The New Job Support Scheme Lowdown

Coronavirus

An article answering key questions on the new Job Support Scheme.

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

The Coronavirus Job Retention Scheme (better known as the furlough scheme) is ending and a new Job Support Scheme is being introduced from 1 November but do you understand what it means for your business? Get the lowdown of changes here.

Job support scheme

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.

How does the new job support scheme work?

The government will contribute towards the wages of your employees who are working fewer than normal hours but at least a third (33%) of their usual hours.

As an employer, you will continue to pay the usual wages of your staff for the hours they work. For hours not worked, the government and yourself, the employer, will each pay one third of the equivalent salary.

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 be on your PAYE payroll on or before 23 September 2020. This means a Real Time Information (RTI) submission notifying payment to that employee to HMRC must have been made on or before 23 September 2020.

For the first three months of the scheme, employees must work at least a third (33%) of their usual hours. The government is expected to review whether to increase the threshold after this period.

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 must 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?

For each hour not worked, the employer and the government will each pay one third of the employee’s usual pay with the government’s contribution up to £2100 per month.

Because of the requirement to work at least a third of usual hours, the scheme will cover the wages for a maximum of two thirds (67%) of hours not worked. This means that the government contribution is capped at 22% of full pay.

As a result – based on full hours worked and state and employer subsidised wages – employees using the scheme will receive at least 77% of their usual pay (unless it is reduced by the government cap of £2100).

How much will I contribute as an employer?

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. 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.

Information correct as of 14.10.20. For updates please visit the Government’s Coronavirus business support page and select the news section. 

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