The Chancellor of the Exchequer has announced a new economic package to support jobs including a new Job Support Scheme which will apply from November.
The Job Support Scheme is designed to protect viable jobs in businesses who are facing lower demand over the winter months due to Covid-19, to help keep their employees attached to the workforce. The employer will continue to pay its employee for time worked, but the burden of hours not worked will be split between the employer and the Government (through wage support) and the employee (through a wage reduction), and the employee will keep their job.
The Government will pay a third of hours not worked up to a cap, with the employer also contributing a third. This will ensure employees earn a minimum of 77% of their normal wages, where the Government contribution has not been capped. In the below we summarise what you need to know about the new scheme:
- Who is eligible?
All employers with a UK bank account and UK PAYE schemes can claim the grant. Neither the employer nor the employee needs to have previously used the Coronavirus Job Retention Scheme. Large businesses will have to meet a financial assessment test, so the scheme is only available to those whose turnover is lower now than before experiencing difficulties from Covid-19. There will be no financial assessment test for small and medium enterprises (SMEs).
Employees must be on an employer’s PAYE payroll on or before 23 September 2020. In order to support viable jobs, for the first three months of the scheme the employee must work at least 33% of their usual hours. After 3 months, the Government will consider whether to increase this minimum hours threshold. Employees will be able to cycle on and off the scheme and do not have to be working the same pattern each month, but each short-time working arrangement must cover a minimum period of seven days.
- What does the grant cover?
For every hour not worked by the employee, both the Government and employer will pay a third each of the usual hourly wage for that employee. The Government contribution will be capped at £697.92 a month. Grant payments will be made in arrears, reimbursing the employer for the Government’s contribution. The grant will not cover Class 1 employer NICs or pension contributions, although these contributions will remain payable by the employer.
Employees who have previously been furloughed, will have their underlying usual pay and/or hours used to calculate usual wages, not the amount they were paid whilst on furlough. Employers must pay employees their contracted wages for hours worked, and the Government and employer contributions for hours not worked. The employee must be working at least 33% of their usual hours. Employees cannot be made redundant or put on notice of redundancy during the period within which their employer is claiming the grant for that employee.
- Can an employer also make a claim under the Job Retention Scheme?
Employers using the Job Support Scheme will also be able to claim the Job Retention Bonus if they meet the eligibility criteria. The bonus is a one-off fixed payment of £1,000 to UK employers for each eligible employee that was furloughed and remains continuously employed through to 31 January 2021. The bonus amount is fixed at £1000, irrespective of the employee’s earnings and is taxable. There is no obligation on the employer to pass the bonus payment to the employee.