The Government’s Coronavirus Job Retention Scheme (Furlough Scheme) has been a safety net to millions of employees since its inception in March by covering 80% of wages up to £2,500 per month, however it was made clear by the Chancellor from the outset that it was only a temporary measure designed to weather the worst of the COVID-19 storm.
As we start to see more and more employees return to the workplace, the Chancellor has set out a new scheme to facilitate this: the Job Support Scheme. This new scheme will start on the 1st November, replacing the existing Furlough Scheme which expires on the 31st October, and will last for an initial period of six-months.
It is easiest to view the new scheme as having two separate branches. The first branch, and the topic of this article, is the “standard” Job Support Scheme now called the ‘JSS Open’, which seeks to protect ‘viable’ jobs through Government contributions of a 61.67% towards the unworked hours of employees working at least 20% of their regular hours. The second branch, now called the ‘JSS Closed’ (details of which can be found here) is an extension to the Job Support Scheme in which Government contribute two thirds towards the wage bill of employees whose place of work has been forced to close due to Government restrictions.
How does the JSS Open differ from the outgoing Furlough Scheme?
The new scheme marks a change in emphasis. While the previous Furlough Scheme maintained the employment of staff by underwriting most of their employment “cost” regardless of whether or not work was available for them to undertake, the new scheme supports part of the cost of employees who have returned to work in ‘viable’ jobs. The Chancellor’s intention is that by offering to share the wage bill of employees in work during the winter months, redundancies may be avoided.
This is significant because the new scheme will not support the staff cost of employees who have no work to undertake. Businesses therefore need to consider whether their employee headcount and structure will be viable in the future short-term trading conditions.
How will the new scheme work?
In order to receive a Government subsidy, the employee must now return to work at least 20% of their normal working hours, which will be paid by the employer. Of the total percentage of hours unworked, the Government will contribute 61.67% up to a cap of £1541.75 per month, with the employer contributing 5% up to a cap of £125 per month (unless they choose to top up the wages) all based on a reference salary of £3,125 per month. These figures come after a change of heart by the Government to protect those Businesses currently under Tier 2 restrictions, this is a reduction in employee contributions originally set at 33% down now to just 5%. For employees, this ensures that they earn a minimum of at least 73% of their normal wages, where their usual wage does not exceed the £3,125 reference salary.
As a practical example, we take an employee usually working full time, 5 days a week, earning £1400 per month. Their employer is suffering from reduced trade due to the COVID-19 impact and decides to place them on the Job Support Scheme.
To ensure they are eligible, the employee must be working 20% of their regular hours, which could be done by bringing them back for 1 day a week (20% of their regular hours). The employee’s wage contributions would then be as follows:
- Employer pays £280 a month for the hours the employee works;
- For the remaining 80% of unworked hours, they will receive 66.67% of pay for that time (creating a total wage package of 73%, equal to £1,027) with the contributions as follows:
- Employers contributes 5%: £56
- Government contributes 61.67%: £691
- Employee forfeits the remaining £373.
The employer would also cover any National Insurance and /or pension contributions payable, and may also be eligible for the Job Retention Bonus worth £1,000 (details of which can be found here).
Is my business eligible?
The new scheme is automatically open to all SME’s (250 employees or less) as long as the employee you wish to place on the scheme was employed (i.e on your PAYE payroll) between 6th April 2019 to 23:59 on the 23rd
Larger companies wishing to use the scheme will have to undergo a financial assessment test to evidence a loss of income due to the pandemic. There is a suggestion that large employers which use the scheme will be prevented from making a capital distribution (i.e. dividend payments) during the period for which they are applying for the grant There is no need for employers to have used the outgoing Furlough Scheme to be eligible to apply for the Job Support Scheme.
What is a ‘viable’ job?
Under current guidance, only employees in ‘viable’ jobs can be placed onto the new scheme. What exactly constitutes viable will be subject to great scrutiny over coming months as there is currently no policy definition of this term. It is likely that it will be decided by the post-lockdown trading conditions. Unlike the previous Furlough Scheme, as a contribution is required from the employer under the JSS Open, employers are likely to support viable jobs rather than all jobs.
Key takeaways of the new scheme
- The new scheme will only support the cost of employees who can return to work for 20% of their regular hours. It will no longer support the cost of employees remaining at home.
- It is critical to assess your immediate future trading conditions and understand what level of staffing your business will require over the coming months. If you have excess levels of staff, you should consider options to alter working patterns /staff headcount to match business need.
- Get legal advice as a priority if you are considering a variation to employee terms and conditions. Redundant employees may have claims for unfair dismissal or insufficient consultation if employers do not use the correct processes.
- Note that unlike the Furlough Scheme, the Job Support Scheme does not cover statutory notice pay, which may be a significant expense should redundancies be made post-Furlough Scheme. Employees on the Job Support Scheme cannot be made redundant or put on notice of redundancy during the period within which their employer is claiming the grant for them, so careful management of any redundancy process will be required.
- If relevant, review your current Furlough Scheme arrangements and plan ahead to transition employees onto the Job Support Scheme if appropriate, depending on workload and customer demand. We may see an increase in the minimum percentage of working hours required; does your business anticipate the market picking back up to be able to offer these hours to employees?
For any further advice on how the new scheme itself or the extension may be used to support your business please contact a member of the Burnetts Employment and HR team on 01228 552222 or e-mail email@example.com. Please note that both telephone and video appointments can be arranged.