Introduction of the Job Support Scheme

Michael McAllister

Michael McAllister

Partner & Head of Payroll Services

The big announcement of Rishi Sunak’s Winter Economy Plan was the Job Support Scheme which will begin in November for six months as a continuation of support following the end of the furlough scheme on 31 October.  This scheme has been put in place to protect viable jobs in businesses who are facing difficulties due to COVID-19.   

The new Job Support Scheme is aimed at protecting "viable" roles, rather than all posts which have been kept going as a result of the furlough scheme.  

How will the new Job Support Scheme work? 

Under the six-month scheme, the government will top up the wages of people working at least a third of their normal hours. They will be paid at regular rates for the hours they do work.  

But with the hours on the sidelines, the government and the employer will each pay one third of the pay an employee has lost.  

The Treasury explains: "Employers will continue to pay the wages of staff for the hours they work - but for the hours not worked, the government and the employer will each pay one third of their equivalent salary."  

The level of grant will be calculated based on employee’s usual salary, capped at £697.92 per month.  

Employers will be reimbursed in arrears for the government contribution.  

Examples of how the new job scheme will work 

If an employee works a third of their hours (the minimum for the first 3 months of the scheme), the employer will in total fund 55% of their normal contractual pay, comprising 33% i.e. full pay for the third worked and 22% of the unworked hours.

  • Sarah works 30 hours per week on £9.30 per hour = 30 * £9.30 = £279.00
  • Sarah is asked to work only 10 hours per week from 1st November 2020

The November payslip will reflect the following:

  • 10 hours = 10 * £9.30 = £93.00
  • 1/3 of 20 hours for those funded by the government =  30 hours – 10 worked = 20 * 1/3 = 6.66 hours * £9.30 = £62.00
  • 1/3 of 20 hours for those funded by the employer =  30 hours – 10 worked = 20 * 1/3 = 6.66 hours * £9.30 = £62.00

Total pay = £93.00 + £62.00 + £62.00 = £217.00 (£217 / £279 = 77.8% of normal pay).

This means that the employer has contributed 55.6% of pay, government has contributed 22.2% and the employee has given up 22.2%.

Who is eligible? 

The Job Support Scheme will be open to businesses across the UK even if they have not previously used the furlough scheme.  

But the Chancellor has said the scheme will only support jobs which are viable, and an employee must not be on a redundancy notice. All small and medium-sized businesses are eligible (fewer than 250 employees), but larger businesses only when their turnover has fallen through the crisis.  

The government expects that large employers will not be making capital distributions such as dividends while using the scheme.  

When will it start and how long will it last? 

The scheme will run for six months from November 1. 

What's happening to furlough? 

The new scheme was announced as the furlough scheme is coming to an end. The government's coronavirus furlough scheme which has helped almost 10 million jobs will close on 31st October 2020.  

Furloughed workers across the UK receive 80% of their current salary, up to £2,500 through the Coronavirus Jobs Retention Scheme.  

It was a lifeline for many employers, as it prevented mass redundancies, and was extended in May to the end of October.  

From August 2020, employers were asked to share the cost of paying employees' salaries.  

Key points to consider 

  • It is a UK-wide scheme; 
  • Eligibility is automatic for SMEs i.e. less than 250 employees. For larger businesses they must prove they have been ‘adversely affected’ (this is called a ‘financial assessment test’) and should not be paying a dividend whilst claiming under the scheme; 
  • The Job Support Scheme will run from the 1st November 2020 to the 30th April 2021 so will cross into a new tax year, 2021/22; 
  • The scheme replaces the CJRS and subsidises wage costs (no on costs of NI or pension are covered this time) for employees who aren’t needed for their full hours; 
  • All included employees must have been on an FPS (Full Payment Submission) sent by midnight on 23rd September 2020 but did not have to have been furloughed previously;  
  • They must work, and be paid in full by the employer, for 1/3 of their ‘usual’ hours. After 3 months, the Government will consider whether to increase this minimum hours threshold;   
  • Flexible reduced hours, as in short-time then full hours, is possible but each short time period must be a minimum of 7 days;  
  • For the remaining 2/3 of ‘usual’ hours the employer pays 55%, the government pays 22% and the employee forfeits 23%; 
  • The grant is capped at a maximum of £697.92 per month and will be reimbursed in arrears, so November 2020 monthly paid claims won’t be paid until the end of December 2020 and there is only a monthly claim whatever the pay frequency;   
  • Guidance will be provided in due course on the reference period for wages and hours;  
  • The employee can’t be in their notice period for redundancy, so this means the employer has to guarantee not to start notice for redundancy until May next year;  
  • Short time working agreements must be made in writing in the same way as furlough agreements

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