of the salary of the remaining hours that are not worked.

The Scheme is scheduled to start on 1st November 2020 and will last for a period of six months.

The aim of the new scheme is to offer staff shorter working hours in viable jobs as an alternative to making them redundant.

In relation to the hours not worked by the employee the Government will pay one third of their usual wage with the employee paying a further third on top.

To clarify this means that an employee working 33% of their normal hours would receive 77% of their pay with 55% paid by the employer and 22% paid by the Government. The amount payable by the Government will depend on the employee’s usual salary but will be capped at £697.92 per month. To qualify the employee must not be on notice of their redundancy.

All businesses are eligible even larger ones as long as they can demonstrate that their business has been adversely affected by Covid-19. It has also been stated that larger employers must not be making any dividend payments to shareholders whilst using the scheme.

Employees must also have been on the employer’s Real Time Information submission on or before 23rd September 2023. Working patterns can also vary under the scheme but each short-term working arrangement must cover a period of seven days.

The Chancellor has also confirmed that further support will be available to the self-employed by way of an extension to the Self Employment Income Support Scheme. Here a grant is payable for those who are eligible where 20% of monthly profits up to a maximum of £1875 is payable and which covers three months’ profits for the period 1st November to 31st January 2021.

There is a second grant available for the period 1st February 2021 to 30th April 2021 which may be adjusted to respond to changing circumstances.

In addition businesses can take advantage of a ‘Pay as you grow’ loan previously known as the ‘bounceback’ loan where the repayment period is being extended from six years to ten. The cut off point for applying for such loans is 31st December 2020 with a new successor loan due to be introduced in January 2021 with the details yet to be announced.

This new Job Support Scheme will be good news to many employers and employees, however the issue for many will be whether they can afford to pay 55% of salary and additional national insurance and pension costs. Although welcome, this new scheme may not be able to salvage a number of businesses especially at the SME end of the scale.

If you have any concerns about the scheme and redundancies in general then contact Steven Eckett, Partner and Head of Employment at Meaby & Co LLP 020 7703 5034 seckett@meaby.co.uk