Last week, the Chancellor announced a new ‘Job Support Scheme’ to support the retention of jobs once the existing furlough scheme ends on 31st October 2020. Detailed guidance on the new scheme is yet to be published, but the government has produced a factsheet and provided some information about how it will work, which we look at in this blog.
What does the scheme do?
The scheme will take effect from 1st November 2020 and last for 6 months. The government has indicated that the purpose of the scheme is to protect ‘viable’ jobs, which will be required going forward but which there may not be full time work for at the moment. It will apply where an employee is working on reduced hours - a minimum of one third of their usual hours – and the government will make a contribution to their wages. Importantly, this means the scheme will not support employees for whom there is no work at all, so it may not avoid redundancies in such cases.
Who will be eligible?
All UK employers with a UK bank account and UK PAYE scheme will be eligible to apply, although large business will have to demonstrate that their turnover has been negatively affected by the pandemic and should not be making capital distributions such as dividends. We await further guidance on what is deemed a ‘large’ business for these purposes.
In determining which employees are eligible for the scheme, the government factsheet mentions the following:
- The employee must have been on the employer’s payroll and have had a payment submitted to HMRC on or before 23rd September 2020.
- The employee must be working less than their usual hours, and this must be a minimum of 33% of their usual hours (this may increase in the latter half of the scheme). This means an application can be made for an employee working anywhere between 33% and 99% of usual hours, although the amount worked will affect the amount which can be claimed.
- The employee must not be serving their notice and cannot be made redundant while subject to the scheme;
- The employee does not previously have to have been furloughed to be eligible for the Job Support Scheme.
- Employees can cycle on and off the scheme and the short-time working pattern can vary, but each period of short-time working must last at least 7 days. Therefore, this suggests an employee could be working 33% of their hours one week and 50% the next and still be eligible. It appears they could also be working multiple short periods of reduced hours (i.e. two weeks on reduced hours and two weeks on their usual hours each month, with a claim being made in respect of the reduced hours).
What will the government pay?
- The employer must pay the employee for the hours worked. The government will then make a contribution of a third of their usual pay for every hour not worked, meaning the government will effectively pay wages for a third of their non-worked hours, with the employer paying a further third and the employee foregoing the remaining third. This means that an employee working the minimum of 33% of their hours will receive the following:
- Pay for 33% of hours ( the hours worked) from their employer;
- Pay for one-third of the non-worked hours they would usually have worked from the government (22% of their usual wages)
- Pay for a further third of the non-worked hours they would usually have worked from their employer (a further 22% of their usual wages)
This means that that the employee working the minimum hours would receive 77% of their usual wages, with 55% payable by the employer and 22% by the government. The government factsheet contains a table setting out the percentage contributions depending on the percentage of hours the employee is working: this can be found here.
In relation to payment, it is important to note the following:
- The government payment for each employee is capped at £697.92 per month.
- The employer will be reimbursed by the government in arrears, so has to pay the full amount to employees initially and then make a claim.
- Employer’s National Insurance Contributions and pension contributions are not covered by the government payment, so the employer will also have to pay these contributions on the total amount (including the wages paid by the government).
How will it work in practice?
There will likely be more comprehensive guidance to follow, but at the moment the following is known about how the scheme will work in practice:
- The employer must agree the reduced hours with the employee, make any changes to the employment contract by agreement and notify the employee of the changes in writing. A copy of the agreement must be available to HMRC on request.
- Claims can be made online from December 2020 – indicating they must be made retrospectively for the previous month.
- HMRC will check claims and may withhold or recover payment if claims are found to be fraudulent or based on incorrect information.
There are still a number of questions which will require to be clarified about how the scheme works, which hopefully will be answered in the anticipated guidance. It remains to be seen whether the scheme will be effective in protecting jobs as intended, as the cost to employers might not be sustainable depending on the extent of and the reason for the reduction in work and the timescales for anticipated recovery.
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