Farewell to furlough, hello to the new Job Support Scheme

Chancellor Rishi Sunak has outlined new measures intended to help businesses and workers impacted by coronavirus across the UK following the Prime Minister’s announcement of further national restrictions.

New package of measures

Whilst the detail of the new package of measures is limited, an overview of the key features has now been announced.

This includes a new Job Support Scheme, extending the Self-Employment Income Support Scheme and a 15% VAT cut for the hospitality and tourism sectors.

Job Support Scheme

The new Job Support Scheme will be introduced from 1 November 2020 after the end of the current Coronavirus Job Retention Scheme (CJRS) and will run for six months. Under the new Job Support Scheme:

• Employees must be on an employer’s PAYE payroll on or before 23 September 2020.
• Employees must work at least 33% of their normal hours and these hours will be paid by the employer.
• The balance of the “normal hours” will be apportioned between the government, the individual and the employer (so, the employer will pay a third, the government will pay a third and the employee will forgo payment in relation to a third of those hours).
• The grant will be capped at £697.92 per month. This means an employee working 33% of their hours should earn at least 77% of their usual pay (unless they earn over c. £38,000 per year in which case they will be negatively impacted by the cap).
• The employer will be reimbursed in arrears for the government contribution. The grant will not cover employer NICs or pension contributions which will remain payable by the employer.
• The employer cannot give notice of redundancy to anyone under the scheme.
• Employees will be able to cycle on and off the scheme but each short-time working arrangement must cover a minimum of seven days.

The new Job Support Scheme will be available to all small and medium sized businesses in the UK, regardless of whether or not they have accessed the CJRS. Large businesses can use the Job Support Scheme, however, they will be required to prove that they have been adversely affected by Covid-19 by completing a financial assessment test. The government expects that large employers will not be making capital distributions (such as dividends) whilst using the scheme.

The devil will be in the detail of the guidance which the government has said will be released shortly. It is, however, questionable as to whether the scheme will be enough to prevent redundancies, as it is likely that many employers won’t feel that they are in a position to pay 55% of a worker’s salary for 33% output. Further, the hospitality industry has been particularly hard-hit by the recently announced national restrictions and that sector typically has a high employee-turnover rate (employees have to have two years’ service in order to be eligible for a statutory redundancy payment), as well as low rates of pay. The costs of redundancies across restaurants and bars could therefore be comparatively low in relation to the amount which employers in that sector would have to pay to retain people under the Job Support Scheme.