Please note, we are aware a further update has been provided by the Government regarding extending the Job Support Scheme. Information can be found here. We will provide an updated blog as soon as is possible, outlining key information arising out of the extension.
What is the Job Support Scheme?
On the 24th September, Chancellor Rishi Sunak announced details of the highly-anticipated successor to the existing Coronavirus Job Retention Scheme (Furlough Scheme), imaginatively called the Job Support Scheme (JJS).
The Job Support Scheme will start on the 1st
November, replacing the existing Furlough Scheme which expires on the 31st October. It will last for a period of six-months.
The Furlough Scheme was described as a “sticking plaster” because it supported the cost of large numbers of employees who were unable to attend their place of work. It was clearly an emergency measure conceived at short notice in response to unprecedented economic events and the lockdown of the economy.
The new scheme has a marked change in emphasis. While the 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. The Chancellor hopes that by sharing the wage bill of employees in work during the winter, redundancies may be avoided. The key “takeaway” for business is that the Furlough Scheme supported businesses to keep staff away from work, and the new scheme supports part of the cost of staff who have returned to work. This is significant for business because the new scheme will not support the staff cost of employees who have no work to undertake. The impact of the new scheme may be most acute for businesses which have not yet considered whether their employee headcount and structure will be viable in the future short-term trading conditions.
The new scheme will support the phased return of employees back to work utilising part time working patterns. This gives employers the option to start bringing staff back on reduced hours, instead of jumping straight to redundancies, whilst also benefitting from the £1,000 Job Retention Bonus scheme which is due to pay out in January.
Employers – key headlines of the new scheme
- The new scheme will only support part of the cost of employees who have returned to work. It will not support the cost of employees who are 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.
- If relevant, review your current Furlough Scheme arrangements and plan ahead to transition employees onto the Job Support Scheme if appropriate, depending on customer demand. There is also a strong possibility that the 1/3rd minimum working hours could be increased during the scheme; does your company anticipate the market picking back up to be able to offer this?
How will the new scheme work?
In order to receive a Government subsidy, the employee must return to work at least a third of their normal working hours, which will be paid by the employer. For the remaining unworked hours, the employer and Government will each cover one third of the lost pay, with the remainder being forfeited (meaning employees working 33% of their regular hours will receive 78% of their total pay). The Governments contribution is capped at £697.92 per month.
As a practical example, we take an employee usually working full time, 5 days a week, earning £350 per week. Their employer is suffering from reduced trade due to the COVID-19 impact, and decides to place them on the JSS.
To be eligible, the employee must be working a third of their regular hours, which could be done by bringing them back for 2 days a week (40% of their usual hours). The contributions would then be as follows:
- Employer pays £140 for the days the employee works;
- Employer contributes 1/3rd to the 3 unworked days: £70
- Government contributes 1/3rd to the 3 unworked days: £70
- Employee forfeits the remaining £70.
The scheme is automatically open to all SME’s (250 employees or less) as long as the employee was employed (i.e on your PAYE payroll) on or before the 23rd September. 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 no need for employers to have used the existing Furlough Scheme to be eligible to apply for the JSS.
What is a ‘viable’ job’?
Many businesses will have been concerned by the Chancellor’s announcement that: “I cannot save every business, I cannot save every job”. The new scheme is a shift in emphasis to protecting viable jobs in businesses and not jobs and businesses which are “not viable”.
There has been significant media attention to the term “viable job” but there is no current policy definition of this term and it seems likely that this will be decided by the post lockdown trading conditions. Lord Wolfson, owner of clothing brand ‘Next’, has suggested that, in his view, thousands of traditional retail jobs are now ‘unviable’ as lockdown has triggered a permanent shift to online shopping.
For any further advice on how the new scheme may be used to support your business, or support with restructuring/changes to employee terms and conditions please contact a member of the Burnetts Employment and HR team on 01228 552222 or email firstname.lastname@example.org. Please note that both telephone and video appointments can be arranged.