29 September 2020
The Chancellor, Rishi Sunak, announced his Winter Economic Plan including a new Job Support Scheme on 24 September 2020. The Chancellor was under pressure to come up with a replacement for the furlough scheme which ends on 31 October. So, this is welcome news following the government announcement on coronavirus restrictions on everyone for the next six months.
Key features of the Job Support Scheme
- This will be available for six months from 1 November 2020.
- It will not be restricted to those who have previously used the Coronavirus Job Retention Scheme (CJRS).
- It is stated to be targeted at SMEs.
- Large corporates will be required to demonstrate that their business has been adversely affected by coronavirus such as via a financial assessment test that their turnover has fallen during the crisis.
- There will be prohibitions on the payment of dividends or other capital distributions by large corporates whilst using the scheme.
- It is available for those employees who were on the employer’s payroll on or before 23 September 2020 and where an RTI submission notifying payment to that employee was made on or before 23 September.
- Employees must work for one third of their usual hours and their employers must pay for those hours fully at their normal contracted wage.
- For every hour not worked, the employer and the government will each pay one third of the employee’s usual pay, and the government contribution will be capped at £697.92 per month. Employees using the scheme will receive at least 77 per cent of their pay, where the government contribution has not been capped.
- Employees who have previously been furloughed will have their underlying usual pay and/or hours used to calculate wages.
- The grant will not cover Class 1 employer NICs or pension contributions, but these will remain payable by the employer.
- Employers can make claim from December 2020.
- The employer will be reimbursed in arrears monthly for the government contribution after the employee has been paid and that payment has been RTI notified.
- The Job Support Scheme will be also able to be claimed alongside the Job Retention Bonus and these are not alternatives.
- It is open to all employers with a UK bank account and a UK PAYE scheme.
- A new short time working agreement must be made with employees who are claimed for under this scheme.
- Employees cannot be made redundant or put on notice of redundancy during the period that the employer is claiming the grant for that employee.
Sitting as we do between 45 and 30 days before CJRS was due to end on 31 October, decisions as to larger scale redundancies were at the top of the business agenda. Will this winter economic plan for jobs be enough to stem the predicted tsunami of redundancies? Businesses are now weighing up whether they can afford to fund their currently under-productive staff over the winter months under the new Job Support Scheme or to use the remaining weeks of CJRS support for their redundancy costs over the period to 31 October.
The new Job Support Scheme takes inspiration from continental Europe, by subsidising 'short time' work helping to top up pay for workers given fewer hours of work in the crisis.
This new scheme is designed to retain the jobs of those businesses that are still viable but operating at a reduced capacity allowing claims only for those actually working, albeit part time.
Whilst the devil is in the detail, the new scheme looks like it will take parts from the latest version of the CJRS scheme in that employees will be required to work for a set amount of time which could be based on their usual hours and then for the remaining hours the cost will be shared.
This is coupled with time extensions for tax payments and for loan support applications and targeted support for the hospitality and tourism sectors with the continuation of reduced VAT rates until 31 March 2020.
However immediate issues with this scheme will be that employers appear to be expected to pay 55 per cent of their employee’s normal wages where the employee only works a third of their normal hours and there will be a prohibition on giving redundancy notices whilst using the Job Support Scheme.
For frequently asked questions surrounding redundancies amidst the global coronavirus health crisis please click here.
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