The Latest Job Support Scheme Changes

What is the new Job Support Scheme and how will it work?

The new job support scheme is based on a German-style system of wage subsidies similar to Germany’s Kurzarbeit – a social insurance program where employers reduce their employees’ working hours instead of laying them off. Following the success of the German model in 2008/09, it is part of the chancellor’s Winter Economy Plan in which he announced a range of packages to support businesses and employees as the existing furlough and self-employed income support schemes come to an end. It is hoped that the new scheme will save viable jobs of workers whose hours are reduced.

How does the new job support scheme work and what are the latest changes?

When the government originally announced the scheme in September, it offered to contribute towards the wages of employees who are working fewer than normal hours but at least a third (33%) of their usual hours. However, the chancellor announced a new, more generous support package this week, reducing the minimum hours worked to 20% so employees working just one day a week will now be eligible.

Under the previously announced scheme, the government and yourself, the employer, would each pay one third of the equivalent salary of hours not worked. However, for hours not worked, the government will now pay 61.67% of the employees’ salaries (up to a maximum of £1,541.75 per month) and you will contribute just 5% (up to a maximum of £125 a month).

Since the chancellor’s announcement on 9th October, the new scheme will also be expanded to protect jobs and support businesses required to close their doors as a result of coronavirus restrictions.

What workers are eligible?

To qualify, all eligible employees must not have been served a redundancy notice and must have been on your PAYE payroll on 23 September 2020. This means a Real Time Information (RTI) submission notifying payment to that employee to HMRC must have been made between 6 April 2019 up to 11:59pm on 23 September 2020.

Until the scheme is reviewed, employees must now work at least one day (20%) of their usual hours.

Employees will be able to “cycle on and off” the scheme and do not have to work the same pattern each month. However, each short-time working arrangement must cover a minimum period of seven days.

What employers are eligible?

The scheme will be open to all employers with a UK bank account and part of PAYE.

All small and medium-sized enterprises (SMEs) will be eligible. However, large companies (with more than 250 employees) need to need to complete a Financial Impact Test and show their business has been adversely affected by Covid-19 and their turnover has fallen by a third. The government also announced it expects that large employers would not pay dividends to shareholders while using the scheme.

How much will employees get?

Employees will continue to receive full pay for hour worked but under the new, more generous package they can now expect to receive 73% of pay for working one day a week. Previously, for hours not worked, employers were required to pay 33%, the government would cover 33%, with workers losing out on 33% of pay.

How much will I contribute as an employer?

Employers will pay 5% of salaried for hours not worked, capped at £125 per month.

Employers will not be required to contribute towards wages and only asked to cover NICS and pension contributions. As the grant will not cover Class 1 employer NICs or pension contributions, these contributions will remain payable by yourself as the employer. Grant payments will be made in arrears, reimbursing employers for the Government’s contribution.

The government estimates that around half of potential claims are likely not to incur employer NICs or auto-enrolment pension contributions and therefore face no employer contribution.

How long will the scheme run?

The new job retention scheme will run for six months from 1 November until the end of April 2021 and will be reviewed in January.

The scheme is designed to sit alongside the government’s jobs retention bonus, announced by Rishi Sunak in his summer statement.

Under the job retentions bonus, businesses receive a one-off payment of £1,000 for every previously furloughed employee they still employ at the end of January 2021.

Local Restrictions Support Grant changes

In addition to the expansion of the Job Support Scheme, the government is making the Local Restrictions Support Grant scheme more generous so that businesses in England can receive up to £3,000 per month if they are forced to close. Payment will also be made sooner, after only two weeks of closure rather than three. Businesses will only be eligible to claim the grant while they are subject to restrictions and employees must be off work for a minimum of seven consecutive days.

How do I apply?

As an employer, you will be able to make a claim online through Gov.uk from December 2020. For more information and how to apply for the job retention scheme, please visit the Gov.uk website.

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Information correct as of 26.10.20.  Please visit the Gov.uk website to keep up-to-date with JSS updates.