Winter Economy is Coming: The Job Support Scheme Announced!

Winter Economy is Coming: The Job Support Scheme Announced!

Key Contact: Claire Knowles

Author: Adam McGlynn

As the end of the Coronavirus Job Retention Scheme (the Retention Scheme) fast approaches on 31 October, Chancellor of the Exchequer, Rishi Sunak, has announced its successor as part of his Winter Economy Address. The new Job Support Scheme on 1 November will target businesses facing lower demand due to COVID-19 over the next six months.

Eligible Employers

Current guidance imposes relatively few restrictions on employer eligibility. Businesses will need a UK bank account and UK PAYE scheme in place but, unlike the flexible furlough scheme, the business will not need to have utilised the Retention Scheme in the past. All small and medium enterprises satisfying these criteria will be eligible but large businesses will need to meet an as yet undetermined financial assessment test, proving that their turnover has seen a reduction due to the disruption caused by COVID-19. These large businesses will be expected to avoid making capital distributions while accessing the Job Support Scheme, however, it is currently unclear whether this will be an eligibility requirement or not.

Eligible Employees

A Real Time Information submission will need to have been made in relation to the employee’s payment through the employer’s PAYE payroll on or before 23 September. In order for employers to make a claim the employee will need to work at least 33% of their usual hours for a period of at least seven days. Though further guidance is anticipated, we expect ‘usual hours’ to be calculated in the same manner as the calculations for flexible furlough under the Retention Scheme. Short-time working arrangements must be agreed with employees where necessary to vary existing contractual terms and such agreements must be made available to HMRC if requested. Employers will not be eligible to claim for employees who have been made redundant and, unlike the Retention Scheme, employees who are put on notice of redundancy during the claim period will also be ineligible.

Grant

Employees will be paid by their employer for hours actually worked, which will amount to at least 33% of their usual wage. The employee’s usual hours which are not worked will be split into three:

  • One third will be paid by the employer and will be reimbursed by the Job Support Scheme;
  • One third will be paid by the employer but not reimbursed; and
  • One third will be sacrificed by the employee.

Government grants under the Job Support Scheme will be made to the employer in arrears and will be capped at £697.92 per employee, per month. Employers will still be obliged to pay NICs and pension contributions, but these will not be reimbursable. Pay for hours not worked will be calculated by reference to the employee’s usual wage which is expected to follow a similar methodology to the Retention Scheme. Current guidance suggests that employers cannot ‘top up’ wages for hours not worked beyond the two-thirds contribution; however, it is not yet confirmed whether this will be enforced.

Comment

By working at least 33% of their usual hours and receiving a two-third contribution for hours not worked, employees participating in the Job Support Scheme will receive at least 77% of their usual wages. 55% of this (the 33% time worked plus one-third of the time not worked) will be at the employer’s expense while the other 22% (on-third of time not worked) will be paid by the employer but reimbursed by the government. The minimum working time for eligible employees will be reviewed after three months when it is expected to increase, reducing the maximum amount of non-working time and, therefore, the government’s maximum contribution.

The maximum government grant under the Job Support Scheme is attainable for employees nearing the minimum threshold of hours actually worked. However, employees on this end of the spectrum are also entitled to the maximum contribution for hours not worked from the employer, making it the most beneficial situation for the employee, but the least efficient situation for the employer. The Job Support Scheme is therefore most appealing to employers who can utilise the employee for the majority of their usual hours but anticipate small periods of low work-flow where the employer would rather contribute only one-third of the employee’s usual wage. Although the grant can be accessed in addition to the previously announced Job Retention Bonus, the bonus is not particularly incentivising either unless the employee is working the majority of their usual hours in any event.

For more updates and guidance on the Job Support Scheme, or any of the government’s coronavirus response schemes, please contact our Employment Department.

Claire Knowles – Partner

Mark Alaszewski – Associate

Rebecca Mahon – Solicitor

Adam McGlynn – Solicitor

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